[Federal Register Volume 77, Number 147 (Tuesday, July 31, 2012)]
[Notices]
[Pages 45408-45410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18549]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67494; File No. SR-NYSE-2012-26]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Extending the Operation of Its New Market Model Pilot, Until the
Earlier of Securities and Exchange Commission Approval To Make Such
Pilot Permanent or January 31, 2013
July 25, 2012.
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 July 12, 2012, New York Stock Exchange LLC (``NYSE'' or
``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 self-regulatory
organization. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the operation of its New Market
Model Pilot, currently scheduled to expire on July 31, 2012, until the
earlier of Securities and Exchange Commission (``Commission'') approval
to make such pilot permanent or January 31, 2013. The text of the
proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at 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
The Exchange proposes to extend the operation of its New Market
Model Pilot (``NMM Pilot''),\4\ currently scheduled to expire on July
31, 2012, until the earlier of Commission approval to make such pilot
permanent or January 31, 2013.
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\4\ See Securities Exchange Act Release No. 58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46). See also
Securities Exchange Act Release Nos. 60756 (October 1, 2009), 74 FR
51628 (October 7, 2009) (SR-NYSE-2009-100) (extending Pilot to
November 30, 2009); 61031 (November 19, 2009), 74 FR 62368 (November
27, 2009) (SR-NYSE-2009-113) (extending Pilot to March 30, 2010);
61724 (March 17, 2010), 75 FR 14221 (March 24, 2010) (SR-NYSE-2010-
25) (extending Pilot to September 30, 2010); 62819 (September 1,
2010), 75 FR 54937 (September 9, 2010) (SR-NYSE-2010-61) (extending
Pilot to January 31, 2011); 63616 (December 29, 2010), 76 FR 612
(January 5, 2011) (SR-NYSE-2010-86) (extending Pilot to August 1,
2011); 64761 (June 28, 2011), 76 FR 39147 (July 5, 2011) (SR-NYSE-
2011-29) (extending Pilot to January 31, 2012); and 66046 (December
23, 2011), 76 FR 82340 (December 30, 2011) (SR-NYSE-2011-65)
(extending Pilot to July 31, 2012).
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The Exchange notes that parallel changes are proposed to be made to
the rules of NYSE MKT LLC.\5\
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\5\ See SR-NYSEMKT-2012-21.
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Background \6\
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\6\ The information contained herein is a summary of the NMM
Pilot. See supra note [4] [sic] for a fuller description.
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In October 2008, the NYSE implemented significant changes to its
market rules, execution technology and the rights and obligations of
its market participants all of which were designed to improve execution
quality on the Exchange. These changes are all elements of the
Exchange's enhanced market model. Certain of the enhanced market model
changes were implemented through a pilot program.
As part of the NMM Pilot, NYSE eliminated the function of
specialists on the Exchange creating a new category of market
participant, the Designated Market Maker or DMM.\7\ The DMMs, like
specialists, have affirmative obligations to make an orderly market,
including continuous quoting requirements and obligations to re-enter
the market when reaching across to execute against trading interest.
Unlike specialists, DMMs have a minimum quoting requirement \8\ in
their assigned securities and no longer have a negative obligation.
DMMs are also no longer agents for public customer orders.\9\
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\7\ See NYSE Rule 103.
\8\ See NYSE Rule 104.
\9\ See NYSE Rule 60; see also NYSE Rules 104 and 1000.
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In addition, the Exchange implemented a system change that allowed
DMMs to create a schedule of additional non-displayed liquidity at
various price points where the DMM is willing to interact with interest
and provide price improvement to orders in the Exchange's system. This
schedule is known as the DMM Capital Commitment Schedule (``CCS'').\10\
CCS provides the Display Book[supreg] \11\ with the amount of shares
that the DMM is willing to trade at price points outside, at and inside
the Exchange Best Bid or Best Offer (``BBO''). CCS interest is separate
and distinct from other DMM interest in that it serves as the interest
of last resort.
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\10\ See NYSE Rule 1000.
\11\ The Display Book system is an order management and
execution facility. The Display Book system receives and displays
orders to the DMMs, contains the order information, and provides a
mechanism to execute and report transactions and publish the 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.
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The NMM Pilot further modified the logic for allocating executed
shares among market participants having trading interest at a price
point upon execution of incoming orders. The
[[Page 45409]]
modified logic rewards displayed orders that establish the Exchange's
BBO. During the operation of the NMM Pilot, orders, or portions
thereof, that establish priority \12\ retain that priority until the
portion of the order that established priority is exhausted. Where no
one order has established priority, shares are distributed among all
market participants on parity.
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\12\ See NYSE Rule 72(a)(ii).
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The NMM Pilot was originally scheduled to end operation on October
1, 2009, or such earlier time as the Commission may determine to make
the rules permanent. The Exchange filed to extend the operation of the
Pilot on several occasions in order to prepare a rule filing seeking
permission to make the above described changes permanent.\13\ The
Exchange is currently still preparing such formal submission but does
not expect that filing to be completed and approved by the Commission
before July 31, 2012.
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\13\ See supra note 4.
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Proposal To Extend the Operation of the NMM Pilot
The NYSE established the NMM Pilot to provide incentives for
quoting, to enhance competition among the existing group of liquidity
providers and to add a new competitive market participant. The Exchange
believes that the NMM Pilot allows the Exchange to provide its market
participants with a trading venue that utilizes an enhanced market
structure to encourage the addition of liquidity, facilitate the
trading of larger orders more efficiently and operates to reward
aggressive liquidity providers. As such, the Exchange believes that the
rules governing the NMM Pilot should be made permanent. Through this
filing the Exchange seeks to extend the current operation of the NMM
Pilot until January 31, 2013, in order to allow the Exchange time to
formally submit a filing to the Commission to convert the pilot rules
to permanent rules.
2. Statutory Basis
The basis under the Securities Exchange Act of 1934 (the ``Act'')
for this proposed rule change is the requirement under Section 6(b)(5)
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 Exchange
believes that this filing is consistent with these principles because
the NMM Pilot provides its market participants with a trading venue
that utilizes an enhanced market structure to encourage the addition of
liquidity, facilitate the trading of larger orders more efficiently and
operates to reward aggressive liquidity providers. Moreover, requesting
an extension of the NMM Pilot will permit adequate time for: (i) The
Exchange to prepare and submit a filing to make the rules governing the
NMM Pilot permanent; (ii) public notice and comment; and (iii)
completion of the 19b-4 approval process.
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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
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, 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.\16\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ 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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A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission believes
that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because such waiver
would allow the pilot program to continue uninterrupted. Accordingly,
the Commission hereby grants the Exchange's request and designates the
proposal operative upon filing.\19\
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ For purposes only of waiving the 30-day operative delay,
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 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 email to [email protected]. Please include
File Number SR-NYSE-2012-26 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-NYSE-2012-26. 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
[[Page 45410]]
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-NYSE-2012-26 and should be
submitted on or before August 21, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-18549 Filed 7-30-12; 8:45 am]
BILLING CODE 8011-01-P