Document ID: SEC-2008-1740-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Alternext US LLC
Posted Date: 2008-12-31T05:00Z

[Federal Register: December 31, 2008 (Volume 73, Number 251)]
[Notices]               
[Page 80502-80504]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31de08-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59144; File No. SR-NYSEALTR-2008-12]

 
Self-Regulatory Organizations; NYSE Alternext US LLC; Notice of 
Filing of Proposed Rule Change To Establish Its New Risk Management 
Gateway Service

December 22, 2008.
    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 December 12, 2008, NYSE Alternext US LLC (``NYSE Alternext'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, formerly the American Stock Exchange LLC, is 
proposing to establish its new Risk Management Gateway (``RMG'') 
service.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE Alternext 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 these statements may be examined at the places 
specified in Item IV below. NYSE Alternext has prepared summaries, set 
forth in sections A, B, and C below, of the most significant aspects of 
such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to offer, through NYSE Euronext Advanced 
Trading Solutions, Inc., the RMG service to NYSE Alternext members and 
member organizations. NYSE Transact Tools, Inc, a division of the NYSE 
Euronext Advanced Trading Solutions Group (``NYXATS''), owns RMG. RMG 
is a part of the NYSE Alternext Trading Systems (defined below) 
operated on behalf of the Exchange by New York Stock Exchange LLC 
(``NYSE'').\3\
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    \3\ NYXATS similarly seeks to offer the same services to the 
NYSE through a separate filing, SR-NYSE-2008-101.
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Background
    As described more fully in a related rule filing,\4\ NYSE Euronext 
acquired The Amex Membership Corporation (``AMC'') pursuant to an 
Agreement and Plan of Merger, dated January 17, 2008 (the ``Merger''). 
In connection with the Merger, the Exchange's predecessor, the American 
Stock Exchange LLC (``Amex''), a subsidiary of AMC, became a subsidiary 
of NYSE Euronext called NYSE Alternext US LLC, and continues to operate 
as a national securities exchange registered under Section 6 of the 
Securities Exchange Act of 1934, as amended (the ``Act'').\5\ The 
effective date of the Merger was October 1, 2008.
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    \4\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex 
2008-62) (approving the Merger).
    \5\ 15 U.S.C. 78f.
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    In connection with the Merger, on December 1, 2008, the Exchange 
relocated all equities trading conducted on the Exchange legacy trading 
systems and facilities located at 86 Trinity Place, New York, New York 
(the ``86 Trinity Trading Systems''), to trading systems and facilities 
located at 11 Wall Street, New York, New York (the ``Equities 
Relocation''). The Exchange's trading systems and facilities at 11 Wall 
Street (the ``NYSE Alternext Trading Systems'') are operated by the 
NYSE on behalf of the Exchange.\6\
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    \6\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex 2008-63) (approving 
the Equities Relocation).
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    In order to implement the Equities Relocation, the Exchange adopted 
NYSE Rules 1-1004 as the NYSE Alternext Equities Rules to govern 
trading on the NYSE Alternext Trading Systems. Rule 54--NYSE Alternext 
Equities provides that only members are permitted to ``* * * make or 
accept bids or offers, consummate transactions, or otherwise transact 
business on the Floor for any security admitted to dealings on the 
[Exchange] * * *.'' \7\
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    \7\ See also Rule 2--NYSE Alternext Equities.
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    Pursuant to Rule 123B--NYSE Alternext Equities, however, the 
Exchange permits NYSE Alternext members and member organizations (a 
``Sponsoring Member Organization'') to sponsor access to Exchange 
systems by non-member firms or customers (``Sponsored Participants''). 
Rule 123B--NYSE Alternext Equities is a general sponsored access rule 
that permits a Sponsoring Member Organization to sponsor a Sponsored 
Participant's access to Exchange systems for the Sponsored 
Participant's entry and execution of orders on the Exchange. Rule 
123B--NYSE Alternext Equities reflects the Exchange's general policy 
regarding sponsored access to the Exchange; it does not govern access 
to NYSE Alternext Bonds.\8\ NYSE Arca, Inc. and other market centers 
similarly permit sponsored access to their trading systems.
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    \8\ That is, currently, the provisions of Rule 123B--NYSE 
Alternext Equities do not apply to Rule 86--NYSE Alternext Equities 
as that rule independently contains provisions related to how a user 
gains sponsored access to the NYSE Alternext Bonds system.
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RMG
    Traditionally, the customers of a member or member organization 
gave orders to the member or member organization and the member or 
member organization then submitted those orders to the Exchange on 
behalf of the customer. By means of sponsored access, a member or 
member organization will allow its customers to enter orders directly 
into the trading systems of the Exchange as Sponsored Participants, 
without the Sponsoring Member Organization acting as an intermediary.
    To facilitate the ability of Sponsoring Member Organizations to 
monitor and oversee the sponsored access activity of their Sponsored 
Participants, NYXATS will offer an order-verification service to 
Sponsoring Member Organizations. This service will act as a risk filter 
by causing the orders of Sponsored Participants to pass through RMG 
prior to entering the

[[Page 80503]]

Exchange's trading systems for execution. When a Sponsored 
Participant's order passes through RMG, RMG software determines whether 
the order complies with order criteria that the Sponsoring Member 
Organization has established for that Sponsored Participant. The order 
criteria pertain to such matters as the size of the order (per order or 
daily quantity limits) or the credit limit (per order or daily value) 
that the Sponsoring Member Organization has established for the 
Sponsored Participant. Additional risk filters may also be selected by 
the Sponsoring Member Organization relating to specific symbols or end 
users.
    If the order is consistent with the parameters set by the 
Sponsoring Member Organization, then RMG allows the order to continue 
along its path to the Exchange's trading systems. If the order falls 
outside of those parameters, then RMG returns the order to the 
Sponsored Participant. RMG will only return an order to the Sponsored 
Participant when the order fails to comply with the criteria set by the 
Sponsoring Member Organization.
    RMG software interacts with orders only prior to the orders' entry 
into the Exchange's trading system for execution. RMG does not have 
order execution or trade reporting capabilities (though it will allow a 
Sponsoring Member Organization to monitor the orders of its Sponsored 
Participants). RMG maintains a record of all messages relating to 
Sponsored Participants' transactions and supplies a copy of such 
messages to the applicable Sponsoring Member Organization.
    The Sponsoring Member Organization, and not RMG, will have full 
responsibility for ensuring that Sponsored Participants' sponsored 
access to the Exchange complies with the Exchange's sponsored access 
rules. The use of RMG by a Member Organization does not automatically 
constitute compliance with Exchange rules.
    NYXATS will host RMG software on NYXATS' infrastructure. After 
passing through RMG software, each order will enter the NYSE Common 
Customer Gateway (CCG) \9\ for connectivity to the Exchange's matching 
engine. In the future NYXATS may integrate RMG into the NYSE CCG for 
more direct access to the Exchange's matching engine.
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    \9\ The NYSE CCG is a part of the NYSE Alternext Trading 
Systems, operated on behalf of the Exchange by NYSE.
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    The Exchange does not require Sponsoring Member Organizations to 
use RMG (even when it is integrated into NYSE CCG in the future). 
Sponsoring Member Organizations are free to use a competing risk-
management service or to use none at all. The Exchange will not provide 
preferential treatment to Sponsoring Member Organizations using RMG.
    The Exchange proposes to make RMG available to its members and 
member organizations pursuant to contractual arrangements. The Exchange 
believes that RMG will offer its members and member organizations 
another option in the efficient risk management of its Sponsored 
Participant's access to the NYSE Alternext Trading Systems.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \10\ 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 proposed rule change also is 
designed to support the principles of section 11A(a)(1) \11\ in that it 
seeks to assure economically efficient execution of securities 
transactions, make it practicable for brokers to execute investors' 
orders in the best market and provide an opportunity for investors' 
orders to be executed without the participation of a dealer. The 
Exchange believes that RMG is consistent with all the aforementioned 
principles because it fosters competition by providing another option 
in the efficient risk management of trading on the Exchange without the 
participation of a dealer.
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    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78k-1(a)(1).
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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 Exchange 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.

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-NYSEALTR-2008-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street, NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number SR-NYSEALTR-2008-12. 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, 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

[[Page 80504]]

available publicly. All submissions should refer to File Number SR-
NYSEALTR-2008-12 and should be submitted on or before January 21, 2009.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-31101 Filed 12-30-08; 8:45 am]

BILLING CODE 8011-01-P