[Federal Register Volume 74, Number 50 (Tuesday, March 17, 2009)]
[Notices]
[Pages 11393-11396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-5719]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59561; File No. SR-NYSEALTR-2009-25]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NYSE Alternext US LLC
Eliminating the Ability To Enter Orders on the Exchange With the
Settlement Instructions of ``Cash'', ``Next Day'' and ``Seller's
Option'' To Conform to Amendments Filed by the New York Stock Exchange
March 11, 2009.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on March 5, 2009, NYSE Alternext US LLC (the ``Exchange'' or
``NYSE Alternext'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to eliminate the ability to enter orders on
the Exchange with the settlement instructions of ``cash'', ``next day''
and ``seller's option'' to conform to amendments filed by the New York
Stock Exchange (``NYSE'').
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
Through this filing the Exchange seeks to amend several NYSE
Alternext Equities rules to conform these rules with amendments filed
by the New York Stock Exchange \4\ to remove references to certain
settlement instructions that are no longer compatible with the
Exchange's more electronic market. These include instructions to settle
on ``cash'', ``next day'' or ``seller's option'' basis.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 34-59446 (February
25, 2009), 74 FR 9323 (March 3, 2009) (SR-NYSE-2009-17).
---------------------------------------------------------------------------
I. Background
As described more fully in a related rule filing,\5\ 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
[[Page 11394]]
NYSE Alternext U.S. 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'') [sic].\6\ The effective
date of the Merger was October 1, 2008. In connection with the Merger,
on December 1, 2008, the Exchange relocated all equities trading
conducted on the Exchange legacy trading systems and facilities located
at 86 Trinity Place, New York, New York, to trading systems and
facilities located at 11 Wall Street, New York, New York (the
``Equities Relocation''). The Exchange's equity trading systems and
facilities at 11 Wall Street (the ``NYSE Alternext Trading Systems'')
are operated by the NYSE on behalf of the Exchange.\7\
---------------------------------------------------------------------------
\5\ 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).
\6\ 15 U.S.C. 78f.
\7\ See Securities Exchange Act Release No. 58705 (October 1,
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (approving
the Equities Relocation).
---------------------------------------------------------------------------
As part of the Equities Relocation, NYSE Alternext adopted NYSE
Rules 1-1004, subject to such changes as necessary to apply the Rules
to the Exchange, as the NYSE Alternext Equities Rules to govern trading
on the NYSE Alternext Trading Systems.\8\ The NYSE Alternext Equities
Rules, which became operative on December 1, 2008, are substantially
identical to the current NYSE Rules 1-1004 and the Exchange continues
to update the NYSE Alternext Equities Rules as necessary to conform
with rule changes to corresponding NYSE Rules filed by the NYSE.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 58705 (October 1,
2008), 73 FR 58995 (October 8, 2008) (SR-Amex-2008-63) (approving
the Equities Relocation); Securities Exchange Act Release No. 58833
(October 22, 2008), 73 FR 64642 (October 30, 2008) (SR-NYSE-2008-
106) and Securities Exchange Act Release No. 58839 (October 23,
2008), 73 FR 64645 (October 30, 2008) (SR-NYSEALTR-2008-03)
(together, approving the Bonds Relocation); Securities Exchange Act
Release No. 59022 (November 26, 2008), 73 FR 73683 (December 3,
2008) (SR-NYSEALTR-2008-10) (adopting amendments to NYSE Alternext
Equities Rules to track changes to corresponding NYSE Rules);
Securities Exchange Act Release No. 59027 (November 28, 2008), 73 FR
73681 (December 3, 2008) (SR-NYSEALTR-2008-11) (adopting amendments
to Rule 62--NYSE Alternext Equities to track changes to
corresponding NYSE Rule 62).
---------------------------------------------------------------------------
II. Proposed Amendments
Currently, in addition to regular way settlement (i.e., settlement
on the third business day following trade date), a customer may submit
an order with settlement instructions for cash, next day or seller's
option. An order with cash settlement instructions requires delivery of
the securities the same day as the transaction in contrast to a regular
way transaction, where the seller is required to deliver the securities
on the third business day. Next day settlement instructions require
delivery of the securities on the first business day following the
transaction. Orders that have settlement instructions of seller's
option afford the seller the right to deliver the security or bond at
any time within a specified period, ranging from not less than two
business days to not more than 180 days for stocks and not less than
two business days and no more than sixty days for U.S. government
securities.
Orders that include cash, next and seller's option settlement
instructions may be submitted electronically to the Exchange; however,
the orders containing any of those settlement instructions cannot be
immediately and automatically executed. Rather, the orders must bypass
the Exchange matching/execution engine, Display Book, and are literally
printed on paper at the trading post for manual processing on the
Floor.
Proposed Elimination of Cash, Next Day, Seller's Option Settlement
Instructions
In the Exchange's current more electronic market, orders received
by Exchange systems that are marketable upon entry are eligible to be
immediately and automatically executed. Order types and settlement
instructions that require manual intervention pose significant
impediments to the efficient functioning of the NYSE Alternext Trading
Systems operated by the NYSE on behalf of the Exchange. To this end the
NYSE filed with the Commission to remove legacy orders that require
manual processing. Specifically, on January 31, 2008, the NYSE filed
with the Commission to amend NYSE Rule 13 to invalidate the use of the
manual order types ``Alternative Order--Either/Or Order'', ``Orders
Good Until a Specified Time'', ``Scale Order'' and ``Switch Order--
Contingent Order'' and Rule 124's order types ``Limited Order, With or
Without Sale'' and ``Basis Price Order'' as being incompatible with the
more electronic NYSE market environment.\9\ These changes were already
reflected in NYSE Alternext's rules following the merger with the NYSE.
---------------------------------------------------------------------------
\9\ See Securities and [sic] Exchange Act Release No. 57295
(February 8, 2008), 73 FR 8731 (February 14, 2008) (SR-NYSE-2008-
11).
---------------------------------------------------------------------------
The Exchange's commitment to provide its market participants with
the ability to have their orders executed in the most efficient manner
necessitates the elimination of cash, next day and seller's option as
valid settlement instructions for orders submitted to the Exchange.
These instructions result in these orders printing to paper at the
trading Post \10\ when they are submitted electronically in Exchange
systems. The DMM and the trading assistant must realize that the
document printed was in fact an order thus causing delay in the
execution of the order. The DMM is then responsible for the manual
execution of the order. The manual intervention required of the DMM and
trading assistant at the Post in the processing of these orders puts
the orders at the very real risk of ``missing the market'' as a result
of the current speed of order execution in the Exchange market. In
addition, since orders with these settlement instructions will no
longer be supported by New York Stock Exchange systems, NYSE Alternext
will also no longer be able to accept them for the securities traded in
the NYSE Alternext market.
---------------------------------------------------------------------------
\10\ Trading Posts are the horseshoe shaped counters manned by
DMMs and trading assistants on the Trading Floor of the NYSE where
individual stocks are bought and sold.
---------------------------------------------------------------------------
The Exchange now seeks to eliminate cash, next day and seller's
option as valid settlement instructions for orders submitted to the
Exchange. The Exchange therefore proposes to delete the references to
those settlement instructions from NYSE Alternext Rules 12 (``Business
Day''), 64 (Bonds, Rights and 100-Share-Unit Stocks), 66 (U.S.
Government Securities) \11\, 123 (Records of Orders), 124 (Odd-Lot
Orders), 130 (Overnight Comparison of Exchange Transactions), 137
(Written Contracts), 137A (Samples of Written Contracts), 189 (Unit of
Delivery), 235 (Ex-Dividends, Ex-Rights), 236 (Ex-Warrants), 241
(Interest--Added to Contract Price), 257 (Deliveries After ``Ex''
Date), 282 (Buy-In Procedures) and 440G (Transactions in Stocks and
Warrants for the Accounts of Members, Principal Executives and Member
Organizations). In addition, the Exchange seeks to eliminate entirely
NYSE Alternext Rules 73 (``Seller's Option''), 177 (Delivery Time--
``Cash'' Contracts) and 179 (``Seller's Option''). In addition, the
Exchange proposes to remove language in NYSE Alternext Rules 64 and 66
that provide for the possibility of using multiple settlement periods
for bids and offers entered on the Exchange since, for all practical
purposes, the Exchange will now only accept orders for regular way
settlement.
---------------------------------------------------------------------------
\11\ The Exchange does not have the capability to accept these
order types for U.S. Government securities.
---------------------------------------------------------------------------
The Exchange also proposes to amend NYSE Alternext Rule 66 to add
the provision that exists in NYSE Alternext Rule 64 to allow the
Exchange, in its
[[Page 11395]]
discretion, to provide for additional settlement periods. The Exchange
is proposing this addition to bring the provisions of the two rules
into harmony as they address similar procedures with respect to
different types of securities admitted to dealings on the Exchange. The
Exchange, however, recognizes that any additional settlement periods it
proposes to add will be subject to the rule filing process under
Section 19(b) of the Securities Exchange Act of 1934 (the ``Act'')
[sic].\12\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------
The Exchange will commence implementation of the proposed
elimination of the settlement instructions discussed herein on March
13, 2009. The Exchange intends to progressively implement this
elimination on a security by security basis as it gains experience with
the implementation until it is operative in all securities traded on
the Floor. During the implementation, the Exchange will identify on its
website which securities will no longer be eligible for these
settlement instructions.
2. Statutory Basis
The basis under the Securities Exchange Act of 1934 (the ``Act'')
[sic] for this proposed rule change is the requirement under Section
6(b)(5) \13\ 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 instant filing accomplishes these goals by rescinding legacy
settlement instructions that place customers at risk of missing the
market and possibly receiving inferior priced executions.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 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 for 30
days after the date of the filing, or such shorter time as the
Commission may designate, if consistent with the protection of
investors and the public interest, it has become effective pursuant to
Section 19(b)(3)(A) \14\ of the Act and Rule 19b-4(f)(6)
thereunder.\15\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative until 30 days after the date of filing.\16\
However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay so that the proposed rule
change may become operative on March 13, 2009. Specifically, the
Exchange states that the proposal will rescind legacy settlement
instructions that are not compatible with the Exchange's electronic
market. The Commission believes that allowing the proposed rule change
to become operative on March 13, 2009 is consistent with the protection
of investors and the public interest, because it will enable the
Exchange to implement pending technological enhancements that require
the rescission of these legacy settlement instructions. The Exchange
expects these enhancements to make its order processing operations more
efficient and thereby strengthen and advance the quality of the
Exchange's market. Accordingly, the Commission designates the proposed
rule change to be operative on March 13, 2009.\18\
---------------------------------------------------------------------------
\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires a self-regulatory organization to give the
Commission written notice of its intent to file 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.
\18\ For purposes only of waiving the 30-day operative delay of
the proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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-NYSEALTR-2009-25 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-NYSEALTR-2009-25. 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 inspection
and copying 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-NYSEALTR-2009-25 and
[[Page 11396]]
should be submitted on or before April 7, 2009.
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5719 Filed 3-16-09; 8:45 am]
BILLING CODE 8011-01-P