[Federal Register Volume 76, Number 128 (Tuesday, July 5, 2011)]
[Notices]
[Pages 39147-39149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16687]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64761; File No. SR-NYSE-2011-29]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Extending the Operation of Its New Market Model Pilot Until the Earlier 
of Securities and Exchange Commission Approval To Make Such Pilot 
Permanent or January 31, 2012

June 28, 2011.
    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 June 21, 2011, New York Stock Exchange LLC (``NYSE'' or the 
``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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to extend the operation of its New Market 
Model Pilot, currently scheduled to expire on August 1, 2011, until the 
earlier of Securities and Exchange Commission (``Commission'') approval 
to make such pilot permanent or January 31, 2012. 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 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
    The Exchange proposes to extend the operation of its New Market 
Model Pilot (``NMM Pilot''),\3\ currently scheduled to expire on August 
1, 2011, until the earlier of Securities and Exchange Commission 
approval to make such pilot permanent or January 31, 2012.
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    \3\ See Securities Exchange Act Release No. 58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46); see also 
Securities Exchange Act Release Nos. 60756 (October 1, 2009), 74 FR 
51628 (October 7, 2009) (SR-NYSE-2009-100) (extending Pilot to 
November 30, 2009); 61031 (November 19, 2009), 74 FR 62368 (November 
27, 2009) (SR-NYSE-2009-113) (extending Pilot to March 30, 2010); 
61724 (March 17, 2010), 75 FR 14221 (March 24, 2010) (SR-NYSE-2010-
25) (extending Pilot to September 30, 2010); 62819 (September 1, 
2010), 75 FR 54937 (September 9, 2010) (SR-NYSE-2010-61) (extending 
Pilot to January 31, 2011); and 63616 (December 29, 2010), 76 FR 612 
(January 5, 2011) (SR-NYSE-2010-86) (extending Pilot to August 1, 
2011).
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    The Exchange notes that parallel changes are proposed to be made to 
the rules of the NYSE Amex LLC.\4\
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    \4\ See SR-NYSE Amex-2011-43.

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[[Page 39148]]

Background \5\
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    \5\ The information contained herein is a summary of the NMM 
Pilot. See supra note 1 [sic] for a fuller description.
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    In October 2008, the NYSE implemented significant changes to its 
market rules, execution technology and the rights and obligations of 
its market participants all of which were designed to improve execution 
quality on the Exchange. These changes are all elements of the 
Exchange's enhanced market model. Certain of the enhanced market model 
changes were implemented through a pilot program.
    As part of the NMM Pilot, NYSE eliminated the function of 
specialists on the Exchange creating a new category of market 
participant, the Designated Market Maker or DMM.\6\ The DMMs, like 
specialists, have affirmative obligations to make an orderly market, 
including continuous quoting requirements and obligations to re-enter 
the market when reaching across to execute against trading interest. 
Unlike specialists, DMMs have a minimum quoting requirement \7\ in 
their assigned securities and no longer have a negative obligation. 
DMMs are also no longer agents for public customer orders.\8\
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    \6\ See NYSE Rule 103.
    \7\ See NYSE Rule 104.
    \8\ See NYSE Rule 60; see also NYSE Rules 104 and 1000.
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    In addition, the Exchange implemented a system change that allowed 
DMMs to create a schedule of additional non-displayed liquidity at 
various price points where the DMM is willing to interact with interest 
and provide price improvement to orders in the Exchange's system. This 
schedule is known as the DMM Capital Commitment Schedule (``CCS'').\9\ 
CCS provides the Display Book[supreg] \10\ with the amount of shares 
that the DMM is willing to trade at price points outside, at and inside 
the Exchange Best Bid or Best Offer (``BBO''). CCS interest is separate 
and distinct from other DMM interest in that it serves as the interest 
of last resort.
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    \9\ See NYSE Rule 1000.
    \10\ The Display Book system is an order management and 
execution facility. The Display Book system receives and displays 
orders to the DMMs, contains the order information, 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.
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    The NMM Pilot further modified the logic for allocating executed 
shares among market participants having trading interest at a price 
point upon execution of incoming orders. The modified logic rewards 
displayed orders that establish the Exchange's BBO. During the 
operation of the NMM Pilot orders, or portions thereof, that establish 
priority \11\ retain that priority until the portion of the order that 
established priority is exhausted. Where no one order has established 
priority, shares are distributed among all market participants on 
parity.
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    \11\ See NYSE Rule 72(a)(ii).
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    The NMM Pilot was originally scheduled to end operation on October 
1, 2009, or such earlier time as the Commission may determine to make 
the rules permanent. The Exchange filed to extend the operation of the 
Pilot on five occasions in order to prepare a rule filing seeking 
permission to make the above described changes permanent.\12\ The 
Exchange is currently still preparing such formal submission but does 
not expect that filing to be completed and approved by the Commission 
before August 1, 2011.
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    \12\ See supra note 4.
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Proposal To Extend the Operation of the NMM Pilot
    The NYSE established the NMM Pilot to provide incentives for 
quoting, to enhance competition among the existing group of liquidity 
providers and to add a new competitive market participant. The Exchange 
believes that the NMM Pilot allows the Exchange to provide its market 
participants with a trading venue that utilizes an enhanced market 
structure to encourage the addition of liquidity, facilitate the 
trading of larger orders more efficiently and operates to reward 
aggressive liquidity providers. As such, the Exchange believes that the 
rules governing the NMM Pilot should be made permanent. Through this 
filing the Exchange seeks to extend the current operation of the NMM 
Pilot until January 31, 2012, in order to allow the Exchange time to 
formally submit a filing to the Commission to convert the pilot rules 
to permanent rules.
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) 
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 Exchange 
believes that the instant filing is consistent with these principles 
because the NMM Pilot provides its market participants with a trading 
venue that utilizes an enhanced market structure to encourage the 
addition of liquidity, facilitate the trading of larger orders more 
efficiently and operates to reward aggressive liquidity providers. 
Moreover, the instant filing requesting an extension of the NMM Pilot 
will permit adequate time for: (i) The Exchange to prepare and submit a 
filing to make the rules governing the NMM Pilot permanent; (ii) public 
notice and comment; and (iii) completion of the 19b-4 approval process.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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 and Rule 19b-
4(f)(6)(iii) thereunder.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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 fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the

[[Page 39149]]

Commission may designate a shorter time if such action is consistent 
with the protection of investors and the public interest.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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-NYSE-2011-29 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-NYSE-2011-29. 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 Web site viewing and 
printing 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 offices 
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-
NYSE-2011-29, and should be submitted on or before July 26, 2011.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16687 Filed 7-1-11; 8:45 am]
BILLING CODE 8011-01-P