Document ID: SEC-2010-1252-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2010-08-17T04:00Z

[Federal Register: August 17, 2010 (Volume 75, Number 158)]
[Notices]               
[Page 50787-50789]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17au10-86]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62669; File No. SR-NYSE-2010-57]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending NYSE Rule 15 To Clarify Use of the Last Sale on the Exchange 
as the Reference Price and To Define the Reference Price of a Security 
in the Event That There Is No Last Sale in That Security on the 
Exchange

August 9, 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 August 5, 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 NYSE Rule 15 to clarify use of the 
last sale on the Exchange as the reference price and to define the 
reference price of a security in the event that there is no last sale 
in that security on the Exchange. The text of the proposed rule change 
is available at the Exchange, 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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Rule 15 (Pre-Opening 
Indications) to clarify use of the last sale on the Exchange as the 
reference price and to define the reference price of a security in the 
event that there is no last sale in that security on the Exchange.\4\
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    \4\ The Exchange's corporate affiliate, NYSE Amex LLC (``NYSE 
Amex''), submitted a companion rule filing proposing corresponding 
amendments to NYSE Amex Equities Rule 15. See SR-NYSEAmex-2010-82.
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Current NYSE Rule 15
    Pursuant to NYSE Rule 15(a), a DMM must issue a pre-opening 
indication if the DMM anticipates that the opening transaction will be 
at a price that represents a change from the security's previous day's 
closing price on the Exchange of more than the ``applicable price 
change.'' \5\ In the case of an American Depositary Receipt (``ADR''), 
Rule 15(b) sets forth provisions to take into account the closing price 
of the underlying security on the primary foreign market or a change 
from parity (as appropriate) in determining the applicable price 
change.
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    \5\ The applicable price change is $0.50 if the closing price of 
a security on the Exchange is under $20, $1.00 if the closing price 
of a security on the Exchange is $20-$49.99, $2.00 if the closing 
price of a security on the Exchange is $50-$99.99, $5.00 if the 
closing price of a security on the Exchange is $100-$500 and 1.5% if 
the closing price of a security on the Exchange is above $500.
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    In addition to the mandatory DMM pre-opening indications, pursuant 
to Rule 15(c), Exchange systems disseminate a data feed of real-time 
order imbalances that accumulate prior to the opening transaction on 
the Exchange and the price at which interest eligible to participate in 
the opening transaction may be executed in full (``Order Imbalance 
Information'').\6\ The Order Imbalance Information data feed includes 
all interest eligible for execution in the opening transaction of the 
security in Exchange systems and uses the previous trading day's 
closing price in the security on the Exchange as the reference price to 
indicate the number of shares required to open the security with an 
equal number of shares on the buy side and the sell side. If, however, 
a mandatory pre-opening indication is published for a security

[[Page 50788]]

pursuant to the provisions of Rule 15(a) or (b), the Order Imbalance 
Information data feed determines the reference price based on a 
comparison of the bid and offer price of the mandatory pre-opening 
indication to the last sale on the Exchange.
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    \6\ The Order Imbalance Information is disseminated in 
accordance with Rule 15(c)(3). If the Exchange decides to change the 
frequency of the dissemination of the Order Imbalance Information, 
it will notify the Commission and the market as part of the required 
rule amendment process.
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    Rule 15 does not address determination of the reference price in an 
IPO or transferred security and none of the alternatives specified in 
Rule 15(c)(2)(ii) are applicable as there would be no last sale on the 
Exchange the previous day.\7\
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    \7\ The Exchange notes that Rule 123D(1) currently provides for 
mandatory pre-opening indications for IPOs if the price change as 
measured from the offering price meets the requirements for a 
mandatory indication as defined under the Rule. However, Rule 
123D(1) generally pertains to situations involving unusual market 
activity and indications under that rule are sent to the 
Consolidated Tape. Rule 15 is intended to be a standardized process 
for the issuance of pre-opening indications under more normal market 
conditions and are available as part of the Exchange's proprietary 
datafeeds.
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Proposed amendments to NYSE Rule 15
    The Exchange believes that publication of mandatory pre-opening 
indications and dissemination of Order Imbalance Information with 
respect to IPOs and transferred securities would be beneficial to the 
market and in the public interest by providing additional information 
and transparency. Accordingly, the Exchange proposes to amend Rules 
15(a) and (c) to include parameters to establish a reference price for 
IPOs and transferred securities for both the mandatory pre-opening 
indication and the Order Imbalance Information data feed. Specifically, 
the Exchange proposes that the reference price be the offering price 
(i.e., ``deal price'') in the case of an IPO, or the last reported sale 
price on the securities market from which the security is being 
transferred. The Exchange Floor Official who is supervising the opening 
of the IPO or transferred security shall confirm that the DMM inputs 
the appropriate reference price for that listing in the Exchange 
system.
    The Exchange also proposes to amend parts (a)(1) and (c)(2) of Rule 
15 to provide that the reference price for pre-opening indications is 
the last reported sale on the Exchange. The current text of Rule 15 
provides that the ``previous day's closing price on the Exchange'' will 
serve as the reference price. Typically, the last reported sale price 
is the price of the previous day's closing transaction on the Exchange. 
However, in some instances, there may not be a previous day's closing 
transaction in a security and, therefore, the last reported sale price 
prior to the close is the last execution on the Exchange. For example, 
if the Exchange halted trading in a security prior to 4 p.m. and did 
not reopen until the following trading day, there would not be any 
closing transaction in that security. Or, in the case of a thinly 
traded stock, the stock may not have traded at all on the previous day 
or the last transaction could have occurred prior to the close of 
trading at 4 p.m. and, absent any additional interest in the security 
being sent to the Exchange, there would not be a closing transaction in 
that security. Therefore, the Exchange proposes to amend Rule 15 to 
more accurately describe the reference price. In addition, the last 
reported sale price on the Exchange would not include any after-hours 
executions of a security on the Exchange.\8\
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    \8\ Currently, the only after-hours trading permitted on the 
Exchange is the entry of basket trades in Crossing Session II. The 
price of an individual security executed as part of a basket trade 
is not sent to the Consolidated Tape and therefore would not be 
reported as a last sale on the Exchange.
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2. Statutory Basis
    The Exchange 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, in that 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change supports the 
objectives of the Act and will provide a benefit to the market while 
also protecting investors and the public interest by (i) filling a 
current gap in Exchange systems and by disseminating pre-opening 
indication and pre-opening Order Imbalance Information for IPOs and 
transferred securities, and (ii) more accurately describing the 
reference price, thereby providing greater transparency to customers 
prior to the opening transaction.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the 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 prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 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 Commission notes that 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 Commission summarily may temporarily suspend 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-2010-57 on the subject line.

[[Page 50789]]

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-2010-57. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090, on official business days between 10 
a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the NYSE's principal office and on its 
Internet Web site at http://www.nyse.com. 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-2010-57 and should be submitted on 
or before September 7, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20240 Filed 8-16-10; 8:45 am]
BILLING CODE 8010-01-P