Document ID: SEC-2010-0922-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-06-24T04:00Z

[Federal Register: June 24, 2010 (Volume 75, Number 121)]
[Notices]               
[Page 36140-36143]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jn10-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62311; File No. SR-NYSEAmex-2010-25]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Proposed Rule Change Amending NYSE Amex Rule 123C To Allow Exchange 
Systems To Provide Order Imbalance Information With Respect to Market 
At-the-Close and Marketable Limit At-the-Close Interest to Floor 
Brokers Beginning Two Hours and Until Fifteen Minutes Prior to the 
Scheduled Close of Trading on Every Trading Day

June 17, 2010.
    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 June 9, 2010, NYSE Amex LLC (``NYSE Amex'' 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 self-regulatory organization. The 
Commission is publishing this notice to solicit

[[Page 36141]]

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 proposes to amend NYSE Amex Rule 123C (``The Closing 
Procedures'') to describe the manner in which Exchange systems provide 
order imbalance information to Floor brokers. 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 LLC (``NYSE Amex'' or ``Exchange'') proposes to amend 
NYSE Amex Rule 123C(6) to specify that, beginning at 2:00 p.m. on every 
trading day,\3\ Floor brokers will receive an electronic communication 
from Exchange systems that provides the amount of, and any imbalance 
between, Market ``At-The-Close'' (``MOC'') interest and marketable 
Limit ``At-The-Close'' (``LOC'') interest to buy and MOC interest and 
marketable LOC interest to sell in certain securities.\4\ The MOC/LOC 
interest is executable only on the Close and is subject to cancellation 
at any time before 3:45 p.m.\5\
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    \3\ See e-mail from Theodore R. Lazo, NYSE Euronext, to Steve 
Kuan, Securities and Exchange Commission, on June 16, 2010 (``June 
16, 2010 e-mail''). On any day that the scheduled close of trading 
on the Exchange is earlier than 4:00 p.m., the information will be 
disseminated beginning two hours prior to the scheduled close of 
trading.
    \4\ The Exchange notes that parallel changes are proposed to the 
rules of its affiliate, the New York Stock Exchange LLC. See SR-
NYSE-2010-20 and June 16, 2010 e-mail.
    \5\ See NYSE Rule 123C(3) and (9).
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Background
    Pursuant to NYSE Amex Rule 115 (``Disclosure of Orders by DMMs''), 
DMMs may, while acting in a market making capacity, provide information 
about buying or selling interest in the market, including (a) 
Aggregated buying or selling interest contained in Floor broker agency 
interest files other than interest the broker has chosen to exclude 
from the aggregated buying and selling interest, (b) aggregated 
interest of Minimum Display Reserve Orders and (c) the interest 
included in DMM interest files, excluding CCS interest as described in 
Rule 1000(c), in response to an inquiry from a member conducting a 
market probe in the normal course of business. Market probes assist 
Floor brokers in representing customer orders efficiently and 
effectively. There is no limitation in Rule 115 as to the number of 
market probes permitted during the trading day.
    Historically, Floor brokers could only orally request a market 
probe from the specialist.\6\ As the NYSE Amex evolved to a more 
automated trading venue, the Exchange and the Floor community 
endeavored to address an increase in the volume of market probes by 
Floor brokers to specialists in the afternoon hours leading up to the 
closing transaction. In May 2008, Exchange systems began electronically 
providing to Floor brokers, the amount of, and any imbalance between 
MOC interest and marketable LOC interest to buy and MOC interest and 
marketable LOC interest to sell in each security in which a Floor 
broker is representing an order or in any security that the Floor 
broker electronically requests such information. In March 2010, as part 
of changes to the Exchange's closing process, Exchange systems began 
decrementing the total imbalance between MOC interest and marketable 
LOC interest to buy and MOC interest and marketable LOC interest to 
sell by any Closing Offset Orders on the opposite side of the imbalance 
to calculate the imbalance (the ``MOC/LOC imbalance information''). The 
dissemination of the MOC/LOC imbalance information to Floor brokers 
between 2 and 3:45 p.m. was deactivated on May 17, 2010. Floor brokers 
may still orally request and receive responses to market probes 
directly from DMMs.
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    \6\ The specialist is the predecessor to the DMM.
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Proposed Amendments to NYSE Amex Rule 123C(6)
    The Exchange proposes to amend NYSE Amex Rule 123C(6) to state 
that, between 2:00 p.m. and 3:45 p.m. on any trading day (or two hours 
prior to the closing transaction until 15 minutes prior to the closing 
transaction on any day that the scheduled close of trading on the 
Exchange is earlier than 4 p.m.), Exchange systems shall automatically 
provide the MOC/LOC imbalance information to Floor brokers, 
approximately every 15 seconds, for any security in which the Floor 
broker is representing an order and in any security that the Floor 
broker specifically requests. Specific requests for information by 
Floor brokers will not carry over to the next trading day and must be 
re-entered on each trade date Floor brokers want to receive the 
information. Beginning at 3:45 p.m., Floor brokers may receive the 
Exchange's proprietary Order Information Imbalance datafeed pursuant to 
NYSE Amex Rule 123C(6)(a)(iv). The Exchange provides the Order 
Information Imbalance datafeed to subscribers for a fee.
    The Exchange's proposed dissemination of this MOC/LOC imbalance 
information is the electronic evolution of the market probe response 
that Floor brokers have always been entitled to receive and may 
otherwise orally request directly from DMMs. While a vast majority of 
the transactions executed on the Exchange are automated, Floor brokers 
play an important role for customers in those transactions that require 
the expertise of a professional trading floor agent. Providing the MOC/
LOC imbalance information to Floor brokers is appropriate because a key 
component of their role as agent for these sophisticated customers is 
to provide market ``color'' to the extent permitted under applicable 
rules. The Exchange's electronic dissemination of this information 
would be limited to the Floor broker hand-held devices, which are 
unable to automatically forward or re-transmit the electronic datafeed 
to any other location, although Floor brokers are permitted to provide 
their customers with specific data points from the feed.\7\
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    \7\ Current NYSE Amex rules permit a Floor broker to communicate 
information obtained through a market probe to a customer using a 
wired telephone line (NYSE Amex Rule 36.20), an NYSE Amex approved 
portable phone (NYSE Amex Rule 36.21), or through a written 
electronic communication from the Floor brokers' hand-held device as 
permitted by the NYSE Amex's ``Wireless Data Communications 
Initiatives'' (See Securities Exchange Act Release No. 59627 (March 
25, 2009), 74 FR 14834 (April 1, 2009) (SR-NYSEAmex-2009-02). See 
June 16, 2010 e-mail. The Exchange records all of the information 
sent to and transmitted from the hand-held devices.
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    Finally, the Exchange proposes to correct erroneous rule text in 
123C(6)(a)(v). The rule text incorrectly states that the dissemination 
of the Order Imbalance Datafeed commences 10 minutes prior to the 
scheduled close

[[Page 36142]]

of trading on any day that the scheduled close of trading on the 
Exchange is earlier than 4 p.m. The 10 minute interval is a legacy time 
frame related to the Exchange's prior publication of imbalance at 3:40 
p.m. and 3:50 p.m. When the Exchange moved to a single imbalance 
publication at 3:45 p.m., the rule text should have been modified to 
reflect that dissemination of the Order Imbalance Information on any 
day that the scheduled close was prior to 4 p.m. would commence 
approximately 15 minutes before the scheduled closing time consistent 
with the single imbalance publication. The Exchange therefore seeks to 
amend NYSE Amex Rule 123C(6)(a)(v) accordingly.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5),\8\ which requires that an exchange 
have rules that are designed to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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 is 
consistent with these objectives in that the dissemination of MOC/LOC 
imbalance information would provide Floor brokers with an understanding 
of developing trends early enough to get appropriate direction from 
their customers and to know where on the physical Trading Floor it 
needs to deploy its brokers in preparation for the closing transaction. 
Overall, the Exchange believes that dissemination of MOC/LOC imbalance 
information to Floor brokers is consistent with the above objectives 
because it removes impediments to and perfects the mechanism of a free 
and open market through the efficient operation of the Exchange.
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    \8\ 15 U.S.C. 78f(b)(5).
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    Dissemination of MOC/LOC imbalance information to Floor brokers 
would serve as an efficiency tool to enhance the Floor brokers' ability 
to meet their best execution obligations in the face of a dilemma that 
is unique to a physical Trading Floor, i.e., how to position resources 
so that they are in the correct place to execute orders on behalf of 
sophisticated customers whose needs are not effectively met by strictly 
electronic trading. While the imbalance information is important to 
Floor brokers in carrying out their obligations to those customers, the 
Exchange believes this information would not be material to market 
participants executing automated orders. In this regard, the Exchange 
believes it is appropriate to provide Floor brokers with specific types 
of information that is directly related to the unique functions they 
perform on the Trading Floor.
    In this particular case, the Exchange believes that the 
dissemination of MOC/LOC information to Floor brokers would promote the 
efficient operation of the Exchange's market by reducing the frequency 
of time-consuming Floor broker oral market probes leading up to the 
closing transaction, thus affording DMMs more time to monitor trading. 
As trading has become more electronic, staffing on the trading Floor 
has declined, so that there are now fewer Floor brokers even as the 
number of listed securities has increased.\9\ Similarly, DMM units and 
individual DMMs on the Floor, are managing trading in greater numbers 
of stocks than ever before. The need for DMMs to be focused on their 
assigned securities, particularly on high volume trading days, such as 
an Expiration Friday or an index rebalancing event, or trading days 
with high levels of market volatility, is critical to the maintenance 
of fair and orderly markets.\10\
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    \9\ The number of Floor brokers operating on the Exchange Floor 
has decreased since 2004 from approximately 800 Floor brokers to 
approximately 325 Floor brokers operating on the Floor today.
    \10\ It should be noted that NYSE rules and the Federal 
securities laws provide safeguards that are designed to deter the 
potential abuse of market probe information. For example, Floor 
broker member organizations are not permitted to initiate 
proprietary orders on the Floor. In addition, Floor brokers 
representing a principal or proprietary order that has been 
initiated in the off-Floor premises of the firm are subject to the 
requirements of Section 11(a) of the Securities Exchange Act of 
1934.
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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 self-regulatory organization consents, the Commission will:
    (A) By order approve such 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 Number SR-NYSEAmex-2010-25 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-NYSEAmex-2010-25. 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 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

[[Page 36143]]

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-
NYSEAmex-2010-25 and should be submitted on or before July 15, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15245 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P