Document ID: SEC-2009-0373-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-03-19T04:00Z

[Federal Register: March 19, 2009 (Volume 74, Number 52)]
[Notices]               
[Page 11800-11803]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19mr09-126]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59570; File No. SR-NYSE-2009-28]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Amending NYSE Rules 13, 902, 903, 904, 905 and Rule 906 To Eliminate 
Certain Order Types From the Off-Hours Trading Facility

March 12, 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 11, 2009, New York Stock Exchange LLC (``NYSE'' 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. NYSE filed 
the proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
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 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Rules 13 (Definitions of 
Orders), 902 (Off-Hours Trading Orders), 903 (Off-Hours Transactions), 
904 (Priority of Off-Hours Trading Orders), 905 (Off-Hours Trading 
Reports and Recordkeeping) and Rule 906 (Impact of Trading Halts on 
Off-Hours Trading) to eliminate certain order types from the off-hours 
trading facility. 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 Exchange 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
    Through this filing, the Exchange seeks to amend NYSE Rules 902, 
903, 904 and 906 to remove certain off-hours trading functions from the 
Exchange's Crossing Session I. The Exchange is making this change in 
connection with certain technology upgrades it expects to begin rolling 
out on or about March 16, 2009.
    As explained more fully below, customers who previously relied on 
the trading functions in Crossing Session I that are being eliminated 
will be able to execute their off-hours trades through the NYSE 
MatchPoint[supreg] system. The Exchange will continue to accommodate 
certain types of off-hours trading (error offset trades and trades 
between a member and the DMM for the purpose of offsetting a market-on-
close imbalance) in Crossing Session I.
I. Background
    The Exchange initiated its Off-Hours Trading Facility in June 
1991.\5\ In connection with its implementation, the Exchange adopted 
the ``900'' series of rules to govern trading, order eligibility, order 
entry and recordkeeping requirements.
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    \5\ See Securities Exchange Act Release No. 29237 (May 31, 
1991), 56 FR 24853 (June 3, 1991) approving File Nos. SR-NYSE-90-52 
and 90-53 which established the NYSE Off-Hours Trading Facility on a 
pilot basis. See also, Securities Exchange Act Release No. 33992 
(May 2, 1994), 59 FR 23907 (May 9, 1994) approving the NYSE Off-
Hours Trading Facility on a permanent basis.
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    In one application of the Off-Hours Trading Facility, members and 
member organizations may enter orders to be executed at the NYSE 
closing price, that is, the price established by the last regular way 
sale in a security at the official closing of the 9:30 a.m. to 4 p.m. 
trading session (``Crossing Session I''). Orders may be entered for any 
Exchange-listed issue, other than a security that is subject to a 
trading halt at the close of the regular trading session \6\ or is 
halted after 4 p.m. Crossing Session I normally runs from 4:15 p.m. to 
5 p.m. on each trading day.
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    \6\ This includes any market-wide trading halt instituted under 
Exchange Rule 80B (Trading Halts Due to Extraordinary Market 
Volatility).
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    Under Rule 902(a)(i) and (ii)(A) respectively, members may enter 
single-sided orders (i.e., either an order to buy or an order to sell) 
and coupled orders (i.e., both a buy and a sell order) into Crossing 
Session I. In addition, pursuant to Rule 902(b), the Exchange will 
migrate into Crossing Session I for possible execution any good-til-
cancelled (``GTC'') orders that have been designated as eligible for 
execution in the Off-Hours Trading Facility.\7\ These types of orders 
entered into Crossing Session I are usually executed at the end of the 
Session, i.e., at 5 p.m.
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    \7\ See NYSE Rule 13 (Definitions of Orders). GTC orders that 
have been designated as ``Off-Hours Eligible'' under this rule are 
referred to as ``GTX orders.''
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    Rules 903 and 904 describe, in pertinent part, how orders that are 
entered into the off-hours trading facility establish priority, and the 
execution protocols for such orders. Specifically, Rule 903 provides 
that single-sided and migrated GTX orders are to be executed against 
opposite side single-sided and GTX orders in the Off-Hours trading 
Facility, while coupled orders are to be executed against the other 
side of the coupled order. Rule 904 provides that GTX orders retain the 
priority among themselves that existed when they were entered into 
Display Book[supreg], while the priority of coupled orders will be 
determined based upon their sequence of entry into the Off-Hours 
Trading facility.
    Rule 905 requires that certain records be maintained by members and 
member organizations with respect to off-hours trading.
    Rule 906 outlines procedures under which Off-Hours Trading Facility 
orders in an NYSE-listed security may go unexecuted if such security 
was subject to a trading halt.
II. Proposed Changes to Off-Hours Order Processing and Rule Amendments
    The Exchange is preparing to institute a number of technology 
changes to its systems that will foster more efficient and cost 
effective processing of orders it receives. As part of these changes, 
the Exchange is phasing out the SuperDOT[supreg] system and will 
replace it with a system referred to as Super Display Book (``SDBK'').
    Because the Off-Hours Trading Facility relies on the SuperDOT 
system for certain trade processing functions, the Exchange plans to 
eliminate the ability for single-sided, coupled orders and GTX to be 
entered or migrated into the off-hours trading facility known as

[[Page 11801]]

Crossing Session I, and to instead direct customers to use the NYSE's 
MatchPoint system to effect those types of trades. Accordingly, the 
Exchange is proposing to amend Rules 902, 903, 905 and 906 and to 
rescind Rule 904 in its entirety to remove the provisions that relate 
to closing price single-sided, coupled and GTX orders. The Exchange 
also proposes to amend Rule 13 to remove provisions relating to GTX 
orders as these will no longer be supported by Exchange systems.
1. Proposed Amendments
a. Rule 13 (Definitions of Orders)
    When the Exchange created its Off-Hours Trading Facility, it 
decided to provide a means for good-til-cancelled (GTC) orders to 
become automatically eligible for execution in this facility if the 
person or entity who had entered the GTC order so desired. This would 
then provide a possible source of liquidity to the Off-Hours Trading 
Facility, and could increase a GTC order's chance of being executed 
since it could access additional liquidity that was entered into the 
Off-Hours Trading Facility that was not available during the Exchange's 
regular trading session. At the same time, the Exchange provided that 
the GTC orders designated to migrate to the Off-Hours Trading Facility 
would return to the Display Book, and retain their original priority on 
Display Book, if not executed in the Off-Hours Trading Facility. This 
would provide a further incentive to migrate GTC orders since they 
would not lose their standing on the Display Book as a result of the 
migration.
    The language indicating that a good-til-cancelled order may be 
designated as ``Off-Hours eligible'' and executed through the ``Off-
Hours Trading Facility'' is proposed for deletion as this order type is 
being eliminated. The Exchange also proposes to add language to the 
definition of the good-til-cancelled order type to indicate that these 
orders are not eligible for execution in any Off-Hours Trading Facility 
of the Exchange.
b. Rule 902 (Off-Hours Trading Orders)
    The Exchange proposes to delete paragraph (a)(i) (Closing-Price 
Orders) and paragraph (a)(ii)(A) (Closing-Price Coupled Orders) in 
their entirety to eliminate these as order types eligible for entry and 
execution in the Off-Hours Trading Facility.\8\ Paragraph (b) 
(Migration of Orders) is also proposed to be deleted to reflect the 
elimination of GTX, as that paragraph explains the migration of GTC 
orders from the regular hours trading session to the Off-Hours Trading 
Session. Paragraph (d) is proposed to be deleted since it explains that 
a migrated order (i.e., a GTX order) or a closing price order may be 
cancelled before execution. Paragraph (e) (Disposition of Unexecuted 
Orders) is proposed for deletion as it relates to migration of 
unexecuted GTX orders back to the Display Book if they are not executed 
in the Off-Hours Trading Facility, and to the fact that unexecuted 
closing-price orders expire if unexecuted in the Off-Hours trading 
Facility. References to closing-price orders and paragraphs (a)(ii) and 
(b) are proposed for deletion in paragraph (g) (Odd-Lots and Partial 
Round Lots).
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    \8\ The Exchange is retaining the Aggregate-Price Coupled Order 
type, as defined in Rule 900 (Off-Hours Trading: Applicability and 
Definitions), paragraph (e)(i). This order type is specified for 
coupled buy and sell orders representing 15 or more securities 
having a total market value of $1 million or more. These orders are 
entered and executed in Crossing Session II.
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c. Rule 903 (Off-Hours Transactions)
    Paragraph (a) (Priority of Single-Sided Orders) is proposed for 
deletion as it relates solely to this order type, which is being 
eliminated. In paragraphs (b) (Priority of Coupled Orders) and (c) 
(Binding Nature), references to closing-price, paragraph (a)(ii) of 
Rule 902 and paragraph (a) of Rule 903 are proposed for deletion as 
they will no longer be valid references. References to single-sided and 
coupled closing-price orders in (d) (Executions of Orders) are also 
proposed for deletion.
d. Rule 904 (Priority of Off-Hours Trading Orders)
    The Exchange proposes to delete this rule entirely. Rule 904 
(Priority of Off-Hours Trading Orders) relates to the priority of GTX 
among themselves as existed when these orders were on the Display Book, 
and the priority of closing-price orders entered into the Off-Hours 
Trading Facility.
e. Rule 905 (Off-Hours Trading Reports and Recordkeeping)
    A reference to closing price and migrated orders is proposed for 
deletion in paragraph (b) (Off-Hours Trading Records) of this rule.
f. Rule 906 (Impact of Trading Halts on Off-Hours Trading)
    Paragraph (a) (Security Halts Prior to Off-Hours Trading) is 
proposed to be deleted in its entirety as it relates to closing-price 
and migrated orders, which are both being eliminated. Paragraph (b) 
(Corporate Developments during Off-Hours Trading Session) of the rule 
establishes the Exchange's ability to halt trading in a security during 
the time it is open for Off-Hours Trading as a result of a corporate 
development. The Exchange proposes to delete subparagraphs (i), (ii) 
and (iii), which relate to closing-price and migrated GTC orders since 
they are being eliminated. The provision in the rule relating the 
permissibility of entry or the exemption from cancellation for closing 
price orders entered by Designated Market Makers (``DMMs'') in stocks 
that would otherwise be cancelled or prohibited from entry as a result 
of corporate developments to offset all or part of a market-on-close 
imbalance that existed in a stock prior to the close of the Exchange's 
regular trading session is being retained.\9\ In these instances, the 
DMM and the member organization taking the other side have already 
agreed to trade in the stock at the closing price and this agreement is 
not affected by the ensuing corporate development. The Exchange is 
therefore proposing to add the phrase ``as a result of corporate 
developments during the Off-Hours Trading Session'' to paragraph (b) to 
complete the last sentence of the paragraph.
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    \9\ These types of orders are entered pursuant to Rule 
902(a)(ii)(B).
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2. Availability of MatchPoint for Off-Hours Trading
    In the Exchange's view these changes will not significantly affect 
the experience of customers who would have previously submitted orders 
to Crossing Session I for execution since similar functionality exists 
in the MatchPoint system. MatchPoint is an NYSE electronic equity-
trading facility that matches aggregated orders at predetermined fixed 
times with prices that are derived from primary markets. There are 
seven matching sessions at fixed times throughout the trading day, and, 
of particular relevance to this filing, an after-hours matching session 
at 4:45 p.m.
    Orders in MatchPoint are executed at a single trading price (known 
as the ``reference price'') that, for the 4:45 match is equal to the 
NYSE official closing price for NYSE-listed securities and the official 
closing price of the primary market for all non-NYSE-listed 
securities.\10\ Customers who previously executed single-sided and 
coupled trades through Crossing Session I at the NYSE's official 
closing price can submit single-sided and coupled orders for execution 
through MatchPoint.
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    \10\ See, generally, NYSE Rule 1500 (NYSE MatchPoint\SM\) and 
Securities Exchange Act Release No. 57058 (December 28, 2007), 73 FR 
903 (January 4, 2008) approving adoption of that rule.

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[[Page 11802]]

    It should be noted that certain other order types allowed under 
Rule 902 will not be affected by the proposed changes, although after 
the phase-out, the Exchange will process these trades on a different 
system instead of through SuperDOT. In particular, Rule 902(a)(ii)(C) 
permits a coupled order to be submitted in Crossing Session I to 
address situations where a member or member organization wishes to 
close out an error at the closing price on the Exchange, and the 
Designated Market Maker has agreed to take the other side of the error 
trade. NYSE Rule 902(a)(ii)(B) permits entry of coupled orders when one 
side of such coupled order is for the account of a specialist member 
organization entered in those instances in which the coupled order 
reflects contra side interest to offset an imbalance of market-on-close 
orders \11\ that existed at the regular 4 p.m. close. The Exchange is 
not deleting these provisions from its rules, and member organizations 
will continue to be able to execute these trades in the same manner 
that they do today.
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    \11\ A ``market-on-close order is a market'' order which is to 
be executed in its entirety at the closing price, on the Exchange, 
of the stock named in the order, and if not so executed, is to be 
treated as cancelled. See NYSE Rule 13.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\13\ 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. The 
Exchange believes the proposed rule change will facilitate the timely 
and efficient execution of securities on the Exchange by eliminating 
the use of an under-utilized order types and thus ultimately serve to 
protect investors and the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 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 foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this 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) \14\ of the Act and subparagraph (f)(6) of Rule 
19b-4 \15\ thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the Exchange can implement a number 
of technology changes to its system related to off-hours trading 
immediately. The Exchange states that the proposed rule change does not 
significantly affect the protection of investors or the public interest 
and does not impose any significant burden on competition. NYSE 
believes that the proposed rule change is non-controversial in that it 
serves to allow the Exchange to merely eliminate duplicate functions 
with respect to entry of off-hours orders.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\16\ Because customers who previously relied on trading 
functions in Crossing Session I will be able to execute their off-hours 
trades through the NYSE MatchPoint[supreg] system, the elimination of 
such functionality within the Exchange's system does not appear to 
present any novel or significant regulatory issues or impose any 
significant burden on competition. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 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-2009-28 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-2009-28. 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 Room, 100 F Street, NE., 
Washington,

[[Page 11803]]

DC 20549, 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-NYSE-2009-28 and 
should be submitted on or before April 9, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5931 Filed 3-18-09; 8:45 am]

BILLING CODE 8011-01-P