[Federal Register Volume 76, Number 250 (Thursday, December 29, 2011)]
[Notices]
[Pages 82009-82011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-33446]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66032; File No. SR-NYSEAmex-2011-99]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending
Supplementary Material .26 (Pegging for d-Quotes and e-Quotes) to NYSE
Amex Equities Rule 70
December 22, 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 December 14, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE
Amex'') 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 Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 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 Supplementary Material .26 (Pegging
for d-Quotes and e-Quotes) to NYSE Amex Equities Rule 70. The text of
the proposed rule change is available at the Exchange, at www.nyse.com,
the Commission's Public Reference Room, and at www.sec.gov.
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
The Exchange proposes to amend Supplementary Material .26 (Pegging
for d-Quotes and e-Quotes) to NYSE Amex Equities Rule 70.
Paragraph (i) of Supplementary Material .26 states that an e-Quote
may be set to provide that it will be available for execution at the
national best bid (``NBB'') (for an e-Quote that represents a buy
order) or at the national best offer (``NBO'') (for an e-Quote that
represents a sell order) as the national best bid or offer (``NBBO'')
changes, so long as the NBBO is at or within the e-Quote's limit price.
Paragraph (x) of Supplementary Material .26 further provides that, as
long as the NBB or NBO is within the pegging price range selected by
the Floor broker, the pegging e-Quote or d-Quote will join the NBB or
NBO as it is autoquoted. As such, pegging interest may peg to a price
that may not be displayed at the Exchange. For example, if the NBB is
$10.05 and the Exchange best bid is $10.04, a pegging e-Quote to buy
will display at the Exchange at $10.05, thus creating a new Exchange
best bid.
Because pegging interest automatically pegs to the NBBO, under
current rules and functionality, a
[[Page 82010]]
pegging e-Quote could peg to an NBB or NBO that is locking or crossing
an existing Exchange best bid or offer. For example, if the Exchange
best bid is $10.04 and the NBO locks it at $10.04, a pegging e-Quote to
sell would peg to the $10.04 NBO price and then immediately execute
against the Exchange's best bid of $10.04. In such scenario, a pegging
e-Quote, which is intended to be reactive, becomes taker interest.
Similarly, if automatic executions on the buy (sell) side are suspended
at the Exchange, for example, if a liquidity replenishment point is
reached pursuant to NYSE Rule 1000, the NYSE would not be displaying a
protected bid (offer) and therefore other markets could display a
protected offer (bid) that crosses the Exchange best bid (offer). In
such scenario, if the NBO moved to below the Exchange best bid of
$10.04, a pegging e-Quote to sell would peg to that NBO, which would
cross the Exchange best bid.
The Exchange proposes to add new paragraph (x)(A) to Supplementary
Material .26 to provide that a pegging e-Quote or d-Quote to buy (sell)
would not peg to an NBB (NBO) that is locking or crossing the Exchange
best offer (bid), but would instead join the next available best-priced
non-pegging interest that does not lock or cross the Exchange best
offer (bid).\5\ Customers have requested this change because in the
infrequent circumstances when the NBBO is locking or crossing the
Exchange best bid or offer,\6\ customers do not want their pegging
interest, for which the ultimate goal is to be passive liquidity for
purposes of execution, to become taker interest. Because the next
available best-priced non-pegging interest may be on an away market,
the Exchange further proposes to amend paragraph (vii) to Supplementary
.26 to specify that the non-pegging interest against which pegging
interest pegs may either be available on the Exchange or may be a
protected bid or offer on an away market. The Exchange believes that
this is already implied in Supplementary .26, particularly because
pegging interest can peg to the NBB or NBO, which may or may not be a
displayed price at the Exchange,\7\ and is proposing this change only
to add greater specificity to Supplementary Material .26.
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\5\ When an exception to the prohibition against trade-throughs
is in effect, pursuant to Rule 611(b)(4) of Regulation NMS,
technically, there are no available protected bids or offers against
which an e-Quote or d-Quote can peg. In such situations, the pegging
interest would peg to the next available best-priced non-pegging
interest on the Exchange that is within the price range selected by
the Floor broker.
\6\ The Exchange would re-price pegging interest only if the
NBBO is locking or crossing the Exchange best bid or offer and not
if the NBBO is ``locking'' or ``crossing'' undisplayed liquidity at
the Exchange. For example, where the Exchange best bid and offer is
$10.02 and $10.04 and there is ``dark'' reserve buy interest at
$10.03, if the NBO becomes $10.03, pegging sell interest will peg to
the $10.03 NBO and will execute against the Exchange ``dark''
reserve interest priced at $10.03.
\7\ See Securities Exchange Act Release No. 61081 (December 1,
2009), 74 FR 64105 (December 7, 2009) (SR-NYSEAmex-2009-76).
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The Exchange also proposes to add new paragraph (x)(B) to
Supplementary Material .26 to provide that the converse of paragraph
(x) is also true. Specifically, if the NBB (NBO) is not within the
pegging price range selected by the Floor broker, then a pegging e-
Quote or d-Quote to buy (sell) will join the next available best-priced
non-pegging interest that is within the price range selected by the
Floor broker.
Finally, the Exchange proposes to amend paragraph (xiii) to
Supplementary Material .26 to delete the text that permits Floor
brokers to specify a maximum size validation for e-Quotes and d-Quotes.
Floor brokers have not availed themselves of this functionality and the
Exchange has therefore decided to eliminate it from Supplementary
Material .26. In addition, because pegging interest is considered when
assessing the minimum volume size of same-side interest against which
to peg, the Exchange proposes to delete the last sentence of paragraph
(xiii) to Supplementary Material .26.
Because of the related technology changes that this proposed rule
change would require, the Exchange proposes to announce the initial
implementation date and related roll-out schedule, if applicable, via
Trader Update.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Securities Exchange Act of 1934 (the ``Act''),\8\ in general, and
furthers the objectives of Section 6(b)(5),\9\ in particular, because
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in 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. Specifically,
the Exchange believes that the proposed changes to Supplementary
Material .26 to NYSE Amex Equities Rule 70 would promote just and
equitable principles of trade and remove impediments to, and perfect
the mechanism of, a free and open market because they would reduce the
potential for the Exchange best bid or offer to be locked or crossed.
The proposed changes would also promote transparency by adding greater
specificity with respect to the interest to which pegging e-Quotes and
d-Quotes may peg and would remove text corresponding to a functionality
that Floor brokers have not availed themselves of and therefore is no
longer necessary to promote just and equitable principles of trade.
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\8\ 15 U.S.C. 78f(b).
\9\ 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 does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's 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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At any time within 60 days of the filing of the 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.
[[Page 82011]]
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 email to [email protected]. Please include
File Number SR-NYSEAmex-2011-99 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-2011-99. This
file number should be included on the subject line if email 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 the 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-NYSEAmex-2011-99 and should
be submitted on or before January 19, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-33446 Filed 12-28-11; 8:45 am]
BILLING CODE 8011-01-P