[Federal Register Volume 77, Number 130 (Friday, July 6, 2012)]
[Notices]
[Pages 40139-40140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-16518]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67314; File No. SR-NYSEAmex- 2012-23]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of
Amendment No. 1 and Order Granting Accelerated Approval of a Proposed
Rule Change, as Modified by Amendment No. 1, Amending NYSE Amex Options
Rule 928NY Specifying That the Potential Range for the Settings
Applicable to the Market Maker Risk Limitation Mechanism Will Be
Between One and 100 Executions Per Second, To Eliminate the Current
Reference to the Default Setting and, in the Future, To Specify the
Applicable Minimum, Maximum and Default Settings via Regulatory
Bulletin
June 29, 2012.
I. Introduction
On April 12, 2012, NYSE Amex LLC (the ``Exchange'' or ``NYSE
Amex'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to: (i) Specify the potential range for the
settings applicable to the Market Maker Risk Limitation Mechanism
(``Mechanism'') will be between one and 100 executions per second; (ii)
eliminate the current reference to the default setting; and (iii)
specify that the Exchange may set the applicable minimum, maximum, and
default settings via Regulatory Bulletin. The proposed rule change was
published for comment in the Federal Register on May 1, 2012.\3\ The
Commission received no comment letters on the proposal. On June 26,
2012, the Exchange filed Amendment No. 1 to the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 66857 (April 25, 2012),
77 FR 25770 (``Notice'').
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The Commission is publishing this notice to solicit comments on
Amendment No. 1 from interested persons and is approving the proposed
rule change, as modified by Amendment No. 1, on an accelerated basis.
II. Description of the Proposal
The Exchange adopted the Mechanism as a way to protect Market
Makers from the risk associated with an excessive number of nearly
simultaneous executions in a single option class.\4\ It functions as
follows: If ``n'' executions occur within one second against the Market
Maker's quotes in an appointed class, the NYSE Amex System
automatically cancels all quotes posted by the Market Maker in that
class. The Mechanism currently defaults the ``n'' number of executions
to 50 executions per second.\5\ However, a Market Maker may instead set
the ``n'' number of executions between five and 100 executions per
second.\6\
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\4\ See Securities Exchange Act Release No. 59472 (February 27,
2009), 74 FR 9843 (March 6, 2009) (SR-NYSEALTR-2008-14).
\5\ See NYSE Amex Options Rule 928NY(b)(1).
\6\ See NYSE Amex Options Rule 928NY(b)(2).
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The Exchange now proposes to decrease the low end of this range
from five to one, while the high end of the range would remain
unchanged at 100 executions per second. The Exchange also proposes to
eliminate the reference to the default setting that is applicable to
the Mechanism. In addition, the Exchange proposes that, in the future,
it will specify the applicable minimum, maximum and default settings
for the Mechanism via Regulatory Bulletin, all of which would be within
the proposed range of one to 100 executions per second.\7\
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\7\ See proposed NYSE Amex Options Rule 928NY(b)(1). The
Exchange proposes to designate NYSE Amex Options Rule 928NY(b)(2) as
``reserved.''
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The Exchange has noted that it anticipates announcing via
Regulatory Bulletin that the applicable minimum, maximum and default
settings for the Mechanism will be decreased to 2, 50, and 5 executions
per second, respectively.\8\
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\8\ See Notice, supra note 3, at 25771.
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In addition, on June 26, 2012, the Exchange submitted Amendment No.
1 to the proposed rule change, which added additional information about
the Regulatory Bulletin that the Exchange would provide to Market
Makers in the event the Exchange makes any changes to the Mechanism's
minimum, maximum, or default settings. The Exchange specified that,
when announcing changes to the Mechanism via Regulatory Bulletin, the
Exchange will issue the bulletin at least one trading day in advance of
the effective date of the change. The Exchange also specified that such
bulletins will include: (1) Information regarding the changes to the
risk settings in the Mechanism; (2) the effective date of the changes;
and (3) contact information of Exchange staff who can provide
additional information.
[[Page 40140]]
III. Discussion
The Commission finds that the proposed rule change, as modified by
Amendment No. 1, is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\9\ Specifically, the Commission finds that the proposal, as
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the
Act,\10\ in that it is designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transaction in securities, to remove
impediments and perfect the mechanisms of a free and open market, and,
in general, to protect investors and the public interest.
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\9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange noted its belief that decreasing the minimum settings
in the Mechanism would provide Market Makers with greater control and
flexibility with respect to managing their risk and the manner in which
they enter quotes on the Exchange. The Exchange also notes that the
proposed rule change allowing the Exchange to modify Mechanism settings
by Regulatory Bulletin is consistent with the Act because it would
permit the Exchange to increase or decrease the Mechanism settings to
accommodate system capacity concerns. The Exchange has also represented
that it believes providing at least one day of advance notice via
Regulatory Bulletin prior to making adjustments to the Mechanism would
afford Market Makers sufficient time to review their settings and make
any necessary operational or technological changes to accommodate such
adjustments. Finally, the Commission notes that the proposal would not
relieve Market Makers of their quoting obligations on the Exchange
under the Exchange's rules.\11\ For these reasons, the Commission
believes that the proposed rule change, as modified by Amendment No. 1,
is consistent with the Act.
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\11\ See NYSE Amex Options Rule 925NY.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
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-2012-23 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-2012-23. 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
10:00 a.m. and 3:00 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 publicly available. All
submissions should refer to File Number SR-NYSEAmex-2012-23 and should
be submitted on or before July 27, 2012.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 1
As discussed above, Amendment No. 1 revised the proposed rule
change to specify that, when announcing changes to the Mechanism via
Regulatory Bulletin, the Exchange will issue the bulletin at least one
trading day in advance of the effective date of the change. The
Exchange also specified that such bulletins will include: (1)
Information regarding the changes to the risk settings in the
Mechanism; (2) the effective date of the changes; and (3) contact
information of Exchange staff who can provide additional information.
The Exchange also stated its belief that providing at least one day of
advance notice prior to making adjustments would afford Market Makers
sufficient time to review their settings and make any necessary
operational or technological changes to accommodate such adjustments to
their own settings in the Mechanism or to their own proprietary
systems. The Commission believes that the amendment addresses potential
concerns about when the Exchange would provide notice of changes to the
Mechanism settings, the form of such notice, and whether such notice
would afford Market Makers sufficient time to adjust their settings in
the Mechanism or their proprietary systems. Accordingly, the Commission
also finds good cause, pursuant to Section 19(b)(2) of the Act,\12\ for
approving the proposed rule change, as modified by Amendment No. 1,
prior to the 30th day after the date of publication of notice in the
Federal Register.
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\12\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-NYSEAmex-2012-23), as
modified by Amendment No. 1, be, and hereby is, approved on an
accelerated basis.
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\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16518 Filed 7-5-12; 8:45 am]
BILLING CODE 8011-01-P