Document ID: SEC-2010-0908-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-06-23T04:00Z

[Federal Register: June 23, 2010 (Volume 75, Number 120)]
[Notices]               
[Page 35862-35864]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jn10-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62293; File No. SR-NYSEAmex-2010-50]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Equities Rule 123C(9)(a)(1) To Extend the Operation of a Pilot 
Operating Pursuant to the Rule Until December 1, 2010

June 15, 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 June 7, 2010, 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(9)(a)(1) to extend the operation of a pilot operating pursuant to 
the Rule until December 1, 2010. 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
    NYSE Amex proposes to amend NYSE Amex Equities Rule 123C(9)(a)(1) 
to extend the operation of a pilot that allows the Exchange to 
temporarily suspend certain rule requirements at the close when extreme 
order imbalances may cause significant dislocation to the closing price 
(``Extreme Order Imbalances Pilot'' or ``Pilot'') \4\ until December 1, 
2010.\5\
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    \4\ See Securities Exchange Act Release No. 59755 (April 13, 
2009) 74 FR 18009 (April 20, 2009) (SR-NYSEALTR-2009-15); see also 
Securities and Exchange Act [sic] Release No. 61265 (December 31, 
2009), 75 FR 1094 (January 8, 2010) (SR-NYSEAmex-2009-96) (extending 
the operation of the pilot from December 31, 2009 to March 1, 2010).
    \5\ The Exchange notes that parallel changes are proposed to be 
made to the rules of New York Stock Exchange LLC. See SR-NYSE-2010-
42.
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Background
    Pursuant to NYSE Amex Equities Rule 123C(9)(a)(1), the Exchange may 
suspend NYSE Amex Equities Rule 52 (Hours of Operation) to resolve an 
extreme order imbalance that may result in a price dislocation at the 
close as a result of an order entered into Exchange systems, or 
represented to a DMM orally at or near the close. The provisions of 
NYSE Amex Equities Rule 123C(9)(a)(1) operate as the Extreme Order 
Imbalance Pilot.\6\
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    \6\ The Exchange notes that a version of the instant filing 
requesting an extension of the Pilot was formally filed with the 
Commission on May 27, 2010. The Pilot was scheduled to expire on 
June 1, 2010. On June 7, 2010, SEC systems generated a rejection 
notice to the Exchange related to the extension request submitted on 
May 27, 2010, due to technical deficiencies in that filing. The 
instant version corrects those technical deficiencies and seeks 
continue the operation of the Pilot until December 1, 2010. The 
Exchange did not invoke the provisions of the Pilot between June 1, 
2010 and June 7, 2010.
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    As a condition of the approval to operate the Pilot, the Exchange 
committed to provide the Commission with information regarding: (i) How 
often a NYSE Amex Equities Rule 52 temporary suspension pursuant to the 
Pilot was invoked during the six months following its approval; and 
(ii) the Exchange's determination as to how to proceed with technical 
modifications to reconfigure Exchange systems to accept orders 
electronically after 4 p.m.
    During the operation of the Pilot, the Exchange believed that the 
systems modifications to allow Exchange systems to accept orders 
electronically after 4 p.m. would not be as onerous as previously 
believed when the Pilot was initially commenced. The Exchange completed 
the system modifications necessary to accept orders electronically 
after 4 p.m. and began the process of testing the modifications. The 
Exchange therefore filed to extend the Extreme Order Imbalance Pilot 
until the earlier of SEC approval to make such Pilot permanent or June 
1, 2010.\7\ At the time, the Exchange anticipated that its quality 
assurance review process would be completed by June 1, 2010 and it 
would be able to operate under the new system. The quality assurance 
review determined that additional testing was required in order to 
assure the optimal functioning of the system modifications. Given 
unanticipated market wide initiatives that were (i.e., short sale and 
stock-by-stock circuit breakers), which require systemic modifications 
and a significant allocation of quality assurance resources, additional 
testing is not feasible at this time.
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    \7\ See Securities Exchange Act Release No. 61611 (March 1, 
2010), 75 FR 10530 (March 8, 2010) (SR-NYSEAmex-2010-15) (extending 
the operation of the pilot from March 1, 2010 to June 1, 2010).
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Proposal To Extend the Operation of the Extreme Order Imbalance Pilot
    The Exchange established the Extreme Order Imbalance Pilot to 
create a

[[Page 35863]]

mechanism for ensuring a fair and orderly close when interest is 
received at or near the close that could negatively affect the closing 
transaction. The Exchange believes that this tool has proved very 
useful to resolve an extreme order imbalance that may result in a 
closing price dislocation at the close as a result of an order entered 
into Exchange systems, or represented to a DMM orally at or near the 
close.
    NYSE Amex Equities Rule 123C(9) was intended to be and has been 
invoked to attract offsetting interest in rare circumstances where 
there exists an extreme imbalance at the close such that a DMM is 
unable to close the security without significantly dislocating the 
price. This is evidenced by the fact that during the course of the 
Pilot to date, the Exchange invoked the provisions of NYSE Amex 
Equities Rule 123C(9), including the provisions of the Extreme Order 
Imbalance Pilot pursuant to NYSE Amex Equities Rule 123C(9)(a)(1), in 
two securities on June 26, 2009, the date of the annual rebalancing of 
Russell Indexes.
    Given the infrequency of these situations, the Exchange proposes to 
extend the operation of the Pilot for a six month period to allow the 
Exchange to complete systemic modifications required to implement the 
short sale and stock-by-stock circuit breakers, as well as to upgrade 
server capacity and an upcoming initiative to incorporate odd-lot 
orders into the round lot market and decommission its Odd-lot System. 
During the six month period, the Exchange will continue to monitor and 
provide to the Commission information on how often it suspends NYSE 
Amex Equities Rule 52 (Hours of Operation) to resolve an extreme order 
imbalance that may result in a price dislocation at the close as a 
result of an order entered into Exchange systems, or represented to a 
DMM orally at or near the close. At the end of that period, the 
Exchange will be in a better position to determine the efficacy of 
providing any additional functionality under this Pilot rule. The 
Exchange therefore requests an extension from the current expiration 
date of June 1, 2010, until December 1, 2010.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \8\ 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. The Exchange believes that the 
instant filing is consistent with these principles. Specifically an 
extension will allow the Exchange to determine the efficacy of 
providing any additional functionality under this Pilot rule. The rule 
operates to protect investors and the public interest by ensuring that 
the closing price at the Exchange is not significantly dislocated from 
the last sale price by virtue of an extreme order imbalance at or near 
the close.
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    \8\ 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 \9\ and 
Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19-4(f)(6)(iii) 
under the Act, the Exchange is required to give 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 requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ 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.
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the operative delay is 
consistent with the protection of investors and the public interest. 
The pilot program was scheduled to expire on June 1, 2010. The 
Commission notes that, although the exchange requested an extension 
from June 1, 2010, because the filing was not properly made until June 
7, 2010, the pilot consequently expired. However, the Commission finds 
good cause to waive the operative delay because doing so will allow 
immediate reinstatement of the pilot program as of June 7, 2010.\13\ In 
addition, the Commission notes that the Exchange requested the 
extension to allow the Exchange time to fully evaluate the Extreme 
Order Imbalance Pilot. Therefore, the Commission designates the 
proposed rule change operative upon filing.\14\
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    \13\ The Commission notes that the Exchange did not invoke the 
provisions permitting supervision of NYSE Amex Equities Rule 52 
between June 1 and June 7, 2010. See supra note 6.
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered
    the proposed rule's impact on efficiency, competition, and 
capital formation. 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 No. SR-NYSEAmex-2010-50 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-2010-50. This file 
number should be included on the

[[Page 35864]]

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,\15\ 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 NYSE Amex. 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-2010-50 and should be submitted on or before July 
14, 2010.
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    \15\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15129 Filed 6-22-10; 8:45 am]
BILLING CODE 8010-01-P