[Federal Register Volume 79, Number 16 (Friday, January 24, 2014)]
[Notices]
[Pages 4197-4200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01396]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71342; File No. SR-NYSEMKT-2014-02)
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Proposing To Extend the
Operation of Its New Market Model Pilot Until the Earlier of Securities
and Exchange Commission Approval To Make Such Pilot Permanent or July
31, 2014
January 17, 2014.
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 January 6, 2014, NYSE MKT LLC (``NYSE MKT'' 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 Exchange. 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 January 31, 2014, until
the earlier of Securities and Exchange Commission (``Commission'')
approval to make such pilot permanent or July 31, 2014. 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
[[Page 4198]]
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'') that was adopted pursuant to its merger
with the New York Stock Exchange LLC (``NYSE'').\4\ The NMM Pilot was
approved to operate until October 1, 2009. The Exchange filed to extend
the operation of the Pilot to November 30, 2009, March 30, 2010,
September 30, 2010, January 31, 2011, August 1, 2011, January 31, 2012,
July 31, 2012, January 31, 2013, July 31, 2013, and January 31, 2014,
respectively.\5\ The Exchange now seeks to extend the operation of the
NMM Pilot, currently scheduled to expire on January 31, 2014, until the
earlier of Commission approval to make such pilot permanent or July 31,
2014.
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\4\ NYSE Euronext acquired The Amex Membership Corporation
(``AMC'') pursuant to an Agreement and Plan of Merger, dated January
17, 2008 (the ``Merger''). In connection with the Merger, the
Exchange's predecessor, the American Stock Exchange LLC (``Amex''),
a subsidiary of AMC, became a subsidiary of NYSE Euronext called
NYSE Alternext US LLC. See Securities Exchange Act Release No. 58673
(September 29, 2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60
and SR-Amex-2008-62) (approving the Merger). Subsequently, NYSE
Alternext US LLC was renamed NYSE Amex LLC, which was then renamed
NYSE MKT LLC and continues to operate as a national securities
exchange registered under Section 6 of the Securities Exchange Act
of 1934, as amended (the ``Act''). See Securities Exchange Act
Release Nos. 59575 (March 13, 2009), 74 FR 11803 (March 19, 2009)
(SR-NYSEALTR-2009-24) and 67037 (May 21, 2012), 77 FR 31415 (May 25,
2012) (SR-NYSEAmex-2012-32).
\5\ See Securities Exchange Act Release No. 60758 (October 1,
2009), 74 FR 51639 (October 7, 2009) (SR-NYSEAmex-2009-65). See also
Securities Exchange Act Release Nos. 61030 (November 19, 2009), 74
FR 62365 (November 27, 2009) (SR-NYSEAmex-2009-83) (extending Pilot
to March 30, 2010); 61725 (March 17, 2010), 75 FR 14223 (March 24,
2010) (SR-NYSEAmex-2010-28) (extending Pilot to September 1, 2010);
62820 (September 1, 2010), 75 FR 54935 (September 9, 2010) (SR-
NYSEAmex-2010-86) (extending Pilot to January 31, 2011); 63615
(December 29, 2010), 76 FR 611 (January 5, 2011) (SR-NYSEAmex-2010-
123) (extending Pilot to August 1, 2011); 64773 (June 29, 2011), 76
FR 39453 (July 6, 2011) (SR-NYSEAmex-2011-43) (extending Pilot to
January 31, 2012); 66042 (December 23, 2011), 76 FR 82326 (December
30, 2011) (SR-NYSEAmex-2011-102) (extending Pilot to July 31, 2012);
67495 (July 25, 2012), 77 FR 45406 (July 31, 2012) (SR-NYSEMKT-2012-
21) (extending the Pilot to January 31, 2013); 68559 (January 2,
2013), 78 FR 1286 (January 8, 2013) (SR-NYSEMKT-2012-84) (extending
Pilot to July 31, 2013); and 69812 (June 20, 2013), 78 FR 38766
(June 27, 2013) (SR-NYSEMKT-2013-51) (extending Pilot to January 31,
2014).
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The Exchange notes that parallel changes are proposed to be made to
the rules of NYSE.\6\
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\6\ See SR-NYSE-2014-01.
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Background \7\
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\7\ The information contained herein is a summary of the NMM
Pilot. See Securities Exchange Act Release No. 58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46) for a fuller
description.
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In December 2008, the Exchange implemented significant changes to
its equities market rules, execution technology and the rights and
obligations of its equities 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 that it
implemented through the NMM Pilot.
As part of the NMM Pilot, the Exchange eliminated the function of
equity specialists on the Exchange creating a new category of market
participant, the Designated Market Maker or DMM.\8\ 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.\9\
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\8\ See NYSE MKT Rule 103--Equities.
\9\ See NYSE MKT Rule 60--Equities; see also NYSE MKT Rules
104--Equities and 1000--Equities.
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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 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 MKT Rule 1000--Equities.
\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 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 MKT Rule 72(a)(ii)--Equities.
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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 \13\ in order to prepare a rule filing
seeking permission to make the above described changes permanent. The
Exchange is currently still preparing such formal submission but does
not expect that filing to be completed and approved by the Commission
before January 31, 2014.
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\13\ See supra note 5.
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Proposal To Extend the Operation of the NMM Pilot
The Exchange 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 July 31, 2014, in order to allow the Exchange time to
formally submit a filing to the Commission to convert the pilot rules
to permanent rules.
The proposed change is not otherwise intended to address any other
issues and the Exchange is not aware of any problems that member
organizations would have in complying with the proposed change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with
[[Page 4199]]
Section 6(b) of the Act,\14\ in general, and furthers the objectives of
Sections 6(b)(5) of the Act,\15\ 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 regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to, and perfect the mechanisms of,
a free and open market and a national market system and, in general, to
protect investors and the public interest and because it is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change is designed to
facilitate transactions in securities and to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system 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. The
Exchange also believes the proposed rule change is designed to prevent
fraudulent and manipulative acts and practices and to promote just and
equitable principles of trade because it seeks to extend a pilot
program that has already been approved by the Commission. 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. Finally, the Exchange
believes that it is subject to significant competitive forces, as
described below in the Exchange's statement regarding the burden on
competition. For these reasons, the Exchange believes that the proposal
is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\16\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The Exchange believes that extending the operation
of the NMM Pilot will enhance competition among liquidity providers and
thereby improve execution quality on the Exchange. The Exchange will
continue to monitor the efficacy of the program during the proposed
extended pilot period.
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\16\ 15 U.S.C. 78f(b)(8).
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Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must continually
review, and consider adjusting the services it offers and the
requirements it imposes to remain competitive with other U.S. equity
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.
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 \17\ and Rule 19b-4(f)(6) thereunder.\18\
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.
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\17\ 15 U.S.C. 78s(b)(3)(A)(iii).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
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) \19\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ 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.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ 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-NYSEMKT-2014-02 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-NYSEMKT-2014-02.
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
[[Page 4200]]
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-NYSEMKT-2014-02 and should be submitted on or before
February 14, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01396 Filed 1-23-14; 8:45 am]
BILLING CODE 8011-01-P