Document ID: SEC-2009-0612-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by NYSE Amex LLC Amending Rule 935NY-Order Exposure Requirements
Posted Date: 2009-05-05T04:00Z

[Federal Register Volume 74, Number 85 (Tuesday, May 5, 2009)]
[Notices]
[Pages 20771-20773]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10287]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59825; File No. SR-NYSEAmex-2009-15]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by NYSE Amex LLC Amending Rule 935NY--Order Exposure 
Requirements

April 27, 2009.
    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 21, 2009, NYSE Amex LLC (``NYSE Amex'' 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 its rules governing order exposure 
requirements on the NYSE Amex System. This proposal will revise Rule 
935NY. The text \4\ of the proposed rule change is attached as Exhibit 
5 to the 19b-4 form. A copy of this filing is available on the 
Exchange's Web site at http://www.nyse.com, at the Exchange's principal 
office and at the Commission's Public Reference Room.
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    \4\ The Exchange requested that the Commission correct a 
typographical error in this sentence. Telephone conversation between 
Glenn Gsell, Managing Director, NYSE Amex, and Kristie Diemer, 
Special Counsel, Commission, on April 27, 2009.
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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 purpose of the proposed rule change is to reduce the exposure 
period contained in Rule 935NY--Order Exposure Requirements, from three 
seconds to one second.
    Rule 935NY provides that with respect to orders routed to the NYSE 
Amex System, Users may not execute as principal orders they represent 
as agent unless (i) agency orders are first exposed on the Exchange for 
at least three (3) seconds or (ii) the User has been bidding or 
offering on the Exchange for at least three (3) seconds prior to 
receiving an agency order that is executable against such bid or offer.
    Specifically, order entry firms may not execute as principal, 
orders they represent as agent unless; [sic] (i) the agency order has 
first exposed on the NYSE Amex System for at least three seconds; [sic] 
(ii) the order entry firm has been bidding or offering for at least 
three seconds prior to receiving the agency order that is executable 
against such bid or offer. During this three-second exposure period, 
other market participants may enter orders to trade against the exposed 
order. Under this proposal, the exposure periods contained in Rule 
935NY would be reduced to one second.
    The Exchange notes that the existing three-second order exposure 
period contained in Rule 935NY, is not necessarily long enough to allow 
human interaction with the exposed orders. Rather, market participants 
on NYSE Amex are sufficiently automated that they can react to these 
orders electronically. In this context, NYSE Amex believes it would be 
in all market participants' best interest to minimize the exposure 
period to a time frame that continues to allow adequate time for market 
participants to electronically respond, while at the same time reducing 
any market risk associated with the longer exposure period. In this 
respect, the Exchange states that its experience with the three-second 
exposure time period indicates that one second would provide an 
adequate response time.\5\ Accordingly, the Exchange does not believe 
it is necessary or beneficial to the orders being exposed to continue 
to subject

[[Page 20772]]

them to market risk for a full three seconds.
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    \5\ There are numerous market participants on NYSE Amex that 
have the capability and already opt to respond within the first one 
second of the present three-second exposure period, currently in 
force for the NYSE Amex System.
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    Since NYSE Amex market participants have the ability [sic] react to 
these orders electronically, and regularly do so in less than one 
second, the Exchange believes that reducing the time period to one 
second will continue to afford sufficient time to ensure effective 
interaction with orders. At the same time, NYSE Amex believes that 
reducing the time period to one second will allow it to provide 
investors and other market participants with more timely executions, 
thereby reducing market risk.
    A shortened exposure period would be fully consistent with the 
electronic nature of the NYSE Amex System. In order to substantiate 
that market participants on NYSE Amex would not be disadvantaged by a 
reduced exposure period, the Exchange conducted a survey of Amex 
Trading Permit Holders (``ATP Holders'') to find out whether they had 
the systems capability available that would allow them to respond in a 
meaningful way within the proposed timeframe.\6\ The Exchange surveyed 
48 member firms, representing 132 ATP Holders, all of whom regularly 
access the Exchange on an electronic basis,\7\ regarding the proposed 
change to Rule 935NY, specifically the Exchange asked; 1. ``What is the 
approximate turnaround time for your firm to take in, process and 
respond to trading interest posted on NYSE Amex Options?'' and 2. ``Do 
you foresee any problems if NYSE Amex Options reduces the exposure time 
from three seconds to one second?'' Of the 6 different member firms 
that responded to the Exchange's survey, four indicated that their 
response time was less than one second, one declined to comment as to 
their response time while the sixth said that they were not exactly 
sure of their response time. None of the responding ATP Firms 
anticipated any problems related to order processing if the Exchange 
was to reduce the exposure period to one second. In addition, none of 
the responding ATP Holders indicated to the Exchange that they were 
opposed to the reduced exposure period.\8\
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    \6\ NYSE Amex introduced a new trading system on March 1, 2009. 
In order to allow sufficient time for ATP Holders to evaluate the 
new system, the Exchange requested ATP Holders respond to the survey 
by April 1, 2009.
    \7\ Collectively, these 132 ATP Holders participated in excess 
of 90% of all electronic orders executed on the NYSE Amex System 
during the month of March 2009. The remaining 10% of transactions 
generally consisted of customer orders executed against other 
customer orders, or orders executed by non-ATP Holder Broker 
Dealers. The Exchange did not survey ATP Holders who act as Floor 
Brokers and transact business strictly on a manual basis.
    \8\ One respondent did indicate that it ``might be hard to 
respond that rapidly'' when asked about the proposed one-second 
exposure period, but then went on to state that they felt the 
Exchange should make the change in order to match other options 
Exchanges (rules).
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    Based on the findings of the survey, the Exchange believes that the 
proposed exposure period will continue to provide sufficient time for 
market participants to respond, and compete for orders, while also 
reducing some of the risks associated with a prolonged exposure period.
2. Statutory Basis
    NYSE Amex believes that the proposed rule change is consistent with 
Section 6(b) of the Act \9\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \10\ in particular, because it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system. In particular, the 
Exchange believes that the proposed rule change will provide investors 
with more timely execution of their options orders, while ensuring that 
there is an adequate exposure of all orders on NYSE Amex.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange has requested accelerated approval of this proposed 
rule change prior to the 30th day after the date of publication of the 
notice in the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 15-day 
comment period.

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-NYSEAmex-2009-15 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-NYSEAmex-2009-15. 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 inspection 
and copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549-1090 on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of the filing will also be available 
for inspection and copying at NYSE Amex's principal office. All 
comments received will be posted without change; the Commission does

[[Page 20773]]

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-NYSEAmex-2009-15 and should 
be submitted on or before May 20, 2009.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-10287 Filed 5-4-09; 8:45 am]
BILLING CODE 8010-01-P