[Federal Register Volume 74, Number 131 (Friday, July 10, 2009)]
[Notices]
[Pages 33286-33290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-16314]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60217; File No. SR-NYSEAMEX-2009-31]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending NYSE 
Amex Equities Rules To Allow Customers To Transmit Orders on the 
Exchange With Settlement Instructions of ``Cash,'' ``Next Day'' and 
``Seller's Option'' Directly to a Floor Broker for Manual Execution

July 1, 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 23, 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. 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 amend several NYSE Amex Equities rules to 
allow customers to transmit orders for execution on the Exchange with 
the settlement instructions of ``cash'', ``next day'' and ``seller's 
option'' directly to a Floor broker for manual execution. 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

[[Page 33287]]

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 allow customers to transmit orders for 
execution on the Exchange with the settlement instructions of ``cash'', 
``next day'' and ``seller's option'' (collectively referred to herein 
as ``non-regular way settlement'') directly to a Floor broker for 
manual execution. Specifically, the Exchange seeks to adopt NYSE Amex 
Rule 14 (Non-Regular Way Settlement Instructions for Orders) to provide 
that orders with these types of settlement instructions may only be 
submitted directly to a Floor broker. In addition, the Exchange 
proposes to add references to NYSE Amex Rule 14 to several Exchange 
rules which relate in some way to these settlement instructions.
    The Exchange notes that parallel changes are proposed to be made to 
the rules of the New York Stock Exchange (``NYSE'').\4\
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    \4\ See SR-NYSE-2009-59.
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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 NYSE Alternext US LLC,\6\ and continues to 
operate as a national securities exchange registered under Section 6 of 
the Securities Exchange Act of 1934 [sic], as amended (the ``Act'').\7\ 
The effective date of the Merger was October 1, 2008.
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    \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\ NYSE Alternext US LLC was subsequently renamed NYSE Amex 
LLC. See Securities Exchange Act Release No. 59575 (March 13, 2009), 
74 FR 11803 (March 19, 2009) (SR-NYSEALTR-2009-24).
    \7\ 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.\8\
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    \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).
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    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.\9\ 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, now renamed the NYSE Amex 
Equities Rules, as necessary to conform with rule changes to 
corresponding NYSE Rules filed by the NYSE.
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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); 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).
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    On March 13, 2009, the Exchange's amended rule became operative to 
require that all orders submitted to the Exchange be submitted for 
regular way settlement (i.e., settlement on the third business day 
following trade date).\10\ Prior to that requirement, the Exchange 
allowed market participants to submit orders that contained non-regular 
way settlement instructions directly to the Exchange matching/execution 
engine (Display Book), or to a Floor broker for representation. Cash 
settlement instructions required delivery of the securities the same 
day as the transaction. Next day settlement instructions required 
delivery of the securities on the first business day following the 
transaction. Orders that had settlement instructions of seller's option 
afforded 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.
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    \10\ See Securities and Exchange Act Release No. 59561 (March 
11, 2009), 74 FR 11393 (March 17, 2009) (SR-NYSEALTR-2009-25). The 
Exchange notes that the implementation of the changes described in 
this filing continue to be made on a security by security basis and, 
to date, are not operative in every security traded on the Exchange.
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    If an order containing non-regular way settlement instructions was 
sent to a Floor broker for representation, then the Floor broker was 
responsible for going to the post where the security traded to effect 
the execution of that order. However, Display Book electronically 
submitted orders that contained non-regular way settlement instructions 
were ineligible for immediate and automatic execution. Rather, the 
orders bypassed the Display Book, and were printed on paper at the 
Designated Market Makers' (``DMMs'') post locations, along with other 
administrative messages. Thereafter, the orders containing non-regular 
way settlement instructions required the DMM and the trading assistant 
to realize that the document printed was in fact an order which in some 
instances caused delay in the execution of the order. The DMM was then 
responsible for the manual execution of the order. The manual 
intervention required by the DMM and trading assistant at the post 
location in the processing of orders containing non-regular way 
settlement instructions put 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 to the risk of ``missing the market'', orders 
containing non-regular way settlement instructions were generally 
infrequently used by market participants for much of the trading 
calendar. The Exchange therefore provided that only orders for regular 
way execution be submitted to the Exchange.
    Exchange customers, however, have expressed that certain trading 
strategies and/or the expiration of certain trading instrument (e.g. 
rights and warrants) require the ability to submit orders to the 
Exchange that contain instructions for execution with non-regular way 
settlement. To accommodate the needs of its customers, the Exchange 
proposes to allow orders containing non-regular way settlement 
instructions to be transmitted directly to a Floor broker for manual 
order handling.

[[Page 33288]]

Proposed Floor Broker Handling of Cash, Next Day, Seller's Option 
Settlement Instructions
    The Exchange's commitment to provide its market participants with 
immediate and automatic execution in the most efficient manner requires 
the establishment of a separate order handling protocol for orders that 
contain non-regular way settlement instructions. Prior to the rule 
changes proposed in SR-NYSEALTR-2009-25, the required manual 
intervention by the DMMs and DMM trading assistants did not provide for 
efficient order handling protocol because it put 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. However, the Exchange 
recognizes that that there may be a continuing need for the 
availability of orders with non-regular way settlement instructions in 
its marketplace. To that end, the Exchange has designed a method of 
entry for these orders that will involve minimal manual handling by 
DMMs.
    The Exchange therefore proposes to adopt NYSE Amex Equities Rule 14 
(``Non-Regular Way Settlement Instructions for Orders'') to allow 
customers to directly transmit an order containing instructions for 
cash, next day and seller's option settlement as described above to a 
Floor broker for representation in the trading crowd.\11\ DMMs will not 
have order handling responsibility for these orders and Exchange 
systems that route orders to the Display Book will not accept orders 
containing non-regular way instructions. Routing orders to Floor 
brokers would then be the only acceptable way for orders with non-
regular way settlement instructions to be transmitted to the 
Exchange.\12\
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    \11\ The Exchange notes that as currently configured, the only 
Exchange system that will accept orders with non-regular way 
instructions is the Broker Booth Support System. Thus, these types 
of orders cannot be transmitted directly to a Floor broker's hand-
held device. In addition, odd-lot orders with non-regular way 
settlement instructions will not be accepted in BBSS and, therefore, 
will not be permitted.
    \12\ On June 10, 2009 the Exchange implemented this proposal 
after submitting a draft of this filing to the Commission, but prior 
to formal submission and receipt of a waiver of the 30-day delayed 
operative date.
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    Proposed NYSE Amex Equities Rule 14 will define the acceptable non-
regular way settlement instructions valid on the Exchange. An order 
submitted with cash settlement instructions would require delivery of 
the securities on the same day as the trade date. Next day settlement 
instructions would require delivery of the securities on the first 
business day following the trade date. Orders that have settlement 
instructions of seller's option would 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 sixty 
days for securities and not less than two business days and no more 
than sixty days for U.S. government securities. The Exchange modified 
from the previously effective version of this rule the maximum days 
from 180 to sixty days to reflect current industry practice for 
securities other than U.S. government securities.
    Further, pursuant to proposed NYSE Amex Equities Rule 14, a 
customer that requests the execution of an order pursuant to non-
regular way settlement instructions of cash, next day or seller's 
option must send the order directly to a Floor broker booth location on 
the Floor of the Exchange. A Floor broker that receives an order 
containing settlement instructions for cash, next day or seller's 
option must enter the order into broker systems prior to representing 
the order in the trading crowd to comply with his or her FESC 
obligations.\13\ Thereafter, the Floor broker would be allowed to 
represent the order in the trading crowd.\14\ Executions by the Floor 
broker of order containing non-regular way settlement would be reported 
to the Consolidated Tape with cash, next day or seller's option 
transaction indicators as appropriate.
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    \13\ FESC stands for ``Front End Systemic Capture''. Under NYSE 
Amex Equities Rule 123 (Records of Orders) members and member 
organizations are required to enter the details of an order, 
including any modification or cancellation, into a system which 
electronically timestamps the time of entry prior to representing or 
executing that order on the Floor.
    \14\ The Exchange notes that Floor brokers who accept customer 
orders with non-regular way settlement instructions will have the 
same best execution responsibilities in representing these orders as 
they would for regular way orders.
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    In addition, the Exchange proposes to amend NYSE Amex Equities 
Rules 64 (Bonds, Rights and 100-Share-Unit Stocks), 66 (U.S. Government 
Securities),\15\ 130 (Overnight Comparison of Exchange Transactions), 
to allow for non-regular way settlement as prescribed by proposed Rule 
14. The Exchange further proposes to amend NYSE Amex Equities Rules 137 
(Written Contracts) and 137A (Samples of Written Contracts) to include 
seller's options in written contracts. In addition, the Exchange 
further proposes to reinstate reserved NYSE Amex Equities Rules 73, 177 
and 179 to re-establish, ``Seller's Option'', ``Delivery Time--`Cash' 
Contracts'' and ``Seller's Option'' in order to specify precedence and 
delivery times for transactions made pursuant to cash and seller's 
option settlement instructions. The Exchange further proposes to amend 
NYSE Amex Equities Rule 189 (Unit of Delivery) to specify that the 
buyer shall not be required to accept a portion of a lot of securities 
contracted for before the seller's option expiration date. NYSE Amex 
Equities Rules 235 (Ex-Dividends, Ex-Rights), 236 (Ex-Warrants), 257 
(Deliveries After ``Ex'' Date) and 282 (Buy-In Procedures) to add 
specific provisions related to orders submitted with cash settlement 
instructions. NYSE Amex Equities Rules 241 (Added to Contract Price) to 
add specific provisions related to orders submitted with seller's 
option settlement instructions.
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    \15\ Currently, the Exchange does not trade U.S. Government 
securities.
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    With respect to NYSE Amex Equities Rule 64, the Exchange proposes 
to add provisions that were previously a part of the Rule before the 
Exchange eliminated non-regular way settlement instructions under SR-
NYSEALTR-2009-25. Specifically, the Exchange proposes to:

    (1) Add paragraph (a)(ii) to require that on the second and 
third business days preceding the final day for subscription, bids 
and offers in rights may only be made for next day settlement, and 
may only be made for cash settlement on the day preceding the final 
day for subscription;
    (2) Add paragraph (b) to require that all trades for other than 
regular way settlement that are more than .10 point away from the 
regular way bid or offer must be approved by a Floor Official, 
except that this will be expanded to .25 during the last trading 
week of the calendar year; and
    (3) Add paragraph (c) to require that while for seller's option 
trades the settlement date is established in business days, they 
must be reported to the tape in calendar days.

    The Exchange believes these provisions are necessary to continue to 
regulate non-regular way trades, as they were before they were 
eliminated.
    The Exchange also proposes to add references to proposed NYSE Amex 
Equities Rule 14 and non-regular way settlement instructions to those 
rules that have provisions that implicate settlement instructions. 
Specifically, the Exchange proposes to add the reference to NYSE Amex 
Equities Rules 12 (``Business Day'') and 123 (Record of Orders).
Odd Lot Orders
    Proposed NYSE Amex Equities Rule 14 will only permit non-regular 
way settlement instructions for round lot orders and orders that are 
comprised of a round lot and an odd lot, i.e., partial round lot orders 
(``PRLs''). Odd lot orders with non-regular way settlement

[[Page 33289]]

instructions will not be acceptable for execution on the Exchange. 
Exchange systems, order execution and post settlement processing will 
not support non-regular way settlement for odd lots. PRL orders 
submitted with non-regular way settlement instructions will be executed 
pursuant to the provisions of proposed NYSE Amex Equities Rule 124.40 
(ii). Proposed NYSE Amex Equities Rule 124.40 (ii) will require that 
the odd-lot portion of the PRL will be executed at the same price of 
the last round lot in the order to better facilitate the post 
settlement processing of these orders.
    The Exchange believes that the instant proposal will meet the needs 
of its customers to submit orders for non-regular way settlement in a 
manner that will provide effective representation for the customer in 
the Exchange's current market.
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) 
\16\ 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 restoring the ability of Exchange 
market participants to enter orders with other than ``regular way'' 
settlement instructions, and allow these orders to be represented at 
the point of sale in the Exchange's auction market while reducing the 
risk of such orders missing the market.
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    \16\ 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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) thereunder \18\ 
because the foregoing proposed rule: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) does not become 
operative for 30 days after the date of filing, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ In addition, Rule 19b-4(f)(6)(iii) requires the self-
regulatory organization to give the Commission notice of its 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. NYSE Amex has satisfied this 
requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \20\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The NYSE Amex 
has requested that the Commission waive the 30-day operative delay. 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 restores the ability of market 
participants to submit, and Floor brokers to receive, orders containing 
non-regular way settlement instructions. Accordingly, the proposed rule 
change does not raise any novel issues. For this reason, the Commission 
designates the proposed rule change as operative upon filing.\22\
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    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 17 CFR 240.19b-4(f)(6)(iii).
    \22\ 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. 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 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-2009-31 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-2009-31. 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 will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2009-31 and should be submitted on or before July 31, 2009.
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    \23\ 17 CFR 200.30-3(a)(12).


[[Page 33290]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-16314 Filed 7-9-09; 8:45 am]
BILLING CODE 8010-01-P