[Federal Register Volume 76, Number 131 (Friday, July 8, 2011)]
[Notices]
[Pages 40410-40412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17123]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64797; File No. SR-NYSEAmex-2011-46]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Exchange
Rule 1000(a)(iv) To Provide for a Different Liquidity Replenishment
Point Value Range During the First Day of Trading of an Initial Public
Offering on the Exchange
July 1, 2011.
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 28, 2011, NYSE Amex LLC (``NYSEAmex'' or the ``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. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend NYSE Amex Equities Rule 1000(a)(iv)
to provide for a different liquidity replenishment point (``LRP'')
value range during the first day of trading of an initial public
offering (``IPO'') on the Exchange. 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 these 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 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 amend NYSE Amex Equities Rule 1000(a)(iv)
to provide for a different LRP value range during the first day of
trading of an IPO on the Exchange. Specifically, the Exchange proposes
to add proposed Rule 1000(a)(iv)(E) to provide that on the first day of
trading of an IPO, the LRP value shall be the greater of $2.00 or the
LRP value range that would be applicable based on the offering price of
the IPO.
I. Background
Pursuant to NYSE Amex Equities Rule 1000(a)(iv), LRPs are pre-
determined price points that function to moderate volatility in a
particular security, improve price continuity, and foster market
quality by temporarily converting the electronic market to an auction
market and permitting new trading interest to add liquidity.\3\
---------------------------------------------------------------------------
\3\ See also NYSE Amex Equities Rules 60(e)(i).
---------------------------------------------------------------------------
Pursuant to NYSE Amex Equities Rule 60, Autoquote is suspended when
an LRP is reached, i.e., when the unfilled balance of an incoming
automatically executing order is able to trade at a price above (below)
the LRP, or if the incoming interest would create a locked or crossed
market. Autoquote resumes after a manual trade or when the lock or
cross is cleared.\4\
---------------------------------------------------------------------------
\4\ See NYSE Amex Equities Rule 60(d)(i)(C).
---------------------------------------------------------------------------
LRPs are calculated by adding and subtracting a value to the
security's last
[[Page 40411]]
sale price. The LRP values are based on an examination of trading data
and vary based on the security's Exchange average daily volume
(``ADV''), price, and volatility. The values used to calculate the
LRPs' range do not change intraday and are disseminated daily by the
Exchange on its Web site.
II. Modification to LRP Value Ranges
The Exchange proposes to amend NYSE Amex Equities Rule 1000(a)(iv)
to provide for a different LRP value range during the first day of
trading of an IPO on the Exchange. Specifically, the Exchange proposes
to provide that for the first day of trading of an IPO on the Exchange,
the LRP value will be the greater of $2.00 or the LRP value that would
be applicable based on the offering price.
The Exchange currently uses the offering price of an IPO, as set by
the investment bank syndicate the night before the first day of
trading, to determine the LRP value range in that security. However,
trading prices on the first day of an IPO can often be volatile, both
compared to the offering price as well as intra-day. As a result, using
the offering price to determine the LRP value range may be inconsistent
with the actual trading prices, resulting in more frequent triggering
of LRPs than is typical on the Exchange, thus unnecessarily limiting
automatic execution of orders on the first day of trading.
A recent example of how an IPO can trade at prices beyond the
original offering prices recently occurred on the New York Stock
Exchange LLC (``NYSE''), which has the same rules as the Exchange
governing LRPs.\5\ For the May 19, 2011, IPO of LinkedIn Corp. (LNKD)
on the NYSE, the offering price was set the night before at $45 per
share and based on that price and pursuant to Rule 1000(a)(iv)(C), the
NYSE set the LRP value for the security at $0.70 for the first day of
trading. Notwithstanding the offering price, the opening price for LNKD
at the NYSE was $83.00 and the stock reached a trading high of $122.70
during the first day of trading, closing at $94.25. LNKD therefore
traded at prices throughout the day that would have otherwise warranted
a higher LRP value and as a result, there was a greater occurrence of
LRPs being reached than would have otherwise occurred on a regular
trading day. The first day of trading in LNKD is illustrative of the
type of volatility and price fluctuations that can occur on the first
day of trading of an IPO.
---------------------------------------------------------------------------
\5\ See NYSE Rule 1000(a)(iv).
---------------------------------------------------------------------------
The Exchange proposes to widen the LRP values for the first day of
trading of an IPO in order to reflect that the first day of trading of
an IPO generally differs from regular trading days in that there is
often greater volume and volatility, with wider price fluctuations. The
NYSE is similarly filing to amend NYSE Rule 1000.\6\ While the Exchange
does not have the same volume of IPOs as occur on the NYSE, the
Exchange believes that the changes to LRP values that are being
proposed for NYSE should also be adopted at the Exchange. As proposed,
the LRP value range would be the greater of $2.00 or the LRP value
range that would be applicable based on the IPO's offering price. For
example, if the IPO's offering price were priced above $150, the LRP
value range could be $4.00 rather than $2.00.
---------------------------------------------------------------------------
\6\ See SR-NYSE-2011-31.
---------------------------------------------------------------------------
The Exchange believes that widening the LRP value ranges for the
first day of trading of an IPO would allow for more continuous
automatic executions of securities before hitting an LRP. While the
purpose of the LRP is to dampen volatility and to provide market
participants with time to react, the Exchange believes that the
proposed amendment is necessary to lessen artificial limitations on
trading. If an LRP is triggered too frequently, such as when the price
of a security increases during the trading day well beyond the LRP
value that has been assigned to that security for the day, trading in
the security may be overly restrained. As such, the Exchange believes
that allowing for an expanded value range on the first day of trading
of an IPO will better facilitate the natural trading of a particular
security.
2. Statutory Basis
The basis under the Act for these proposed rule changes are the
requirement under Section 6(b)(5) \7\ 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) \8\ 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's proposal to provide flexibility in setting the LRP range on
the first day of trading for an IPO is intended to provide for faster
executions of securities by limiting the amount of time automatic
executions are suspended when an LRP is triggered.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b)(5).
\8\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, 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 and Rule 19b-
4(f)(6)(iii) thereunder.\11\
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ 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 fulfilled this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
---------------------------------------------------------------------------
\12\ 17 CFR 240.19b-4(f)(6).
\13\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Exchange has requested that the Commission waive the 30-day
operative delay so that the proposal may become
[[Page 40412]]
operative upon filing. The Commission hereby grants that request. The
New York Stock Exchange LLC has proposed a similar change to its Rule
1000, and the Commission is waiving the 30-day operative delay for that
proposal.\14\ Waiving the operative delay for this proposal will thus
keep Exchange Rule 1000 consistent with NYSE Rule 1000 in this respect.
In addition, waiving the 30-day operative delay will enable this change
to be implemented immediately so that the wider LRP values will be
available for the next IPO that takes place on the Exchange. Therefore,
the Commission believes it is consistent with the protection of
investors and the public interest to waive the 30-day operative delay
and designates the proposal as operative upon filing.\15\
---------------------------------------------------------------------------
\14\ See SR-NYSE-2011-31.
\15\ 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).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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 [email protected]. Please include
File Number SR-NYSEAmex-2011-46 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-2011-46. 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 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 offices 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-NYSEAmex-2011-46, and should be submitted on or before
July 29, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17123 Filed 7-7-11; 8:45 am]
BILLING CODE 8011-01-P