[Federal Register Volume 74, Number 169 (Wednesday, September 2, 2009)]
[Notices]
[Pages 45506-45508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21137]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60574; File No. SR-NYSEAmex-2009-58]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Extending the 
Length of Time That Exchange Systems Transmit Odd-Lot Order-by-Order 
Information to the DMM Unit Algorithm Prior to the Opening Transaction 
From August 31, 2009 to October 31, 2009

August 26, 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 August 21, 2009, NYSE Amex LLC (``Exchange'' or ``NYSE Amex'') filed 
with the Securities and Exchange Commission (``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 
designated the proposal eligible for immediate effectiveness pursuant 
to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 length of time that Exchange 
systems transmit odd-lot order-by-order information to the DMM unit 
algorithm prior to the opening transaction from August 31, 2009 to 
October 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 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 the 
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 extend the length of time that 
Exchange systems transmit odd-lot order-by-order information to the DMM 
unit algorithm prior to the opening transaction from August 31, 2009 to 
October 31, 2009.
    The Exchange notes that parallel changes are proposed to be made to 
the rules of New York Stock Exchange LLC (``NYSE'').\5\
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    \5\ See SR-NYSE-2009-86.
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Background
    As described more fully in a related rule filing, \6\ 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, \7\ later renamed NYSE 
Amex LLC (hereinafter referred to as ``NYSE Amex'') 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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    \6\ 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).
    \7\ 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).
    \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, the Exchange adopted NYSE Rules 
1-1004, subject to such changes as necessary to apply the Rules to the 
Exchange, as the NYSE Alternext Equities Rules, now renamed 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) 
(together, 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 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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    Included in the adoption of the NYSE Rules was the adoption and 
operation of the NYSE's New Market Model Pilot (``Pilot'') approved by 
the Securities and Exchange Commission (``SEC or ``Commission'') on 
October 24, 2008.\11\ As part of the original Pilot filing, the NYSE 
explained that although the Designated Market Maker (``DMM'') would no 
longer receive order-by-order information, there would continue to be 
certain times when human interaction was essential to market quality 
and maintaining a fair and orderly market.
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    \11\ See Securities Exchange Act Release No. 58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46) (approving 
certain rules to operate as a pilot scheduled to end October 1, 
2009.)
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    Currently the DMM is responsible for facilitating the opening 
transaction and ultimately determines the price,\12\ and

[[Page 45507]]

executes the orders at that price to open the trading in his or her 
assigned securities. In order to effect a fair and orderly opening 
transaction, the individual DMM is provided aggregate order 
information.\13\ DMMs have access to aggregate order information as it 
pertains to round-lot and odd-lot orders; however, the DMM unit 
algorithm receives odd-lot information on an order-by-order basis prior 
to the opening transaction. In order for the DMM unit algorithm to 
effectively facilitate an opening transaction, the DMM unit algorithm 
is provided odd-lot information prior to the opening. Constraints 
inherent to the Odd-lot System require that odd-lot information be 
transmitted to the DMM unit algorithm on an order-by-order basis prior 
to the opening. As such, prior to the opening, Exchange systems 
transmit to the DMM unit algorithm odd-lot order information \14\ 
excluding e-Quote odd-lots, odd-lot cancellations, Stop odd-lot orders 
and Good `til Cancel odd-lot orders.\15\ Once the security is opened, 
Exchange systems do not provide any order-by-order odd-lot information 
to the DMM unit algorithm.
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    \12\ In an opening and reopening trade, the Display Book[supreg] 
(``Display Book'') will verify that all interest that must be 
executed in the opening or reopening can be executed at the price 
chosen by the DMM. If all the interest that must be executed in the 
transaction cannot be executed at that price, the Display Book will 
block the execution. In addition, when executing blocks (10,000 
shares or more or value of $200,000 or more), trading out of a gap 
quote situation or an Liquidity Replenishment Point (``LRP'') that 
locks or crossed the market, the Display Book may adjust the 
execution price if there is enough interest on the Display Book to 
complete the transaction at a better price.
    The Display Book[supreg] is an order management and execution 
facility. The Display Book receives and displays orders to the DMM, 
contains order information, and provides a mechanism to execute and 
report transactions and publish the results to the Consolidated 
Tape. The Display Book 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.
    \13\ See proposed NYSE Amex Equities Rule 104(a)(2).
    \14\ See NYSE Amex Equities Rule 104 Supplementary Material .05.
    \15\ Odd-lot cancellations and GTC odd-lot orders are not 
included because of system constraints. Stop odd-lot orders are 
elected by the opening transaction which in turn commences the 
execution of orders in the Odd-lot System. The Stop odd-lot orders 
elected by the opening transaction are executed in the Odd-lot 
system pursuant to the rule governing odd-lot executions. See NYSE 
Amex Equities Rule 124(e).
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Proposed Amendment to NYSE Amex Equities Rule 104
    The Exchange anticipated that the work required to modify its 
systems to transmit aggregate odd-lot information to DMM unit 
algorithms would have been completed by August 31, 2009; however, after 
the completion of several system modifications it is clear that the 
Exchange will require an extension to October 31, 2009, in order to 
complete these particular enhancements.
    Since the commencement of the Pilot, the Exchange has completed 
several modifications to remove and enhance legacy systems. These 
enhancements are necessary to provide the foundation needed for 
Exchange systems to transmit aggregate odd-lot information to the DMM 
unit algorithm prior to the opening transaction.\16\ The Exchange 
continues to enhance its systems to create a strong platform for 
technological growth that offers its customers the most comprehensive 
set of trading technology solutions to meet their needs and 
expectations. In furtherance of this goal, the Exchange must either 
upgrade or replace in its entirety legacy systems that accept, manage, 
execute and report executions.
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    \16\ See Securities and Exchange Act Release No 59592 (March 17, 
2009), 74 FR 12417 (March 24, 2009) (SR-NYSE-2009-29) (Filing to, 
among other things, replace references to specific NYSE systems that 
perform particular functions and replace it with the phrase 
``Exchange systems'' in order to keep pace with the enhancements to 
its technology).
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    The extensive nature of the modifications requires the Exchange to 
progressively implement these systemic changes on a security by 
security basis as it gains experience with the new technology until the 
new technology is operative in all securities traded on the Floor. 
Consequently, the modifications have progressed at a slower pace than 
initially anticipated. The next Exchange technology release will modify 
Exchange systems such that odd-lot information will be provided to the 
Display Book in aggregate prior to the opening transaction. Display 
Book in turn will provide aggregate order information to the DMM unit 
algorithm prior to the opening transaction to facilitate the ability of 
the DMM unit algorithm to electronically open trading in certain 
securities. It is anticipated that these modifications will be 
completed no later than October 31, 2009.
    Given the above, the Exchange requests an extension to October 31, 
2009, to complete the system modifications required to transmit 
aggregate odd-lot information to the DMM unit algorithms prior to the 
opening transaction.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
\17\ for these proposed rule changes is the requirement under Section 
6(b)(5) \18\ 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 supports these principles and serves to 
protect the investor and the public interest. in that it seeks to 
continue providing DMM unit algorithms with the order by order odd-lot 
information required to facilitate the timely opening of securities on 
the Exchange until Exchange systems can be modified to provide such 
information in an aggregated format.
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    \17\ 15 U.S.C. 78a.
    \18\ 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 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 prior to 
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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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 proposal may become operative immediately 
upon filing. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because such waiver will allow the

[[Page 45508]]

Exchange to provide the DMM unit algorithms with order-by-order odd-lot 
information prior to the opening transaction without interruption until 
October 31, 2009, when the Exchange anticipates necessary modifications 
to its systems will be completed. Therefore, the Commission designates 
the proposal operative upon filing.\21\
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    \21\ 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. 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-2009-58 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-2009-58. 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 available publicly. All 
submissions should refer to File Number SR-NYSEAmex-2009-58 and should 
be submitted on or before September 23, 2009.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21137 Filed 9-1-09; 8:45 am]
BILLING CODE 8010-01-P