Document ID: SEC-2009-0202-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Alternext US LLC
Posted Date: 2009-02-11T05:00Z

[Federal Register: February 11, 2009 (Volume 74, Number 27)]
[Notices]
[Page 6936-6939]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11fe09-102]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59360; File No. SR-NYSEALTR-2009-06]

Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NYSE Alternext U.S. LLC
Amending NYSE Alternext Equities Rules 116 and 123C To Create a Single
Closing Print To Be Reported to the Consolidated Tape for Each Security

February 4, 2009.
    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 2, 2009, NYSE Alternext US LLC (the
``Exchange'' or ``NYSE Alternext'') 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. NYSE Alternext filed the proposed
rule change pursuant to Section 19(b)(3)(A) of the Act \4\ and Rule
19b-4(f)(6) thereunder,\5\ which renders it 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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 Alternext Equities Rules 116
(``Stop'' Constitutes Guarantee) and 123C (Market On The Close Policy
And Expiration Procedures) to create a single closing print to be
reported to the Consolidated Tape for each security.
    The text of the proposed rule change is available at http://
www.nyse.com, the Exchange, and the Commission's Public Reference Room.

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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Through this filing the Exchange seeks to amend NYSE Alternext
Equities Rules 116 and 123C to create a single closing print to be
reported to the Consolidated Tape for each security.
Background
    As described more fully in a related rule filing,\6\ 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'').\7\ The
effective date of the Merger was October 1, 2008.
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    \6\ 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).
    \7\ 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 equity trading systems and facilities at
11 Wall Street (the ``NYSE Alternext Trading Systems'') are operated by
the NYSE on behalf of the Exchange.\8\
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    \8\ 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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[[Page 6937]]

    In order to implement the Equities Relocation, the Exchange adopted
Rules 1-1004 of the New York Stock Exchange LLC as the NYSE Alternext
Equities Rules to govern the equities trading on the NYSE Alternext
Trading Systems.
Current Reporting of Closing Transactions
    NYSE Alternext Equities Rules 116.40 and 123C prescribe, inter
alia, the procedures for the execution of the entry of market at-the-
close (``MOC'') and limit at-the-close (``LOC'') orders \9\ and the
determination of the closing print(s) to be reported to the
Consolidated Tape for each security at the close of trading.
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    \9\ In the NYSE Alternext Equities Rules and for the purposes of
this discussion, the terms ``market-on-close'' and ``limit-on-
close'' are used interchangeably with ``market-at-the-close'' and
``limit-at-the-close''.
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    Pursuant to NYSE Alternext Equities Rule 123C market participants
may enter an MOC order to have that order executed as part of the
closing transaction at the price of the close.\10\ Similar to a market
order, an MOC order is to be executed in its entirety at the closing
price; however, if the order is not executed as a result of a trading
halt or because of its terms (e.g., buy minus or sell plus), the MOC
order is cancelled.\11\
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    \10\ See NYSE Alternext Equities Rule 123C(1).
    \11\ See Id.
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    Market participants that seek to have their orders executed on the
close but are sensitive to price may, pursuant to NYSE Alternext
Equities Rule 123C, enter LOC orders that will be eligible for
execution in the closing transaction, provided that the closing price
is at or within the limit specified.\12\ An LOC order is not guaranteed
an execution in the closing transaction; rather, only an LOC order with
a limit price that is better \13\ than the closing price in the subject
security is guaranteed an execution.\14\ An LOC order limited at the
closing price is sequenced with other LOC orders on the NYSE Alternext
Equities Display Book[supreg] \15\ (``Display Book'') in time priority
and will be available for execution after all other orders on the
Display Book at the closing price are executed regardless of when such
other orders are received.\16\
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    \12\ See NYSE Alternext Equities Rule 123C(2).
    \13\ As used herein, better than the closing price means an
order that is lower than the bid in the case of an order to sell or
higher than the offer in the case of an order to buy.
    \14\ It should be noted that orders are cancelled if there is a
trading halt in the security that is not lifted prior to the close
of trading.
    \15\ The Display Book system is an order management and
execution facility. The Display Book system receives and displays
orders to the DMM, contains the Book, and provides a mechanism to
execute and report transactions and publish results to the
Consolidated Tape. The Display Book system is connected to a number
of other Exchange systems for the purposes of comparison,
surveillance, and reporting information to customers and other
market data and national market systems.
    \16\ See NYSE Alternext Equities Rules Rule [sic] 123C(2).
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    Pursuant to NYSE Alternext Equities Rule 123C(5), at 3:40 p.m. if a
security has a disparity between MOC and marketable LOC interest to buy
and MOC and marketable LOC interest to sell of 50,000 shares or more
the assigned DMM is required to send a message from Display Book that
is published to the Consolidated Tape informing the investing public of
the disparity (``Mandatory Indication''). The Mandatory Indication
includes the symbol, the amount and the side of the imbalance. In
addition, to the Mandatory Indication, a DMM may, with Floor Official
approval, disseminate an imbalance publication that is for a disparity
of less than 50,000 shares when the imbalance in the security is
significant in relation to the average daily trading volume in the
security. At 3:50 p.m. the DMM is required to provide an update of the
previous imbalance publications.
    At the close of trading, any closing imbalance of MOC and
marketable LOC orders are calculated by netting (i.e., pairing off) the
aggregate amount of MOC and marketable LOC buy orders against the
aggregate amount of MOC and marketable LOC sell orders.\17\ Exchange
systems calculate the number of MOC and marketable LOC orders on each
side of the market and pair them off. Where there is an imbalance (i.e.
more orders to buy than sell or vice versa), the shares constituting
the imbalance are executed against the offer (in case of a buy
imbalance) or the bid (in the case of a sell imbalance).\18\ This
transaction is reflected on the first closing print from the NYSE to
the Consolidated Tape for the particular security.\19\ The DMM then
pairs off the remaining MOC and marketable LOC buy and sell orders
against each other at the price at which the imbalanced shares were
executed.\20\ This ``pair off'' transaction is reported as a second
closing print from the NYSE to the Consolidated Tape as ``stopped
stock.'' \21\
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    \17\ See NYSE Alternext Equities Rules 116.40 and 123C(3).
    \18\ See NYSE Alternext Equities Rules 116.40(B) and 123C(3)(A).
    \19\ See Id.
    \20\ See NYSE Alternext Equities Rule 123C(3)(A).
    \21\ See NYSE Alternext Equities Rules 116.40(C) and 123C(3)(A).
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    If there is no imbalance, the aggregate buy and sell MOC and
marketable LOC orders are paired off at the price of the last sale of
the subject security on the Exchange prior to the close of trading in
the security.\22\ This transaction is reported to the Consolidated Tape
in a single closing print as ``stopped stock.'' \23\
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    \22\ See NYSE Alternext Equities Rules 116.40(C) and 123C(3)(B).
    \23\ See Id.
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Proposed Single Closing Print
    The closing transaction on the Exchange continues to be a manual
auction in order to facilitate greater price discovery and allow for
the maximum interaction between market participants. Currently,
increased volatility in the market has given rise to the need to
simplify procedures. In order to continue to provide timely closing of
securities, the Exchange believes that it is necessary to reduce the
manual processing required of the DMM to promote an even more efficient
close. As such, the Exchange seeks to create a single closing print to
be reported to the Consolidated Tape for each security. The Exchange
believes that this will work to optimize the efficient operation of the
closing process.
    The Exchange therefore proposes to amend NYSE Alternext Equities
Rules 116 and 123C(3) to provide for a single closing print to be
reported to the Consolidated Tape system for each listed security.
Currently, the DMM is required to manually enter the imbalance and the
paired prints to Exchange systems for reporting to the Consolidated
Tape. Requiring two prints impedes DMMs' efficiency in reporting the
closing transaction.
    Multiple closing prints were used to provide information about the
share imbalances that impacted the closing price of a security on the
Exchange. NYSE Alternext Equities Rule 123C allows Exchange systems to
disseminate a data feed of real-time order imbalances that accumulate
prior to the close of trading on the Exchange (``Order Imbalance
Information''). Order Imbalance Information is supplemental information
disseminated by the Exchange prior to a closing transaction.\24\
Specifically, Order Imbalance Information is disseminated every fifteen
seconds between 3:40 p.m. and 3:50 p.m.; thereafter, it is disseminated
every five seconds between 3:50 p.m. and 4 p.m. On any day that the
scheduled close of trading on the Exchange is earlier than 4 p.m., the
dissemination of Order Imbalance Information commences 20 minutes

[[Page 6938]]

before the scheduled closing time. On those days, Order Imbalance
Information is disseminated every fifteen seconds for approximately 10
minutes; thereafter, the Order Imbalance Information is disseminated
ever [sic] five seconds until the scheduled closing time.
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    \24\ See NYSE Alternext Equities Rule 123C(6).
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    The Exchange believes that the Order Imbalance Information achieves
the goal of providing real-time detail and transparency for market
participants about the factors that impact the closing price of a
security. The Exchange further notes that the current imbalance
publications pursuant to NYSE Alternext Equities Rule 123C(5) will
continue to be disseminated in accordance with the provisions of the
rule. As such, the Exchange believes that there no longer exists a need
for the dissemination of two separate prints at the close.
    The Exchange therefore proposes that the imbalance, if any, paired
off closing transactions and stop orders elected for execution on the
close be reported to the Consolidated Tape System as a single
transaction and print. The Exchange proposes to amend the text of NYSE
Alternext Equities Rule 116.40(C) to remove language that states that
``pair off'' transactions should be printed to the Consolidated Tape as
stopped stock. Similarly, the Exchange proposes to amend NYSE Alternext
Equities Rule 123C(3) (Closing Prints) to state that the imbalance and
the pair off amounts shall be printed to the Consolidated Tape as a
single transaction.
    Pursuant to the above proposed changes, a single print close in a
security would occur as described in the example below:

    The DMM for stock XYZ has determined that the closing price in
the stock will be $30.25. The last sale price on the Exchange was
$30.00. The DMM has 6,000,000 shares of MOC and marketable LOC buy
orders up to a price of $30.25. On the sell side, there are
5,000,000 MOC and marketable LOC sell orders down to a price of
$30.24. The DMM pairs 5,000,000 shares of MOC and marketable LOC buy
orders against the 5,000,000 shares of MOC and marketable LOC sell
orders at a price of $30.25, leaving an imbalance of 1,000,000
shares on the buy side. On the Display Book, the DMM has 700,000
shares of limit sell orders at various prices marketable up to a
price of $30.25, and there is also Crowd interest of 300,000 shares
at that price. The DMM will use the 700,000 shares of limit sell
orders on the Display Book and 300,000 shares of Crowd interest to
offset the remaining 1,000,000 shares of MOC and marketable buy LOC
imbalance.

    In the above example, the DMM would continue to arrange the closing
transaction as set forth in NYSE Alternext Equities Rules 123C(3) and
116.40; however, rather than reporting two separate closing prints to
the Consolidated Tape, a single closing print reflecting the execution
of 6,000,000 shares at $30.25 would be reported. The 6,000,000 share
volume in the single print close includes: (1) the 1,000,000 share buy
order imbalance; and (2) the 5,000,000 shares of MOC and marketable LOC
buy and sell orders that were paired off.
    The Exchange believes that the consolidation of the separate
closing transactions and prints will reduce the amount of manual
information to be reported by the DMM thus increasing the speed and
efficiency of the closing process ultimately improving the quality of
the Exchange market with timelier reporting of closing transactions.
Proposed Technical Amendment to NYSE Alternext Equities Rule 123C(3)
    Percentage orders are not valid orders on the Exchange; however,
there remains an inadvertent reference to this legacy order type in
NYSE Alternext Equities Rule 123C(3). The Exchange therefore seeks to
correct this oversight by deleting that reference to percentage order
from the rule through this filing given that percentage orders are not
valid order types.
Proposed Changes to NYSE Alternext Rules
    The Exchange notes that parallel changes are proposed to be made to
the rules of the NYSE. These changes are described in SR-NYSE-2009-
10.\25\
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    \25\ See SR-NYSE-2009-10 (filed January 30, 2009).
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Operative Date
    The Exchange proposes that the amendments herein will be operative
as of February 6, 2009.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\26\ in
general, and furthers the objectives of Section 6(b)(5) of the Act,\27\
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 closing of securities on the Exchange and thus ultimately
serve to protect investors and the public interest.
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    \26\ 15 U.S.C. 78f(b).
    \27\ 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 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 \28\ and Rule 19b-4(f)(6) thereunder.\29\
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    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 17 CFR 240.19b-4(f)(6).
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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.\30\ 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 requested that the Commission waive
the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii),\31\
and has proposed to make the rule change operative as of February 6,
2009.
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    \30\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the
Commission 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.
    \31\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest
because doing so will enable the Exchange to immediately implement a
more efficient closing process, thereby providing for timelier
reporting of the

[[Page 6939]]

closing transaction. Additionally, the Commission notes that the
Exchange will continue to publish the Mandatory Indication when there
is a significant imbalance before the close, as required under Rule
123C(5). Accordingly, the Commission designates the proposed rule
change as operative as of February 6, 2009.\32\
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    \32\ For purposes only of waiving the operative delay for this
proposal, the Commission has 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.\33\
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    \33\ 15 U.S.C. 78s(b)(3)(C).
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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-NYSEALTR-2009-06 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-NYSEALTR-2009-06. 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, 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 Number SR-NYSEALTR-2009-06 and should
be submitted on or before March 4, 2009.
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    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2856 Filed 2-10-09; 8:45 am]

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