[Federal Register Volume 74, Number 121 (Thursday, June 25, 2009)]
[Notices]
[Pages 30342-30345]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-14957]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60139; File No. SR-NYSEAmex-2009-18]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending NYSE 
Amex Equities Rule 124 To Clarify the Pricing Methodology for the Odd-
Lot Portion of a Part of a Round-Lot Order; Clarify the Systems Capable 
of Accepting PRL Orders; and Clarify the Systems Capable of Accepting a 
Good `Til Cancelled Order During the Implementation of Exchange System 
Enhancements

June 18, 2009.
    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 June 8, 2009, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. NYSE Amex filed the proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \4\ and Rule 19b-4(f)(6) thereunder,\5\ 
which renders it effective upon filing with the Commission. 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.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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: (i) Amend NYSE Amex Equities Rule 124 
(Odd-Lot Orders) to clarify the pricing methodology for the odd-lot 
portion of a part of a round-lot (``PRL'') order; (ii) clarify the 
systems capable of accepting PRL orders; and (iii) clarify the systems 
capable of accepting a Good `Til Cancelled Order (``GTC'') during the 
implementation of Exchange system enhancements. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.nyse.com.

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
    NYSE Amex LLC (``NYSE Amex'' or ``the Exchange''), formerly the 
American Stock Exchange LLC, proposes to: (i) Amend NYSE Amex Equities 
Rule 124 (Odd-Lot Orders) to clarify the pricing methodology for the 
odd-lot portion of a part of a round-lot (``PRL'') order; (ii) clarify 
the systems capable of accepting PRL orders; and (iii) clarify the 
systems capable of accepting a Good `Til Cancelled Order (``GTC'') 
during the implementation of Exchange system enhancements. The text of 
the proposed rule change is attached hereto as Exhibit 5.
    The Exchange notes that parallel changes are proposed to be made to 
the rules of the New York Stock Exchange LLC (``NYSE'').\6\
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    \6\ See SR-NYSE-2009-45 (filed June 8, 2009).
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I. Background

    As described more fully in a related rule filing,\7\ 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 now called NYSE Amex 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'').\8\ The 
effective date of the Merger was October 1, 2008.
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    \7\ 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).
    \8\ 15 U.S.C. 78f.
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    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 Amex Trading 
Systems'') are operated by the NYSE on behalf of the Exchange.\9\
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    \9\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex 2008-63) (approving 
the Equities Relocation).
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    As part of the Equities Relocation, NYSE Amex adopted NYSE Rules 1-
1004, subject to such changes as necessary to apply the Rules to the 
Exchange, as the NYSE Amex Equities Rules to govern trading on the NYSE 
Amex Trading Systems.\10\ The NYSE Amex 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 
Amex Equities Rules as necessary to conform with rule changes to 
corresponding NYSE Rules filed by the NYSE.
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    \10\ 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) 
(implementing 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 Amex 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 
Amex Equities to track changes to corresponding NYSE Rule 62).
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II. Background of NYSE Amex Equities Rule 124

    Currently, odd-lot orders on the Exchange are processed and 
executed systemically by an Exchange system designated solely for odd-
lot orders (the ``Odd-lot System'').\11\ The Odd-lot System executes 
all odd-lot orders against the Designated Marker Maker (``DMM'') as the 
contra party.\12\
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    \11\ See NYSE Amex Equities Rule 124(a).
    \12\ Id. Odd-lot orders are in effect netted against one another 
and executed; however, since the DMM is buying the same amount that 
he or she is selling, there is no economic consequence to the DMM in 
this type of pairing-off of orders. Any imbalance of buy or sell 
odd-lot market orders are executed against the DMM, up to the size 
of the round-lot transaction or the bid/offer size which ever is 
less.

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[[Page 30343]]

    Pursuant to NYSE Amex Equities Rule 124(c), after odd-lot market 
orders and marketable odd-lot limit orders are received by the Odd-lot 
System, they are automatically executed at the price of the next round-
lot transaction in the subject security on the Exchange. Specifically, 
marketable odd-lot orders and marketable odd-lot limit orders are 
executed in time priority of receipt at the price of the next round-lot 
transaction, pursuant to the netting provision described in footnote 
12. The imbalance of marketable odd-lot orders that do not receive an 
execution as a result of the netting provision are executed in time 
priority of receipt at the price of the National Best Bid or Offer 
(``NBBO''), subject to a volume limitation.\13\ Any imbalances of odd-
lot limit orders that were non-marketable upon receipt that 
subsequently become marketable receive an execution at their limit 
price.\14\ Marketable odd-lot orders, which would otherwise receive a 
partial execution pursuant to the volume limitation, are executed in 
full.\15\
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    \13\ The volume limitation in section (c) of the rule is defined 
as the lesser of either the number of shares in the last round-lot 
transaction or the number of shares available at the national best 
bid (in the case of an odd-lot order to sell), or the national best 
offer (in the case of an odd-lot order to buy).
    \14\ Pursuant to NYSE Amex Equities Rule 124(d) odd-lot limit 
orders that are non-marketable upon receipt that become marketable 
are eligible to be netted and executed at the price of the next 
round-lot transaction. If an odd-lot limit order does not receive an 
execution pursuant to the netting provision, then the order is 
eligible to be executed, at its limit price, subject to the volume 
limitation of section (c) of the rule.
    \15\ As with marketable odd-lot orders, non-marketable odd-lot 
limit orders which would otherwise receive a partial execution will 
be executed in full. A non-marketable odd-lot limit order that 
becomes marketable, that remains unexecuted within 30 seconds of 
receipt will be executed, in time priority of receipt, except that 
the order will be executed at its limit price.
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    Any marketable odd-lot orders that do not receive an execution 
because of the volume limitation are executed, in time priority of 
receipt at the price of the next round-lot transaction, following 
pricing and execution procedures described above. Marketable odd-lot 
orders (including odd-lot limit orders that were non-marketable upon 
receipt and subsequently become marketable) that remain unexecuted 
within 30 seconds of receipt will be executed, in time priority of 
receipt, at the price of the NBBO (or at its limit price if the order 
is a non-marketable odd-lot limit order upon receipt that has become 
marketable). These orders are also subject to the volume limitation.
    Marketable odd-lot orders and non-marketable odd-lot limit orders 
that have become marketable and remain unexecuted prior to the close of 
trading shall be executed, in time priority of receipt at the price of 
the closing transaction, subject to the netting provision and a volume 
restriction which is not to exceed the size of the closing transaction.
PRL Pricing
    The Exchange believes that the most appropriate way to execute odd-
lot orders is to represent them in the round-lot auction market where 
they would interact with all other market interest and be priced in 
accordance with supply and demand dynamics. The Exchange is committed 
to the goal of integrating odd-lots into the round-lot market and 
eliminating the separate handling of odd-lot and PRL transactions. 
However, until the requisite technology changes can be completed, the 
Exchange is proposing these modifications in order to further 
streamline the handling performed by its current systems.
    NYSE Amex Equities Rule 124 was amended as interim measures to 
accommodate the pricing and execution of odd-lot orders in a manner 
based on the prevailing market.\16\ Most recently, significant upgrades 
to the Exchange's technology \17\ made it possible for the Exchange 
systems that process orders sent to Display Book, the Exchange matching 
engine, to price odd-lot orders sent to the post that were consistent 
with the provisions of NYSE Amex Equities Rule 124(c) and (d).
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    \16\ See Securities Exchange Act Release No. 56551 (September 
27, 2007), 73 FR 56415 (October 3, 2007) (SR-NYSE-2007-82); See also 
Securities Exchange Act Release No. 49536 (April 7, 2004), 69 FR 
19890, 19893 (April 14, 2004) (SR-NYSE-2003-37); Securities Exchange 
Act Release No. 49745 (May 20, 2004), 69 FR 29998 (May 26, 2004) 
(SR-NYSE-2003-37).
    \17\ See Securities Exchange Act Release No. 58184 (July 17, 
2008), 73 FR 42853 (July 23, 2008) (SR-NYSE-2008-46) (Key changes in 
this filing served to enhance the Exchange technology).
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    On March 11, 2009, the Exchange filed a proposed rule change with 
the Commission to amend NYSE Amex Equities Rule 124.40 to allow the 
odd-lot portion of PRLs to be executed in the Odd-lot System pursuant 
to the pricing provisions of NYSE Amex Equities Rule 124.\18\ As 
modified, the odd-lot portion of the PRL retains the time stamp of its 
original entry as a PRL and is sequenced for execution based on the 
initial entry time of the PRL. Once all round lot components of the PRL 
are fully executed, the odd-lot portion of the order is executed at a 
price consistent with other odd-lot orders subject to the provisions of 
NYSE Amex Equities Rule 124(c) and (d).

    \18\ See Securities Exchange Act Release No. 59614 (March 20, 
2009), 74 FR 13501 (March 27, 2009) (SR-NYSEALTR-2009-27).
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    Example: A marketable order to sell 399 shares of security XYZ 
is received by Exchange systems at 12:00:00. The 99 share portion of 
the order is eligible for execution only after the 300 share portion 
of the PRL order is sold. See table below.


------------------------------------------------------------------------
                       Number of     Price of
 Time of  execution      shares     execution       Customer receives
------------------------------------------------------------------------
12:00:01............          100       $30.22  Report of Execution 100
                                                 shares at a price of
                                                 $30.22.
12:01:00............          100        30.21  Report of Execution 100
                                                 shares at a price of
                                                 $30.21.
12:01:47............          100        30.22  Report of Execution 100
                                                 shares at a price of
                                                 $30.22.
12:01:48............           99    \19\30.23  Report of Execution 99
                                                 shares at a price of
                                                 $30.23.
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    In the filing to amend the execution of PRL orders, the Exchange 
explained that the system enhancements to Display Book would be 
progressively implemented on a security by security basis. On March 16, 
2009, the Exchange commenced migration of symbols to the enhanced 
systems. This migration is ongoing and PRL orders submitted to the 
Display Book in those migrated symbols are executed as described above. 
The list of securities that are operating on the enhanced systems, are 
available on the Exchange's Web site at: http://www.nyse.com/attachment/SDBK_SecurityRolloutList.xls.
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    \19\ This example assumes that the odd-lot portion of the PRL 
had priority of execution in the Odd-lot System because its original 
order entry time was 12:00:00.
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    Systems that process orders sent to the Exchange to be executed by 
a Floor broker, collectively called Exchange Floor broker systems, are 
also being upgraded to provide improved functionality. The Exchange 
Floor broker systems can be divided into two categories--booth systems 
(Broker

[[Page 30344]]

Booth Support Systems or ``BBSS'') and hand-held devices. As of yet, 
neither system has been provided with the newer PRL pricing 
functionality. As a result, PRLs sent to BBSS are processed pursuant to 
the prior provisions of NYSE Amex Equities Rule 124, Supplemental 
Material .40, which requires the odd-lot portion of a PRL to be 
executed only where no round lot portion thereof is cancelled and at 
the same price of the last round lot execution that would complete the 
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round lot portion of the PRL.

    Example: An order to sell 399 shares of security XYZ is received 
by Exchange Floor broker systems at 12:00:00. The 99 share portion 
of the order is eligible for execution only after the 300 share 
portion of the PRL order is sold. See table below.


------------------------------------------------------------------------
                       Number of     Price of
 Time of  execution      shares     execution       Customer receives
------------------------------------------------------------------------
12:00:01............          100       $30.22  Report of Execution 100
                                                 shares at a price of
                                                 $30.22.
12:01:00............          100        30.21  Report of Execution 100
                                                 shares at a price of
                                                 $30.22.
12:01:47............          100        30.22  Report of Execution 199
12:01:47............           99        30.22   shares at a price of
                                                 $30.22.
------------------------------------------------------------------------

    Until such time as the Exchange Floor broker systems can be 
enhanced to execute PRL orders pursuant to NYSE Amex Equities Rule 
124(c) and (d), the Exchange proposes to amend the provisions of NYSE 
Amex Equities Rule 124.40 to provide that the odd-lot portion of PRL 
orders transmitted to a Floor broker via the Floor broker booth system 
for execution will be executed at the same price of the last round lot 
execution that would complete the round lot portion of the PRL.
    The Exchange anticipates that the enhancements to the Exchange 
Floor broker systems will be completed no later than the end of the 
fourth quarter of 2009.
Systems Capable of Accepting PRL and GTC Orders
    During the implementation of the Exchange Floor broker system 
enhancements, any PRL orders and GTC orders sent to a Floor broker's 
hand-held device will be rejected. Furthermore, GTC orders in symbols 
that have been migrated to the enhanced systems noted above will not be 
accepted in any broker system. PRL and GTC orders (in non-migrated 
symbols) must be transmitted to BBSS where the customer seeks to 
utilize a Floor broker's business expertise in the execution of such 
orders. Once the full migration has been completed, GTC orders will not 
be accepted by broker systems or broker hand-held devices and PRL 
orders will not be accepted by broker hand-held devices. Therefore, the 
Exchange proposes to amend NYSE Amex Equities Rule 13 (Definitions of 
Orders) to state that GTC orders will not be accepted by broker hand-
held devices or broker systems. Similarly, the Exchange proposes to 
amend NYSE Amex Equities Rule 124.40 to state that PRL orders will not 
be accepted by broker hand-held devices.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \20\ 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 proposal is in keeping 
with these principles in that it seeks to clarify and temporarily 
modify the Exchange's pricing methodology for PRL orders to provide 
customers the benefit of the Floor broker's business expertise while 
the Exchange completes required system enhancements.
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    \20\ 15 U.S.C. 78f(b)(5).
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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

    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 \21\ and Rule 19b-4(f)(6) thereunder.\22\ 
Because the foregoing proposed rule change: (1) Does not significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) by its terms does not 
become operative for 30 days of this filing, 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 \23\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\24\
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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) does not 
normally become operative prior to 30 days after the date of 
filing.\25\ However, Rule 19b-4(f)(6)(iii) 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 proposal may become operative immediately upon filing.
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    \25\ See id. In addition, Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to provide the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief descriptiption 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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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposed rule change seeks to avoid investor confusion by 
clarifying the systems capable of executing PRL and GTC orders and the 
pricing methodology for such orders. Therefore, the Commission 
designates the proposed rule change operative upon filing.\26\
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    \26\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact 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

[[Page 30345]]

necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance 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-2009-18 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-2009-18. 
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-NYSEAmex-2009-18 and should 
be submitted on or before July 16, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-14957 Filed 6-24-09; 8:45 am]
BILLING CODE 8010-01-P