[Federal Register Volume 74, Number 137 (Monday, July 20, 2009)]
[Notices]
[Pages 35223-35225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17136]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60297; File No. SR-NYSE Amex-2009-42]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Proposed Rule Change To Propose New Rules To Govern Electronic Complex 
Order Trading

July 13, 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 July 9, 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, II, and III below, which 
Items have been prepared by the Exchange. 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\ 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 new rules to govern Electronic Complex Order 
trading.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.nyse.com, at the Exchange's principal 
office, and at the Commission's Public Reference Room.

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
    NYSE Amex proposes new rules that describe Electronic Complex Order 
Trading. Electronic Complex Orders are Complex Orders and Stock/option 
Orders that are entered electronically into the NYSE Amex System.
    Proposed Rule 980NY describes the entry of Electronic Complex 
Orders in the Consolidated Book and the operation of a Complex Matching 
Engine. The Complex Matching Engine is the mechanism in which 
Electronic Complex Orders are executed against each other or against 
individual quotes and orders in the Consolidated Book. Electronic 
Complex Orders in the Consolidated Book will be available to all market 
participants via an electronic interface. NYSE Amex proposes that 
Electronic Complex Orders be ranked in the Consolidated Book in price/
time priority based on the strategy and the total or net debit or 
credit, provided that Electronic Complex Orders on behalf of Customers 
shall be ranked ahead of same price Electronic Complex Orders for non-
Customers.
    Electronic Complex Orders eligible for execution in the Complex 
Matching Engine are defined to be consistent with the Linkage Plan 
Trade Through exemption; \3\ they therefore may report execution prices 
for the individual legs of a Complex Trade that are outside of the 
National Best Bid or Offer. However, the Complex Matching Engine will 
never execute any of the legs of a Complex Trade at a price outside of 
the NYSE Amex best bid/offer for that leg.
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    \3\ They are also defined to be consistent with the proposed 
exemption described in the Proposed Options Order Protection and 
Locked/Crossed Market Plan (File No. 4-546, Exchange Act Release No. 
34-59647).
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    NYSE Amex also proposes that Electronic Complex Orders attempt to 
execute against other Electronic Complex Orders in the Consolidated 
Book, before attempting to execute against the individual leg markets 
in the Consolidated Book, provided that for purposes of priority, where 
the total or net debit or credit derived from Customer orders in the 
individual leg market is better than or equal to the price of the 
Electronic Complex Order, the Customer orders in the individual leg 
markets will maintain priority.
    NYSE Amex notes that the various options exchange rule sets 
recognize that investors wishing to complete a complex strategy should 
not be encumbered by orders for a single leg.
    For instance, the markets for two call series is as follows:

XYZ July 30: 2.20-2.40 10 x 10
XYZ July 35: 1.10-1.25 10 x 10

    An Electronic Complex Order is entered to Buy 10 July 30/Sell 10 
July 35 for a Net Debit of 1.30. The Complex Matching Engine checks the 
Consolidated Book, and seeing there are

[[Page 35224]]

no Electronic Complex Orders willing to sell the strategy, executes 
against the leg markets, at prices of 2.40 for the July 30 calls, and 
1.10 for the July 35 calls.
    With the same leg markets available, another Electronic Complex 
Order is sent to NYSE Amex to Buy 10 July 30/Sell 10 July 35 for a Net 
Debit of 1.00. Since the screen market is .95-1.30, the order would not 
execute, but route to the Consolidated Book, and post with a Debit of 
1.00. This would be disseminated to all NYSE Amex market participants.
    An order to Sell July 30/Buy July 35 for a credit of 1.00 arrives. 
It is routed directly to the Complex Matching Engine, where it is 
matched against the posted order with a debit of 1.00, and priced at 
the first available prices found in the Complex Matching Engine. For 
example, under this scenario, it is possible to execute at 2.20 and 
1.20.
    The Exchange proposes, however, that if Customer orders in the 
individual leg markets are pricing the strategy at the same price as 
the posted Electronic Complex Order, an Electronic Complex Order sent 
to be executed against the posted order will instead execute against 
the individual Customer orders in the leg markets. For instance, 
suppose that before the second order described above arrives, the 
individual leg markets in the options change as follows, with Customer 
orders at the best prices in the Consolidated Book:

XYZ July 30: 2.20-2.40 10 x 10
XYZ July 35: 1.10-1.20 10 x 10

    The Customer orders in the individual leg markets are now pricing 
the strategy at the same price as the posted Electronic Complex Order. 
Even though the Electronic Complex Order net debit has been 
disseminated and advertised, the Customer orders in the individual leg 
markets will maintain priority over the posted Electronic Complex 
Order. The Complex Matching Engine will execute the incoming Electronic 
Complex Order with a credit of 1.00 against the 1.00 debit price of the 
Customer orders in the leg markets, and then any residual will be 
matched against the Electronic Complex Order in the Consolidated Book 
at the same 1.00 debit.
    Electronic Complex Orders that are not executable are entered into 
the Consolidated Book. The Complex Matching Engine will monitor the 
markets in the individual legs of Electronic Complex Orders in the 
Consolidated Book. If the market prices in the legs move so that the 
Electronic Complex Order is now executable in full (or in a permissible 
ratio), the Electronic Complex Order will be executed against the 
individual orders and quotes in the leg markets.
    The Exchange proposes that Specialists not be afforded any 
guaranteed allocation either in the execution of a complex strategy nor 
if present at the NYSE Amex BBO when an Electronic Complex Order 
executes against the individual leg markets. There is no obligation for 
Specialists (or any Market Maker) to quote prices for complex 
strategies; therefore there is no need for a guaranteed allocation. A 
market participant that establishes a price for a strategy should be 
rewarded for setting that price by being granted time priority, 
provided that Electronic Complex Orders on behalf of Customers are 
ranked ahead of same price Complex Orders for non-Customers. Similarly, 
the Specialist's quotes in the individual leg markets are available to 
all orders, but are not advertising a particular strategy. They should 
not be granted a guaranteed allocation in any of the leg markets 
resulting from the execution of a Complex Order. Complex Orders will 
thus execute against Customer Orders in the individual legs of the 
Consolidated Book, and then against non-Customer trading interest in 
the leg markets on a size pro-rata basis.
    For purposes of the firm quote rule, Electronic Complex Orders in 
the Consolidated Book shall be considered ``firm'' at the posted debit 
or credit.\4\
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    \4\ See Exchange Act Rule 602.
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    The Exchange also proposes clarifying Commentaries to the proposed 
Rule. Commentary .01 clarifies that Complex bids and offers may be 
expressed and executed in one cent increments, regardless of the 
minimum price variation of the component series. Commentary .02 
clarifies that at least one leg of a Complex Order transaction must 
trade at a price that is at least one minimum price variation better 
than all Customer bids and offers in the Consolidated Book for the that 
series.
    Proposed Commentary .03 outlines special provisions for Stock/
option orders. Among these are that a Complex Order with a stock 
component is considered a Stock/option order. Additionally, a Stock/
option order may not trade on the price of a Customer order in the 
Consolidated Book in the option leg unless it trades with the Customer 
order.
    Commentary .03 also outlines that the stock component must be 
executed in accordance with the rules of the executing venue, and that 
Stock/option orders may be executed in one cent increments regardless 
of the minimum price increment in the option leg.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\5\ in general, and furthers the objectives of Section 6(b)(5) \6\ 
in particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism for a free and open 
market and a national market system. NYSE Amex believes the proposed 
rule, related to Electronic Complex Orders, are appropriate in that 
Complex Orders are widely recognized by market participants as 
invaluable, both as an investment, and a risk management strategy. The 
proposed rule will provide the opportunity for a more efficient 
mechanism for carrying out these strategies.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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.

[[Page 35225]]

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-NYSE Amex-2009-42 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE Amex-2009-42. 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 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 publicly available. All 
submissions should refer to File Number SR-NYSE Amex-2009-42 and should 
be submitted on or before August 10, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
Florence E. Harmon,
Deputy Secretary.
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    \7\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-17136 Filed 7-17-09; 8:45 am]
BILLING CODE 8010-01-P