[Federal Register Volume 74, Number 77 (Thursday, April 23, 2009)]
[Notices]
[Pages 18597-18600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-9240]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59778; File No. SR-NYSEAmex-2009-12]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC To Adopt a 
Policy Relating to Its Treatment of Trade Reports That It Determines To 
Be Inconsistent With the Prevailing Market

April 16, 2009.
    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 April 6, 2009, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II

[[Page 18598]]

below, which Items have been prepared by the Exchange. The Exchange has 
designated this proposal as eligible for immediate effectiveness 
pursuant to Securities Exchange Act Rule 19b-4(f)(6).\3\ The Commission 
is publishing this notice to solicit comments on the proposal from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 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 adopt a policy relating to its treatment 
of trade reports that it determines to be inconsistent with the 
prevailing market.

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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Trades in listed securities occasionally occur at prices that 
deviate significantly from prevailing market prices and those trades 
sometimes establish a high, low or last sale price for a security that 
does not reflect the true market for the security.
    The Consolidated Tape Association (``CTA'') offers each Participant 
in the CTA Plan the discretion to append an indicator (an ``Aberrant 
Report Indicator'') to a trade report to indicate that the market 
believes that the trade price in a trade executed on that market does 
not accurately reflect the prevailing market for the security. The CTA 
recommends that data recipients should exclude the price of any trade 
to which the Aberrant Report Indicator has been appended from any 
calculation of the high, low and last sale prices for the security.
    During the course of surveillance by the Exchange or as a result of 
notification by another market, listed company or market participant, 
the Exchange may become aware of trade prices that do not accurately 
reflect the prevailing market for a security. In such a case, the 
Exchange proposes to adopt as policies that it:
     May determine to append an Aberrant Report Indicator to 
any trade report with respect to any trade executed on the Exchange 
that the Exchange determines to be inconsistent with the prevailing 
market; and
     Shall discourage vendors and other data recipients from 
using prices to which the Exchange has appended the Aberrant Report 
Indicator in any calculation of the high, low or last sale price of a 
security.
    The Exchange will urge vendors to disclose the exclusion from high, 
low or last sale price data of any aberrant trades excluded from high, 
low or last sale price information they disseminate and to provide to 
data users an explanation of the parameters used in the Exchange's 
aberrant trade policy. Upon initial adoption of the Aberrant Report 
Indicator, the Exchange will also contact all of its listed companies 
to explain the aberrant trade policy and will notify users of the 
information that these are still valid trades. The Exchange will inform 
the affected listed company each time the Exchange or another market 
appends the Aberrant Report Indicator to a trade in an NYSE Amex listed 
stock and will remind the users of the information that these are still 
valid trades in that they were executed and not unwound as in the case 
of a clearly erroneous trade.
    While the CTA disseminates its own calculations of high, low and 
last sale prices, vendors and other data recipients--and not the 
Exchange--frequently determine their own methodology by which they wish 
to calculate high, low and last sale prices. Therefore, the Exchange 
shall endeavor to explain to those vendors and other data recipients 
the deleterious effects that can result from including in the 
calculations a trade to which the Aberrant Report Indicator has been 
appended.
    In making the determination to append the Aberrant Report 
Indicator, the Exchange shall consider all factors related to a trade, 
including, but not limited to, the following:
     Material news released for the security;
     Suspicious trading activity;
     System malfunctions or disruptions;
     Locked or crossed markets;
     A recent trading halt or resumption of trading in the 
security;
     Whether the security is in its initial public offering;
     Volume and volatility for the security;
     Whether the trade price represents a 52-week high or low 
for the security;
     Whether the trade price deviates significantly from recent 
trading patterns in the security;
     Whether the trade price reflects a stock-split, 
reorganization or other corporate action;
     The validity of consolidated tape trades and quotes in 
comparison to national best bids and offers; and
     The general volatility of market conditions.
    In addition, the Exchange proposes that its policy shall be to 
consult with other markets (in the case of executions that take place 
across multiple markets) and to seek a consensus as to whether the 
trade price is consistent with the prevailing market for the security.
    In determining whether trade prices are inconsistent with the 
prevailing market, the Exchange proposes that Exchange policy shall be 
to follow the following general guidelines: The Exchange will determine 
whether a trade price does not reflect the prevailing market for a 
security if the trade occurs during regular trading hours (i.e., 9:30 
a.m. to 4 p.m.) and occurs at a price that deviates from the 
``Reference Price'' by an amount that meets or exceeds the following 
thresholds:

------------------------------------------------------------------------
               Trade price                      Numerical threshold
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Between $0 and $15.00...................  Seven percent.
Between $15.01 and $50.00...............  Five percent.
In excess of $50.00.....................  Three percent.
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    The ``Reference Price'' refers to (a) if the primary market for the 
security is open at the time of the trade, the national best bid or 
offer for the security, or (b) if the primary market for the security 
is not open at the time of the trade, the first executable quote or 
print for the security on the primary market after execution of the 
trade in question. However, if the circumstances suggest that a 
different Reference Price would be more appropriate, the Exchange will 
use the different Reference Price. For instance, if the national best 
bid and offer for the security are so wide apart as to fail to reflect 
the market for the security, the Exchange might use as the Reference 
Price a trade price or best bid or offer that was available prior to 
the trade in question.
    If the Exchange determines that a trade price does not reflect the 
prevailing market for a security and the trade represented the last 
sale of the security on the Exchange during a trading session, the 
Exchange may also

[[Page 18599]]

determine to remove that trade's designation as the last sale. The 
Exchange may do so either on the day of the trade or at a later date, 
so as to provide reasonable time for the Exchange to conduct due 
diligence regarding the trade, including the consideration of input 
from markets and other market participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 \4\ of the Act in general and furthers 
the objectives of Section 6(b)(5) \5\ in particular, in that it is 
designed to promote just and equitable principles of trade, to remove 
impediments, and to perfect the mechanism of, a free and open market 
and a national market system, and, in general, to protect investors and 
the public interest.\6\
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ The Commission notes that, in the filing's purpose section, 
the Exchange provided a more complete statutory basis for the 
proposed rule change, as follows:
    The Exchange believes that the proposed rule change is 
consistent with Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''), in general, and furthers the objectives of Section 
6(b)(5) of the Act, in particular in that it is designed 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 
mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
    In particular, the Aberrant Report Indicator is consistent with 
the protection of investors and the public interest in that the 
Exchange will seek to ensure a proper understanding of the Aberrant 
Report Indicator among securities market participants by: (i) Urging 
vendors to disclose the exclusion from high, low or last sale price 
data of any aberrant trades excluded from high, low or last sale 
price information they disseminate and to provide to data users an 
explanation of the parameters used in the Exchange's aberrant trade 
policy; (ii) informing the affected listed company each time the 
Exchange or another market appends the Aberrant Report Indicator to 
a trade in an NYSE Amex listed stock; and (iii) reminding the users 
of the information that these are still valid trades in that they 
were executed and not unwound as in the case of a clearly erroneous 
trade.
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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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) 
thereunder,\8\ the Exchange has designated this proposal as one that 
effects a change that: (A) does not significantly affect the protection 
of investors or the public interest; (B) does not impose any 
significant burden on competition; and (C) by its terms, does not 
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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative for 30 days after the date of filing.\9\ However, Rule 
19b-4(f)(6)(iii) \10\ 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 and designate the proposed rule change 
to become operative upon filing.
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    \9\ 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.
    \10\ Id.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposal is substantially similar to a proposal previously 
approved by the Commission.\11\ The Commission believes that the 
Exchange's proposal to append an Aberrant Report Indicator to certain 
trade reports is a reasonable means to alert investors and others that 
the Exchange believes that the trade price for a trade executed in its 
market does not accurately reflect the prevailing market for the 
security. In addition, the Commission notes that the Exchange will use 
objective numerical thresholds in determining whether a trade report is 
eligible to have an Aberrant Trade Indicator appended to it. The 
Commission further notes that the Exchange's appending the Aberrant 
Trade Indicator to a trade report has no effect on the validity of the 
underlying trade. Finally, waiving the 30-day operative delay will 
allow the Exchange to apply the proposed change to aberrant trades 
immediately.\12\ Based on the above, the Commission designates the 
proposal to become operative upon filing.
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    \11\ See Securities Exchange Act Release No. 58736 (October 6, 
2008), 73 FR 60380 (October 10, 2008) (SR-NYSE-2008-91). See also 
Securities Exchange Act Release No. 59151 (December 23, 2008), 74 FR 
158 (January 2, 2009) (SR-NASDAQ-2008-100).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the impact of the proposed rule on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    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 the 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-NYSEAmex-2009-12 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-2009-12. 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

[[Page 18600]]

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 on official business days between the hours of 10 a.m. 
and 3 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 available publicly. All 
submissions should refer to File Number SR-NYSEAmex-2009-12 and should 
be submitted on or before May 14, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-9240 Filed 4-22-09; 8:45 am]
BILLING CODE 8010-01-P