Document ID: SEC-2010-0557-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-04-13T04:00Z

[Federal Register: April 13, 2010 (Volume 75, Number 70)]
[Notices]               
[Page 18929-18931]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap10-101]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61848; File No. SR-NYSE-2010-31]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending Rule 70 in Order To Update Functionality Relating to the Entry 
of D-Quotes and Pegging E-Quotes

April 6, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on April 1, 2010, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 70 in order to update 
functionality relating to the entry of d-Quotes and pegging e-Quotes. 
The text of the proposed rule change is available at the Exchange, on 
the Commission's Web site at http://www.sec.gov, the

[[Page 18930]]

Commission's Public Reference Room, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its rules to provide that d-Quotes 
and pegging e-Quotes that are entered 10 seconds or less before the 
scheduled close will automatically be rejected by Exchange systems. 
Accordingly, on a regular trading day, Exchange systems will reject d-
Quotes or pegging e-Quotes entered at or after 3:59:50 p.m. On days 
where trading closes at 1 p.m., e.g., the day after Thanksgiving, 
Exchange systems will reject d-Quotes or pegging e-Quotes eligible for 
the close entered at or after 12:59:50 p.m.\4\
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    \4\ NYSE Amex LLC has filed a companion rule proposal to conform 
its equities rules to the changes proposed in this filing. See SR-
NYSEAmex-2010-34.
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    The Exchange believes that the 10 second cut-off will contribute to 
a more orderly closing process, by providing an opportunity for contra-
side interest, including the new Closing Offset (``CO'') order, to flow 
into the Exchange market. This proposed change is consistent with the 
Exchange's ongoing effort to streamline the closing process and enhance 
transparency at the close. In light of recent enhancements to the 
imbalance feed information, the Exchange believes that designating a 
cut-off time before the close for the entry of d-Quotes and pegging e-
Quotes will contribute to these objectives.
    Currently, d-Quotes and pegging e-Quotes are added to the pre-close 
data feed beginning at 3:55 p.m., and updated every five seconds until 
the close. The Exchange believes that a 10 second cut-off prior to the 
close for entry of d-Quotes and pegging e-Quotes will provide 
sufficient time for all market participants to electronically recognize 
and respond to this information by entering offsetting interest to 
mitigate market impact, by entering limit orders or the new CO 
order.\5\ The Exchange further believes that the 10-second cut off will 
not materially impact a Floor broker's ability to represent customer 
interest in the closing transaction because, like other market 
participants, Floor brokers can enter offsetting market-on-close or 
limit-on-close orders or CO orders in that 10-second period. Floor 
brokers also continue to have the ability to represent interest orally 
at the close. However, the Exchange believes that the proposed cut-off 
period will have minimal impact on current trading practices of Floor 
brokers because the manual entry process for d-Quotes in the handheld 
devices creates physical constraints that naturally limit the number of 
d-Quotes that can be sent in the last 10 seconds. Therefore, the cut-
off time should not impose a significant limitation on Floor brokers 
that is not already present because of the manual aspect of d-Quote 
entry. The proposed change is also consistent with ongoing regulatory 
guidance that encourages all market participants, including Floor 
brokers, to avoid holding back large interest until at or near the 
close.\6\
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    \5\ See Securities Exchange Act Release Nos. 61233 (Dec. 23, 
2009), 74 FR 69169 (Dec. 30, 2009) (SR-NYSE-2009-111); 61244 (Dec. 
28, 2009), 75 FR 4797 [sic] (Jan. 5, 2010) (SR-NYSEAmex-2009-81). 
The Exchange implemented these rule changes for both NYSE and NYSE 
Amex Equities on March 1, 2010.
    \6\ See e.g., NYSE Regulation Information Memo 09-29 (June 19, 
2009), published at http://www.nyse.com.
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    To effect this change, the Exchange proposes to amend Rules 
70.25(a)(ii) and 70.26(iii) to provide that Exchange systems will 
reject d-Quotes or pegging e-Quotes, as applicable, that are entered 10 
seconds or less before the scheduled close. The Exchange also proposes 
to add to Rule 70(h)(i) to cross reference Supplementary Material .25 
and .26 of Rule 70 to reflect that those rules also impact how Floor 
broker agency interest interacts in the closing process. The Exchange 
notes that any d-Quotes or pegging e-Quotes eligible for the close that 
were entered before this proposed cut-off time remain eligible to 
participate in the close. The Exchange will notify members and member 
organizations, including Floor brokers, of these rule changes and the 
date they will be implemented by issuing a Trader Notice and/or 
publication of an Information Memorandum.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\7\ which requires the rules of an exchange to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system 
and, in general, to protect investors and the public interest. The 
proposed rule change also is designed to support the principles of 
Section 11A(a)(1) \8\ of the Act in that it seeks to assure fair 
competition among brokers and dealers and among exchange markets and 
the practicability of brokers executing investor's orders in the best 
market. The Exchange believes that the proposed updates to Floor broker 
functionality meet such goals as it will contribute to a more orderly 
closing process, by providing an opportunity for contra-side interest 
to flow into the Exchange market.
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \9\ and 
Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing of 
the proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the

[[Page 18931]]

Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2010-31 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2010-31. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also 
will be available for inspection and copying at the principal office of 
the Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2010-31 and should be submitted on or before May 4, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8363 Filed 4-12-10; 8:45 am]
BILLING CODE 8011-01-P