[Federal Register Volume 74, Number 149 (Wednesday, August 5, 2009)]
[Notices]
[Pages 39128-39130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18667]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60397; File No. SR-NYSEAmex-2009-48]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Extending the 
Operative Date of NYSE Amex Equities Rule 92(c)(3) from July 31, 2009 
to December 31, 2009

July 30, 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 24, 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.
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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 extend the operative date of NYSE Amex 
Equities Rule 92(c)(3) from July 31, 2009 to December 31, 2009. 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 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 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 is proposing to extend the delayed operative date of 
NYSE Amex Equities Rule 92(c)(3) from July 31, 2009 to December 31, 
2009. The Exchange believes that this extension will provide the time 
necessary for the Exchange, the New York Stock Exchange LLC (``NYSE''), 
and the Financial Industry Regulatory Authority, Inc. (``FINRA'') to 
harmonize their respective rules concerning customer order protection 
to achieve a standardized industry practice.\6\
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    \6\ See SR-NYSE-2009-73, formally submitted on July 24, 2009.
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Merger 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 and was renamed NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange''), 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 (Sept. 29, 
2008), 73 FR 57707 (Oct. 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 (Oct. 1, 
2008), 73 FR 58995 (Oct. 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

[[Page 39129]]

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 Nos. 58705 (Oct. 1, 
2008), 73 FR 58995 (Oct. 8, 2008) (SR-Amex-2008-63); No. 58833 (Oct. 
22, 2008), 73 FR 64642 (Oct. 30, 2008) (SR-NYSE-2008-106); No. 58839 
(Oct. 23, 2008), 73 FR 64645 (October 30, 2008) (SR-NYSEALTR-2008-
03); No. 59022 (Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR-
NYSEALTR-2008-10); and No. 59027 (Nov. 28, 2008), 73 FR 73681 (Dec. 
3, 2008) (SR-NYSEALTR-2008-11).
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Rule 92 Background
    On July 5, 2007, the Commission approved amendments to NYSE Rule 92 
to permit riskless principal trading at the NYSE.\11\ These amendments 
were filed in part to begin the harmonization process between NYSE Rule 
92 and FINRA's Manning Rule.\12\ In connection with those amendments, 
the NYSE implemented for an operative date of January 16, 2008, NYSE 
Rule 92(c)(3), which permits NYSE member organizations to submit 
riskless principal orders to the NYSE, but requires them to submit to a 
designated NYSE database a report of the execution of the facilitated 
order. That rule also requires members to submit to that same database 
sufficient information to provide an electronic link of the execution 
of the facilitated order to all of the underlying orders.
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    \11\ See Securities Exchange Act Release No. 56017 (Jul. 5, 
2007), 72 FR 38110 (Jul. 12, 2007) (SR-NYSE-2007-21).
    \12\ See NASD Rule 2111 and IM-2110-2.
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    For purposes of NYSE Rule 92(c)(3), the NYSE informed member 
organizations that when executing riskless principal transactions, 
firms must submit order execution reports to the NYSE's Front End 
Systemic Capture (``FESC'') database linking the execution of the 
riskless principal order on the NYSE to the specific underlying orders. 
The information provided must be sufficient for both member firms and 
the NYSE to reconstruct in a time-sequenced manner all orders, 
including allocations to the underlying orders, with respect to which a 
member organization is claiming the riskless principal exception.
    Because the rule change required both the NYSE and member 
organizations to make certain changes to their trading and order 
management systems, the NYSE filed for immediate effectiveness to delay 
to May 14, 2008 the operative date of the NYSE Rule 92(c)(3) 
requirements, including submitting end-of-day allocation reports for 
riskless principal transactions and using the riskless principal 
account type indicator.\13\ The NYSE filed for additional extensions of 
the operative date of NYSE Rule 92(c)(3) to March 31, 2009 and July 31, 
2009.\14\ Because NYSE Amex adopted NYSE Rule 92 in its then current 
form, the delayed operative date of March 31, 2009 for the NYSE Rule 
92(c)(3) reporting requirements also applied for NYSE Amex Equities 
Rule 92(c)(3) reporting requirements and NYSE Amex filed for an 
extension of the operative date of Rule 92(c)(3) from March 31, 2009 to 
July 31, 2009.\15\
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    \13\ See Securities Exchange Act Release No. 56968 (Dec. 14, 
2007), 72 FR 72432 (Dec. 20, 2007) (SR-NYSE-2007-114).
    \14\ See Securities Exchange Act Release Nos. 57682 (Apr. 17, 
2008), 73 FR 22193 (Apr. 24, 2008) (SR-NYSE-2008-29) and 59621 (Mar. 
23, 2009), 74 FR 14179 (Mar. 30, 2009) (SR-NYSE-2009-30).
    \15\ See Securities Exchange Act Release No. 59620 (Mar. 23, 
2009), 74 FR 14176 (Mar. 30, 2009) (SR-NYSEALTR-2009-29).
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Request for Extension
    FINRA, NYSE, and the Exchange have been working diligently on fully 
harmonizing their respective rules, including reviewing the 
possibilities for a uniform reporting standard for riskless principal 
transactions. However, because of the complexity of the existing 
customer order protection rules, including the need for input from 
industry participants as well as Commission approval, the Exchange, 
NYSE, and FINRA will not have harmonized their respective customer 
order protection rules by the current July 31, 2009 date for the 
implementation of the FESC riskless principal reporting.
    The Exchange notes that it has agreed with NYSE and FINRA to pursue 
efforts to harmonize customer order protection rules. As authorized by 
their respective Boards, FINRA and NYSE Regulation, Inc. (``NYSE 
Regulation'') have each published a Regulatory Notice/Information Memo 
that solicit comments from their respective member participants on the 
proposed harmonized approach to customer order protection.\16\ Because 
industry participants need to code their trading systems to comply with 
customer order protection rules, the Exchange believes that industry 
input is vital to ensuring that the approach to customer order 
protection both meets regulatory needs of protecting customer orders, 
but is also feasible technologically.
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    \16\ See NYSE Regulation Information Memo 09-13 (March 12, 
2009); FINRA Regulatory Notice 09-15 (March 12, 2009).
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    Both FINRA and NYSE Regulation have received comments from the 
public on the Regulatory Notice and Information Memo, including 
comments from industry forums such as SIFMA and FIF. The comments have 
generally supported efforts to harmonize the FINRA and NYSE rules. 
Among issues raised in the comment letters, however, is the concern 
that FINRA and NYSE have a harmonized approach for reporting riskless 
principal transactions. In addition, commenters note the need for an 
implementation period to develop any technology that would be needed to 
comply with the proposed reporting standard. FINRA and NYSE Regulation 
continue to work together to develop such a harmonized approach to 
reporting riskless principal trades.
    The Exchange continues to believe that pending full harmonization 
of the respective customer order protection rules, it would be 
premature to require firms to meet the current NYSE Amex Equities Rule 
92(c)(3) FESC reporting requirements.\17\ Indeed, having differing 
reporting standards for riskless principal orders would be inconsistent 
with the overall goal of the harmonization process.
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    \17\ The Exchange notes that it would also need to make 
technological changes to implement the proposed FESC reporting 
solution for Rule 92(c)(3).
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    Accordingly, to provide the Exchange, NYSE, and FINRA the time 
necessary to review their respective rules and develop a harmonized 
rule set that would apply across their respective marketplaces, 
including a harmonized approach to riskless principal trade reporting, 
the Exchange is proposing to delay the operative date for NYSE Amex 
Equities Rule 92(c)(3) from July 31, 2009 to December 31, 2009.
    Pending the harmonization of the three rules, the Exchange will 
continue to require that, as of the date each member organization 
implements riskless principal routing, the member organization have in 
place systems and controls that allow them to easily match and tie 
riskless principal execution on the Exchange to the underlying orders 
and that they be able to provide this information to the Exchange upon 
request. To make clear that this requirement continues, the Exchange 
proposes to amend supplementary material .95 to Rule 92 to specifically 
provide that the NYSE Amex Equities Rule 92(c)(3) reporting 
requirements are suspended until December 31, 2009 and that member 
organizations are required to have in place such systems and controls 
relating to their riskless principal executions on the Exchange. 
Moreover, the Exchange will coordinate

[[Page 39130]]

with NYSE and FINRA to examine for compliance with the rule 
requirements for those firms that engage in riskless principal trading 
under Rule 92(c).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\18\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\19\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, 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 Exchange 
believes the proposed extension provides the Exchange, NYSE, and FINRA 
the time necessary to develop a harmonized rule concerning customer 
order protection that will enable member organizations to participate 
in the national market system without unnecessary impediments.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 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

    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 \20\ 
and Rule 19b-4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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.
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    The Exchange has requested the Commission to waive the 30-day 
operative delay so that the Exchange can extend the operative date of 
NYSE Equities Rule 92(c)(3) without interruption. The Commission hereby 
grants the Exchange's request and believes such waiver is consistent 
with the protection of investors and the public interest.\22\ 
Accordingly, the Commission designates the proposed rule change 
operative upon filing with the Commission.
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    \22\ 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).
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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-2009-48 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-2009-48. 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-2009-48 and should be submitted on or before 
August 26, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18667 Filed 8-4-09; 8:45 am]
BILLING CODE 8010-01-P