[Federal Register Volume 74, Number 136 (Friday, July 17, 2009)]
[Notices]
[Pages 34826-34829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17016]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60290; File No. SR-NYSEAmex-2009-39]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending NYSE 
Amex Equities Rules 60, 70 and 1000 To Reflect Modifications to the 
Manner in Which the Exchange Will Quote and Trade With Respect to 
Liquidity Replenishment Points

July 10, 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 July 9, 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 Exchange 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Amex Equities Rules 60 
(Dissemination of Quotations), 70 (Execution of Floor Broker Interest) 
and 1000 (Automatic Executions) to reflect modifications to the manner 
in which the Exchange will quote and trade with respect to Liquidity 
Replenishment Points. 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 proposes to amend Exchange Rules 60 (Dissemination of 
Quotations), 70 (Execution of Floor Broker Interest) and 1000 
(Automatic Executions) to reflect modifications to the manner in which 
the Exchange will quote and trade with respect to Liquidity 
Replenishment Points (``LRPs'').\6\ As proposed, LRPs will convert the 
Display Book to an auction market by causing autoquote to be suspended 
only when an LRP is reached that will result in a locked or crossed 
market condition on the Exchange or with respect to an away market 
center (``lock/cross'') or where the next action required is to 
consummate a trade. Once the locked/crossed condition is cleared or the 
required trade is consummated, the automatic quoting and executions 
will resume immediately without any pre-set timing delays. As such, the 
proposal will allow Exchange systems to quote interest through an LRP 
price point without converting the Exchange market to an auction market 
where the next required action is simply to quote the interest.
---------------------------------------------------------------------------

    \6\ LRPs are pre-determined price points that temporarily 
convert the automatic Exchange market to an auction market in order 
to dampen volatility when the market is experiencing a large price 
movement based on a security's typical trading characteristics or 
market conditions over short periods of time during the trading day. 
LRPs allow the DMM to solicit additional liquidity.
---------------------------------------------------------------------------

    The Exchange notes that parallel changes are proposed to be made to 
the rules of the New York Stock Exchange (``NYSE'').\7\
---------------------------------------------------------------------------

    \7\ See SR-NYSE-2009-68 (to be filed July 9, 2009). NYSE 
Euronext acquired The Amex Membership Corporation (``AMC'') pursuant 
to an Agreement and Plan of Merger, dated January 17, 2008 (the 
``Merger''). 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). The effective date of 
the Merger was October 1, 2008. 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, 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 15 U.S.C. 78f. 
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).
---------------------------------------------------------------------------

a. Background
    The Exchange uses LRPs to temporarily convert the automatic 
Exchange market to an auction market in order to dampen volatility when 
the market is experiencing a large price movement based on a security's 
typical trading characteristics or market conditions over short periods 
of time during the trading day. For example, a large-sized order on one 
side of the market, or a series of orders that will trade beyond the 
current market could cause the price of a security to move to its 
current LRP value. Conversion to an auction market as a result of an 
LRP allows the Exchange to solicit additional liquidity.
    Floor broker interest with discretionary trading instructions (``d-
Quotes'') is prohibited from triggering an LRP. Specifically, a d-Quote 
participating in a sweep transaction cannot use its price discretion to 
trade at a price that would trigger an LRP.\8\ d-Quotes were designed 
in this manner so they would not cause the Exchange's market to ``go 
slow'' by triggering an LRP. It should also be noted that a d-Quote 
cannot cause a lock/cross market because the d-Quote only trades at 
prices within its designated discretion but does not quote at a price 
using its price discretion.
---------------------------------------------------------------------------

    \8\ Exchange systems automatically prevent a d-Quote from using 
its price discretion to trade at an LRP price.
---------------------------------------------------------------------------

b. Functioning of Autoquote and Auomatic [sic] Executions
    Autoquote is a part of the Display Book[supreg] \9\ that 
immediately displays

[[Page 34827]]

customer limit orders received on the Exchange. When autoquote is 
suspended, it is suspended on both sides of the market. The Exchange 
will publish a ``slow'' quote (i.e., one that is not eligible for 
automatic execution) when autoquote is suspended. The Exchange can also 
publish a slow quote on one side of the market, under certain market 
conditions, such as when there is no interest on one side of the 
market.
---------------------------------------------------------------------------

    \9\ The Display Book[supreg] system is an order management and 
execution facility. The Display Book system receives and displays 
orders to the DMMs, contains the Book, 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.
---------------------------------------------------------------------------

    Pursuant to NYSE Amex Equities Rule 60, autoquote is suspended when 
an LRP is reached and resumes in no more than ten seconds after the LRP 
is reached. Specifically, NYSE Amex Equities Rule 60(d)(ii)(C) provides 
that autoquoting is suspended when an LRP is reached, that is, if an 
automatic execution would take place at or beyond an LRP. When 
autoquoting is suspended in this situation, the Display Book ``goes 
slow'', i.e., quotes and trading in that security do not take place 
automatically. Pursuant to current Rule 60, autoquoting will resume in 
no more than ten seconds (but usually in five seconds) after an LRP is 
reached. Autoquoting resumes unless there is interest on the Display 
Book system that would lock/cross the market. In such case, autoquoting 
will resume following a manual transaction.
    For example, if the market on the Exchange for a security is 20.10 
bid and 20.15 offered. The designated LRP for this security is at a 
price of 20.15 on the offer side. A buy order is received to lift the 
offer at 20.15. Exchange systems will execute the buy order against the 
interest at 20.15 and then suspend autoquote. Autoquote resumes in no 
more than ten seconds unless there is interest on the NYSE Amex Display 
Book system that would lock/cross the market. An example of this would 
be if in the same market situation after autoquote suspended, interest 
arrived to sell below the bid price (e.g., sell at 20.09 or below), the 
market would be ``crossed''. In such case, autoquote will resume after 
a manual transaction, conducted by the DMM to trade out of the cross 
market and resume automatic quoting.
    Similarly, pursuant to NYSE Amex Equities Rule 1000(a)(iv), 
automatic executions are suspended when an LRP is reached, and resume 
pursuant to the same parameters for the resumption of autoquote. 
Automatic executions on the Exchange are suspended when autoquote is 
suspended. In certain instances, autoquote is available to disseminate 
a slow quote. This may occur on either the bid or offer side or both 
sides of the market. In instances when autoquote is disseminating a 
slow quote, auto executions will not be available against the quote 
that is slow.
    Pursuant to current NYSE Amex Equities Rules, once an LRP is 
reached interest may not quote through the price point. For example the 
Exchange market is 500 shares bid 20.10 and 300 shares offered at 
20.15. The designated LRP for this security is at a price of 20.15 on 
the offer side. An order to buy 600 shares with a limit price of 20.16 
is received. There is no interest offered on the Display Book at 20.16. 
The next offer is 400 shares at 20.20. The order will execute 300 
shares at 20.15. Thereafter, autoquote and automatic executions will be 
suspended. No more than ten seconds later, the quote will be updated to 
reflect the new bid price of 20.16 and the new offer price of 20.20 and 
autoquote and auto execution will resume.
    Similarly, pursuant to current NYSE Amex Equities Rules, interest 
may also not trade through the price point. Again, the Exchange market 
is 500 shares bid 20.10 and 300 shares offered at 20.15. The designated 
LRP for this security is at a price of 20.15 on the offer side. An 
order to buy 600 shares with a limit price of 20.16 is received. There 
are 200 shares offered on the Display Book at 20.16 and the next offer 
on the Display Book is for 400 shares at 20.20. The order will execute 
300 shares at 20.15. Thereafter, autoquote and automatic executions 
will be suspended. The DMM will manually execute an additional 200 
shares of the order at 20.16 and auto quote and auto execution will 
resume. The Exchange quote will be updated to reflect 100 shares bid at 
20.16 and 400 shares offered at the price of 20.20.
c. Proposed Amendment to NYSE Amex Equities Rules
    In order to have the Exchange market increase the amount of 
continuous automatic quoting and executions, it is proposed to reduce 
the number of situations when an LRP converts the Exchange to a manual 
market. The Exchange is proposing to allow Exchange systems to quote 
interest through an LRP price point without converting the Exchange 
market to an auction market where the next required action is simply to 
quote. In the event a trade is required after reaching an LRP, the 
Exchange market will continue to be converted to an auction market.
    In instances where the next action after the LRP would be to quote 
because there is no interest capable of trading at the relevant price 
point, the Exchange proposes to have the Display Book[supreg] maintain 
fast market conditions and not convert to a manual market for any 
period of time. Rather, interest will be immediately and automatically 
quoted and available for automatic executions. As proposed, an LRP will 
convert the Display Book to an auction market when an automated quote 
following such LRP would result in a locked/crossed market condition. 
Once the locked/crossed condition is cleared, automatic quoting and 
executions will resume immediately without any pre-set timing delays.
    The Exchange believes that in certain situations, when an LRP is 
reached, and there is not a locked/crossed market situation, keeping 
autoquote active is beneficial to the market since interest on the 
Display Book will continue to be autoquoted, and therefore available 
for automatic executions.\10\ For example, suppose the market on NYSE 
Amex is 20.10 bid and 20.15 offered, last sale at 19.90, with the 
current LRP for this security at 20.15 on the offer side since the LRP 
is .25. If there is incoming interest that would trade up to the .15 
offer, and there is interest on the Display Book to sell at .16, the 
Exchange believes the .16 offer should be eligible for autoquoting and, 
therefore, automatic execution, rather than the Exchange's market 
having to go slow.
---------------------------------------------------------------------------

    \10\ The Exchange notes that in its experience it does not often 
receive additional liquidity in the prescribed amount of time during 
LRP situations where the next required action is to quote the 
remaining interest, and, therefore, the Exchange believes that 
allowing for the continuation of autoquoting will be beneficial to 
its market.
---------------------------------------------------------------------------

    Therefore, the Exchange proposes to amend NYSE Amex Equities Rule 
60(d) to allow autoquote to continue when an LRP is reached if the 
market on the Exchange is not locked/crossed. For example the Exchange 
market is 500 shares bid 20.10 and 300 shares offered at 20.15. The 
designated LRP for this security is at a price of 20.15 on the offer 
side. An order to buy 600 shares with a limit price of 20.16 is 
received. There is no interest offered on the Display Book at 20.16. 
The next offer is 400 shares at 20.20. The order will execute 300 
shares at 20.15. Autoquote and automatic executions will not be 
suspended. Thereafter autoquote will reflect the new quote of 300 
shares bid at a price of 20.16 and 400 shares offered at a price of 
20.20.
    Pursuant to the proposal, there will be no interruption of 
autoquote unless the market would be locked/crossed by the interest 
that would be autoquoted. Moreover, Exchange systems will still

[[Page 34828]]

not allow the Display Book to trade through an LRP. As such, if the 
Exchange market is 500 shares bid 20.10 and 300 shares offered at 
20.15. The designated LRP for this security is at a price of 20.15 on 
the offer side. An order to buy 600 shares with a limit price of 20.16 
is received. There are 200 shares offered on the Display Book at 20.16 
and the next offer on the Display Book is 400 shares at 20.20. The 
order will execute 300 shares at 20.15. Thereafter, autoquote and 
automatic executions will be suspended as it is today. The DMM must 
intervene to execute the additional 200 shares of the order at 20.16. 
Autoquoting will also resume as soon as a locked/crossed market is 
cleared by a manual execution or cancellation of the locking/crossing 
interest.\11\
---------------------------------------------------------------------------

    \11\ The Exchange is working on technology to replicate certain 
manual functions currently done by the individual DMM, including 
trading out of LRPs that would lock/cross the market. The proposed 
change to Rule 60(d) will thus have the effect of providing for the 
resumption of Autoquoting when a locked/crossed market is cleared 
manually or automatically.
---------------------------------------------------------------------------

    The Exchange further proposes to amend NYSE Amex Equities Rule 
1000(a)(iv) to allow for the continuation of automatic execution unless 
(a) any residual interest of the executing order is locking/crossing 
the market on the Exchange; or (b) if the resulting bid or offer is 
beyond the revised LRP in that security. NYSE Amex Equities Rule 
1000(a)(iv) will further be amended to suspend automatic executions 
only on the side of the market that is quoted beyond the newly 
calculated LRP, except that undisplayed reserve orders at price points 
before the LRP will continue to be eligible for automatic executions.
    For example, suppose the market on NYSE Amex is 20.10 bid and 20.15 
offered, with an LRP Parameter of .25. The designated LRP for this 
security is at a price of 20.15 on the offer side. An incoming buy 
order limited to 20.15 is entered. It trades up to the 20.15 offer with 
residual shares to be executed. There is no other sell interest on the 
Display Book until 20.45. An LRP will be calculated based on the last 
sale price of 20.15 (i.e., last sale of 20.15 plus the .25 LRP 
parameter equals 20.40). The offer will be published as slow since it 
is beyond the newly calculated offer side LRP of 20.40 (last sale of 
20.15 plus .25). The bid will remain fast since the bid side LRP is 
calculated as 19.90 (last sale of 20.15 minus .25). The offer will stay 
slow until new interest arrives to quote within the LRP, the LRP is 
recalculated off of a new trade or the DMM intervenes and trades 
manually.
    Finally, the Exchange proposes to amend NYSE Amex Equities Rule 
70.25(d)(ix)(A) to remove the restriction that a d-Quote participating 
in a sweep transaction must stop within one minimum price variation, 
for most Exchange securities, one cent, of a security's LRP. Given the 
proposed modification to LRP functionality, allowing d-Quotes to trade 
at an LRP price will not cause the Exchange's market to go slow if the 
next action will be a quote. For example, presume the market is 20.05 
bid and offered at 20.10, with the security's LRP on the sell side set 
at 20.13, but with interest on the Display Book to sell higher than the 
LRP. If a d-Quote to buy has three cents maximum discretion, it would 
not be able to trade at 20.13 under current rules since this price is a 
LRP price point. However, since there is interest eligible to be quoted 
beyond the LRP, under the proposed rule changes allowing the d-Quote to 
use its maximum discretion to trade at 20.13 would not cause the market 
to go slow. Therefore, the restriction on the d-quote trading at the 
LRP no longer serves its original purpose. As such, the Exchange 
proposes to remove said restriction.
    The Exchange will commence implementation of the systemic changes 
to allow Exchange systems to quote interest through an LRP price point 
without converting the Exchange market to an auction market where the 
next required action is simply to quote the interest on or about July 
10, 2009. The Exchange intends to progressively implement this systemic 
change for LRPs on a security by security basis as it gains experience 
with the new technology until it is operative in all securities traded 
on the Floor. During the implementation, the Exchange will identify on 
its Web site which securities have been transitioned to the new system.
    In addition to the substantive change proposed above, the Exchange 
further proposes to make a technical amendment to NYSE Amex Equities 
Rule 1000 to delete a reference to the timing of the beginning of the 
New Market Model Pilot \12\ from the preliminary provisions of Rule 
1000 since this Pilot has been underway for a number of months.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46).
---------------------------------------------------------------------------

2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the 
``Act'')\13\ for these proposed rule changes is the requirement under 
Section 6(b)(5)\14\ 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 proposed rule change also is designed to support the 
principles of Section 11A(a)(1) \15\ in that it seeks to assure 
economically efficient execution of securities transactions, make it 
practicable for brokers to execute investors' orders in the best market 
and provide an opportunity for investors' orders to be executed without 
the participation of a dealer. The Exchange's proposal to maintain fast 
market conditions more often is consistent with the principles above in 
that it will increase the amount of time that the Exchange's quote is 
eligible for immediate and automatic executions.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78a.
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

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 foregoing 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 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written 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. The Exchange has satisfied this requirement.

---------------------------------------------------------------------------

[[Page 34829]]

    The Exchange has requested that the Commission waive the 30-day 
operative delay in order to permit the Exchange to immediately 
implement the modifications to its systems discussed in full above, 
which should permit the Exchange to maintain fast market conditions 
more often, thus increasing the amount of time that the Exchange's 
quote is eligible for automatic executions. The Commission believes 
such waiver is consistent with the protection of investors and the 
public interest.\18\ Accordingly, the Commission designates the 
proposed rule change operative upon filing with the Commission.
---------------------------------------------------------------------------

    \18\ 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. See 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-NYSEAmex-2009-39 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-2009-39. 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 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-2009-39 and should be submitted on or before 
August 7, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-17016 Filed 7-16-09; 8:45 am]
BILLING CODE 8010-01-P