Document ID: SEC-2012-0305-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2012-02-22T05:00Z

[Federal Register Volume 77, Number 35 (Wednesday, February 22, 2012)]
[Notices]
[Pages 10584-10586]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4079]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66400; File No. SR-NYSEAmex-2012-07]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Equities Rule 123C(4) To Provide for How Certain Interest Is Included 
in the Calculation of MOC and LOC Imbalances

February 15, 2012.
    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 February 3, 2012, NYSE Amex LLC (the ``Exchange'' or 
``NYSE Amex'') 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 Amex Equities Rule 123C(4) to 
provide for how certain interest is included in the calculation of MOC 
and LOC imbalances. The text of the proposed rule change is available 
at the Exchange, the Commission's Public Reference Room, and 
www.nyse.com, and www.sec.gov.

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 Amex Equities Rule 123C(4) to 
provide more specificity of how certain interest is treated for purpose 
of calculating MOC and LOC \4\ imbalances. In particular, the Exchange 
proposes to amend Rule 123C(4)(a)(vi) to describe how LOC orders priced 
equal to the last sale are treated in the imbalance publication and to 
add new supplementary material to describe how sell short interest is 
treated in the imbalance publication during a Short Sale Period, as 
defined in NYSE Amex Equities Rule 440B.
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    \4\ See NYSE Amex Equities Rule 13 for definitions of MOC and 
LOC orders.
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Background
    NYSE Amex Equities Rule 123C(4) describes how the Exchange 
calculates the MOC and LOC imbalances. The Exchange publishes MOC and 
LOC imbalance information as part of its Informational Imbalance 
Publication (as defined in Rule 123C(1)(b)), Mandatory MOC/LOC 
Imbalance Publication (as defined in Rule 123C(1)(d)), and Order 
Imbalance Information (as defined in Rule 123C(1)(e)), which are 
further described in Rule 123C(5) and (6). The MOC and LOC imbalance 
information is intended to provide market participants with a snapshot 
of the prices at which interest eligible to participate in the closing 
transaction would be executed in full against each other at the time 
the data feed is disseminated. The manner by which the imbalance is 
calculated takes into consideration the order of execution at the 
close, as set forth in Rule 123C(7). The goal of such transparency is 
to attract contra-side interest to offset order imbalances, thereby 
potentially minimizing price dislocation at the close.
Proposed Amendments
    Because the MOC and LOC imbalance calculations under Rule 123C(4) 
are intended to provide an informational snapshot of what an imbalance 
may be at a particular time, and are intended to mirror how the 
imbalance is calculated for purposes of determining the closing price, 
the Exchange proposes to amend elements of Rule 123C(4) to describe 
with more specificity how the imbalance is calculated. The Exchange 
notes that these proposed rule change does not change how the Exchange 
currently calculates the imbalance information, but rather provides 
more detail in the rule text concerning the methodology for 
calculation.
    First, the Exchange proposes to amend Rule 123C(4)(a)(vi) to 
describe with more specificity how LOC interest that is priced equal to 
the last sale is addressed in the MOC and LOC imbalance calculation. 
Because the Buy or Sell Imbalance is intended to be indicative of what 
the imbalance would be at the close, the Exchange seeks to reduce the 
Buy or Sell Imbalance by any closing interest that could potentially 
participate in the close, which is why the rule currently provides that 
tick sensitive MOC and LOC interest can reduce the Buy or Sell 
Imbalance to bring the imbalance quantity as close to zero as possible.
    The Exchange proposes to amend Rule 123C(4)(a)(vi) to add that LOC 
orders priced equal to the last sale also reduce the Buy or Sell 
Imbalance. The Exchange proposes this change because, as set forth in 
Rule 123C(7)(b)(ii), LOC orders priced equal to the closing price may 
participate in the closing transaction. Because such interest may

[[Page 10585]]

participate in the close, the Exchange believes that when calculating 
the imbalance, reducing the Buy or Sell Imbalance by the amount of LOC 
interest priced equal to the last sale provides a potentially more 
realistic indication of how the imbalance may be offset at the close.
    Second, the Exchange proposes to make conforming amendments to 
Rules 123C(4)(a)(vi)(A) and (B), which currently provide more detail of 
which tick sensitive interest is included to offset a Buy or Sell 
Imbalance, as provided for under Rule 123C(4)(a)(vi). Rule 
123C(4)(a)(vi)(A) currently provides that of tick sensitive orders, 
only Sell Plus \5\ MOC and Sell Plus LOC orders priced below the last 
sale will be included to offset the Buy Imbalance. Rule 123C4(a)(vi)(B) 
currently provides that of tick sensitive orders, only Buy Minus \6\ 
MOC and Buy Minus LOC orders priced above the last sale price will be 
included to offset the Sell Imbalance. Because the Exchange is 
proposing to amend Rule 123C(4)(a)(vi) to add that LOC interest priced 
equal to the last sale price can offset the Buy or Sell Imbalance, the 
Exchange proposes to make conforming amendments to Rules 
123C(4)(a)(vi)(A) and (B). Accordingly, the Exchange proposes to amend 
Rule 123C(4)(a)(vi)(A) to specify that Sell Plus LOC orders priced 
equal to or below the last sale price and Sell and Sell Short LOC 
orders priced equal to the last sale price will also be included to 
offset the Buy Imbalance. Similarly, the Exchange proposes to amend 
Rule 123C(4)(a)(vi)(B) to specify that Buy Minus LOC orders priced 
equal to or above the last sale price, and Buy LOC orders priced equal 
to the last sale will be included to offset the Sell Imbalance.
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    \5\ As defined in NYSE Amex Equities Rule 13, a Sell Plus order 
is a market or limit order to sell a stated amount of stock for 
which the price to be obtained is not lower than the last sale if 
the last sale was a ``plus'' or ``zero plus'' tick, and is not lower 
than the last sale plus the minimal fractional change in the stock 
if the last sale was a ``minus'' or ``zero minus'' tick. The purpose 
of a Sell Plus order is to ensure that a market participant does 
create a new low price with the sell order. For example, if the 
closing price is $10.10, and the last sale prior to the closing 
transaction was $10.11 or higher on a plus or zero plus tick, a Sell 
Plus LOC with a limit of $10.09 would not participate in the closing 
transaction because it would be selling at a price lower than the 
last sale, which was on a plus or zero plus tick.
    \6\ As defined in NYSE Amex Equities Rule 13, a Buy Minus order 
is a market or limit order to buy a stated amount of stock on the 
close for which the price to be obtained is not higher than the last 
sale if the last sale was a ``minus'' or ``zero minus'' tick, and is 
not higher than the last sale minus the minimum fractional change in 
the stock if the last sale was a ``plus'' or ``zero plus'' tick. The 
purpose of a Buy Minus order is to ensure that a market participant 
does not create a new high price with the buy order. For example, if 
the closing price is $10.10, and the last sale prior to the closing 
transaction was $10.09 or below on a minus or zero minus tick, a Buy 
Minus LOC with a limit price of $10.11 would not participate in the 
closing transaction because it would be buying at a price higher 
than the last sale, which was on a minus or zero minus tick.
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    Third, the Exchange proposes to amend Rule 123C(4)(a)(vi)(A) and 
(B) to further specify that tick sensitive interest will be included to 
offset the Buy or Sell Imbalance only if such orders could be executed 
consistent with the terms of their tick restrictions. This proposed 
amendment is consistent with the rationale of how MOC and LOC 
imbalances are calculated, namely, to include interest that could 
participate in the closing price to offset the imbalance. If, by the 
terms of the tick restriction, an order could not participate in the 
close, such interest should not be used to offset the imbalance 
calculation. For example, if the Buy Imbalance is calculated based on a 
$10.10 reference price, and the last sale prior to that reference price 
is $10.11 on a plus or zero plus tick, Sell Plus MOCs and Sell Plus 
LOCs are not included to offset that Buy Imbalance because they would 
not participate if that were the closing price at that time. Likewise, 
if the last sale is $10.09 on a minus or zero minus tick, and the Sell 
Imbalance is calculated based on a $10.10 reference price, Buy Minus 
MOCs and Buy Minus LOCS priced below the last sale are not included to 
offset the Sell Imbalance because they would not participate if that 
were the closing price at that time.
    Finally, the Exchange proposes to add supplementary material .30 to 
Rule 123C to specify how Sell Short interest is treated for purposes of 
calculating MOC and LOC imbalances during a Short Sale Period, as 
defined in Rule 440B(d). Rule 123C(4)(a)(iv) currently provides that 
Sell Short MOC and Sell Short LOC orders priced below the last sale 
price are included in the aggregation of the Sell side closing volume. 
During a Short Sale Period, if a security closes at a price equal to or 
lower than the last Exchange bid, sell short interest would not be 
eligible to participate in the closing transaction. Because a Sell 
imbalance publication is an indication that the security is more likely 
to close at a price that is equal to or lower than the bid, during a 
Short Sale Period, Sell Short MOC and LOC interest likely would not 
participate in the closing transaction. The Exchange therefore believes 
it is appropriate during a Short Sale Period to exclude Sell Short MOC 
and LOC orders from the Sell side volume because such interest would 
likely not be eligible to participate in the closing transaction.
    In addition, during a Short Sale Period, in addition to the 
interest specified in Rule 123C(a)(4)(vi)(A) that offsets the Buy 
Imbalance (as amended by this rule proposal), all Sell Short MOC and 
LOC interest priced equal to or below the last sale price will be 
included to offset the Buy Imbalance. During a Short Sale Period, if a 
security closes higher than the last Exchange bid, Sell Short MOC and 
LOC interest would be eligible to participate in the closing 
transaction. Because a Buy side imbalance publication is an indication 
that there may be upward price pressure on the closing sale price, and 
the security is more likely to close at a price that is above the bid, 
in such a situation, Sell Short MOC and LOC interest likely would 
participate in the closing transaction. The Exchange therefore believes 
it is appropriate during a Short Sale Period to offset the Buy 
Imbalance with Sell Short MOC and LOC interest because such interest 
would likely participate in the closing transaction.
    The Exchange notes that the manner by which the Exchange currently 
calculates the MOC and LOC imbalances is consistent with how such 
interest would participate if the closing transaction were to be based 
on the point in time at which each MOC and LOC imbalance publication is 
calculated. The Exchange proposes these rule amendments to provide that 
level of specificity in how the rule text describes the manner by which 
the MOC and LOC imbalances are being calculated. The Exchange further 
notes that this rule change concerns only the manner by which the MOC 
and LOC imbalance is calculated for purposes of imbalance publications 
and does not change in any way the manner by which trading occurs at 
the Exchange or how interest is executed in the closing transaction.
2. Statutory Basis
    The basis under the Act for these proposed rule changes are the 
requirement under Section 6(b)(5) \7\ that an Exchange have rules that 
are designed 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. Specifically, this rule proposal 
supports the objective of perfecting the mechanism of a free and open 
market as it provides transparency in the manner by which the Exchange 
calculates the MOC and LOC imbalance information that the Exchange 
publishes

[[Page 10586]]

pursuant to NYSE Amex Equities Rule 123C(5) and (6) both during regular 
trading and during a Short Sale Period pursuant to NYSE Amex Equities 
Rule 440B. Specifically, these rule changes provide transparency of how 
LOC interest priced equal to the last sale price will be used to offset 
a Buy or Sell Imbalance and how Sell Short interest will be treated for 
the imbalance calculation during a Short Sale Period.
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    \7\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of such 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 email to rule-comments@sec.gov. Please include 
File No. SR-NYSEAmex-2012-07 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 No. SR-NYSEAmex-2012-07. This file 
number should be included on the subject line if email 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, 100 F Street NE., 
Washington, DC 20549, 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 No. SR-NYSEAmex-2012-07 and should be 
submitted on or before March 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4079 Filed 2-21-12; 8:45 am]
BILLING CODE 8011-01-P