Document ID: SEC-2009-0427-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Alternext US LLC
Posted Date: 2009-03-30T04:00Z

[Federal Register: March 30, 2009 (Volume 74, Number 59)]
[Notices]               
[Page 14176-14179]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30mr09-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59620; File No. SR-NYSEALTR-2009-29]

 
Self-Regulatory Organizations; NYSE Alternext US LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Extending 
the Operative Date of Rule 92(c)(3) From March 31, 2009 to July 31, 
2009

March 23, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 13, 2009, NYSE Alternext US LLC \3\ (``NYSE Alternext'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
filed the proposed rule change pursuant to Section 19(b)(3)(A) of the 
Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the proposed 
rule change effective upon filing with the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 USC. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that NYSE Alternext US LLC recently 
changed its name to NYSE Amex LLC. See Securities Exchange Act 
Release No. 59575 (March 13, 2009) (SR-NYSEALTR-2009-24).
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).

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[[Page 14177]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the operative date of Rule 92(c)(3) 
from March 31, 2009 to July 31, 2009. The text of the proposed rule 
change is available at NYSE Alternext, the 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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these 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 aspects 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 is proposing to extend the delayed operative date of 
Rule 92(c)(3) from March 31, 2009 to July 31, 2009. The Exchange 
believes that this extension will provide the time necessary for the 
Exchange, the New York Stock Exchange LLC (``NYSE''), and the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') to harmonize their 
respective rules concerning customer order protection to achieve a 
standardized industry practice.\6\
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    \6\ See SR-NYSE-2009-30 (formally submitted on March 13, 2009).
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Merger Background
    As described more fully in a related rule filing,\7\ NYSE Euronext 
acquired The Amex Membership Corporation (``AMC'') pursuant to an 
Agreement and Plan of Merger, dated January 17, 2008 (the ``Merger''). 
In connection with the Merger, the Exchange's predecessor, the American 
Stock Exchange LLC (``Amex''), a subsidiary of AMC, became a subsidiary 
of NYSE Euronext and was renamed NYSE Alternext US LLC (``NYSE 
Alternext'' or the ``Exchange''), and continues to operate as a 
national securities exchange registered under Section 6 of the 
Securities Exchange Act of 1934, as amended (the ``Act'').\8\ The 
effective date of the Merger was October 1, 2008.
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    \7\ See Securities Exchange Act Release No. 58673 (Sept. 29, 
2008), 73 FR 57707 (Oct. 3, 2008) (SR-NYSE-2008-60 and SR-Amex 2008-
62) (approving the Merger).
    \8\ 15 U.S.C. 78f.
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    In connection with the Merger, on December 1, 2008, the Exchange 
relocated all equities trading conducted on the Exchange legacy trading 
systems and facilities located at 86 Trinity Place, New York, New York, 
to trading systems and facilities located at 11 Wall Street, New York, 
New York (the ``Equities Relocation''). The Exchange's equity trading 
systems and facilities at 11 Wall Street (the ``NYSE Alternext Trading 
Systems'') are operated by the NYSE on behalf of the Exchange.\9\
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    \9\ See Securities Exchange Act Release No. 58705 (Oct. 1, 
2008), 73 FR 58995 (Oct. 8, 2008) (SR-Amex-2008-63) (approving the 
Equities Relocation).
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    As part of the Equities Relocation, NYSE Alternext adopted NYSE 
Rules 1-1004, subject to such changes as necessary to apply the Rules 
to the Exchange, as the NYSE Alternext Equities Rules to govern trading 
on the NYSE Alternext Trading Systems.\10\ The NYSE Alternext Equities 
Rules, which became operative on December 1, 2008, are substantially 
identical to the current NYSE Rules 1-1004 and the Exchange continues 
to update the NYSE Alternext Equities Rules as necessary to conform 
with rule changes to corresponding NYSE Rules filed by the NYSE.
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    \10\ See Securities Exchange Act Release Nos. 58705 (Oct. 1, 
2008), 73 FR 58995 (Oct. 8, 2008) (SR-Amex-2008-63); No. 58833 (Oct. 
22, 2008), 73 FR 64642 (Oct. 30, 2008) (SR-NYSE-2008-106); No. 58839 
(Oct. 23, 2008), 73 FR 64645 (October 30, 2008) (SR-NYSEALTR-2008-
03); No. 59022 (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR-
NYSEALTR-2008-10); and No. 59027 (Nov. 28, 2008), 73 FR 73681 (Dec. 
3, 2008) (SR-NYSEALTR-2008-11).
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Rule 92 Background
    On July 5, 2007, the Commission approved amendments to NYSE Rule 92 
to permit riskless principal trading at the NYSE.\11\ These amendments 
were filed in part to begin the harmonization process between NYSE Rule 
92 and FINRA's Manning Rule.\12\ In connection with those amendments, 
the NYSE implemented for an operative date of January 16, 2008, NYSE 
Rule 92(c)(3), which permits NYSE member organizations to submit 
riskless principal orders to the NYSE, but requires them to submit to a 
designated NYSE database a report of the execution of the facilitated 
order. That rule also requires members to submit to that same database 
sufficient information to provide an electronic link of the execution 
of the facilitated order to all of the underlying orders.
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    \11\ See Securities Exchange Act Release No. 56017 (Jul. 5, 
2007), 72 FR 38110 (Jul. 12, 2007) (SR-NYSE-2007-21).
    \12\ See NASD Rule 2111 and IM-2110-2.
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    For purposes of NYSE Rule 92(c)(3), the NYSE informed member 
organizations that when executing riskless principal transactions, 
firms must submit order execution reports to the NYSE's Front End 
Systemic Capture (``FESC'') database linking the execution of the 
riskless principal order on the NYSE to the specific underlying orders. 
The information provided must be sufficient for both member firms and 
the NYSE to reconstruct in a time-sequenced manner all orders, 
including allocations to the underlying orders, with respect to which a 
member organization is claiming the riskless principal exception.
    Because the rule change required both the NYSE and member 
organizations to make certain changes to their trading and order 
management systems, the NYSE filed for immediate effectiveness to delay 
to May 14, 2008 the operative date of the NYSE Rule 92(c)(3) 
requirements, including submitting end-of-day allocation reports for 
riskless principal transactions and using the riskless principal 
account type indicator.\13\ The NYSE filed for an additional extension 
of the operative date of Rule 92(c)(3) to March 31, 2009.\14\ Because 
NYSE Alternext adopted NYSE Rule 92 in its then current form, the 
delayed operative date of March 31, 2009 for the NYSE Rule 92(c)(3) 
reporting requirements also applies for NYSE Alternext Equities Rule 
92(c)(3) reporting requirements.
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    \13\ See Securities Exchange Act Release No. 56968 (Dec. 14, 
2007), 72 FR 72432 (Dec. 20, 2007) (SR-NYSE-2007-114).
    \14\ See Securities Exchange Act Release No. 57682 (Apr. 17, 
2008), 73 FR 22193 (Apr. 24, 2008) (SR-NYSE-2008-29).
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Request for Extension
    FINRA, NYSE, and the Exchange have been working diligently on fully 
harmonizing their respective rules, including reviewing the 
possibilities for a uniform reporting standard for riskless principal 
transactions. However, because of the complexity of the existing 
customer order protection rules, including the need for input from 
industry participants as well as Commission approval, the Exchange, 
NYSE, and FINRA will not have harmonized their respective customer 
order protection rules by March 31, 2009.
    The Exchange notes that it has reached agreement with NYSE and 
FINRA on a harmonized approach to customer order protection rules. As 
authorized by their respective Boards, FINRA and NYSE Regulation, Inc. 
have

[[Page 14178]]

each published a Notice to Members/Information Memo that solicit 
comments from their respective member participants on the proposed 
harmonized approach to customer order protection.\15\ Because industry 
participants need to code their trading systems to comply with customer 
order protection rules, the Exchange believes that industry input is 
vital to ensuring that the approach to customer order protection both 
meets regulatory needs of protecting customer orders, but is also 
feasible technologically.
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    \15\ See NYSE Regulation Information Memo 09-13 (March 12, 
2009); FINRA Regulatory Notice 09-15 (March 12, 2009).
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    The Exchange continues to believe that pending full harmonization 
of the respective customer order protection rules, it would be 
premature to require firms to meet the current Rule 92(c)(3) FESC 
reporting requirements.\16\ Indeed, having differing reporting 
standards for riskless principal orders would appear to defeat the 
overall goal of the harmonization process.
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    \16\ The Exchange notes that it would also need to make 
technological changes to implement the proposed FESC reporting 
solution for Rule 92(c)(3).
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    Accordingly, to provide the Exchange, NYSE, and FINRA the time 
necessary to review their respective rules and develop a harmonized 
rule set that would apply across their respective marketplaces, the 
Exchange is proposing to delay the operative date for NYSE Alternext 
Equities Rule 92(c)(3) from March 31, 2009 to July 31, 2009.
    Pending the harmonization of the three rules, the Exchange will 
continue to require that, as of the date each member organization 
implements riskless principal routing, the member organization have in 
place systems and controls that allow them to easily match and tie 
riskless principal execution on the Exchange to the underlying orders 
and that they be able to provide this information to the Exchange upon 
request. To make clear that this requirement continues, the Exchange 
proposes to add supplementary material to Rule 92 that explains that 
the Rule 92(c)(3) reporting requirements are suspended until July 31, 
2009 and that member organizations are required to have in place such 
systems and controls relating to their riskless principal executions on 
the Exchange. Moreover, the Exchange will coordinate with NYSE and 
FINRA to examine for compliance with the rule requirements.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\18\ in particular, insofar as 
it is designed to prevent fraudulent and manipulative acts and 
practices, 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 Exchange believes the proposed extension provides 
the Exchange, NYSE, and FINRA the time necessary to develop a 
harmonized rule concerning customer order protection that will enable 
member organizations to participate in the national market system 
without unnecessary impediments.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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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 proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \19\ and 
Rule 19b-4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\21\ 
However, Rule 19b-4(f)(6)(iii) \22\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
would allow the Exchange to extend the operative date of NYSE Alternext 
Equities Rule 92(c)(3) without interruption. For this reason, the 
Commission designates the proposed rule change to be operative upon 
filing with the Commission.\23\
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    \21\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization 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 notice requirement.
    \22\ Id.
    \23\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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-NYSEALTR-2009-29 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-NYSEALTR-2009-29. 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

[[Page 14179]]

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 inspection and copying in the Commission's Public 
Reference Room, on official business days between the hours of 10 a.m. 
and 3 p.m. Copies of the 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-NYSEALTR-2009-29 and should 
be submitted on or before April 20, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6961 Filed 3-27-09; 8:45 am]