[Federal Register Volume 77, Number 105 (Thursday, May 31, 2012)]
[Notices]
[Pages 32157-32159]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13148]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67057; File No. SR-NYSEAmex-2012-31]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Proposed Rule Change Defining a Primary Specialist in Each Options 
Class and Modifying the Specialist Entitlement Accordingly

May 24, 2012.
    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 May 11, 2012, NYSE Amex LLC (the ``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 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 to define a Primary Specialist in each 
options class and modify the Specialist entitlement accordingly. The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and 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
    The Exchange proposes to amend Rules 964NY and 964.2NY to define 
Primary Specialists, and to modify the order allocation entitlement 
amongst Specialist Pool participants so as to enhance competition 
between the Specialist and e-Specialists.
    Rule 964NY sets forth the priority for the allocation of incoming 
orders to resting interest at a particular price in the NYSE Amex 
System. Under the rule, resting Customer orders have first priority. 
After that, Directed Order Market Makers have second priority, provided 
they satisfy the criteria to be eligible to receive a Directed Order. 
If an order is not allocated to a Directed Order Market Maker, the 
Specialist Pool has next priority. As currently provided in Rule 
964NY(b)(2)(C) and Rule 964.2NY, the Specialist and e-Specialists in 
each class compete in the Specialist Pool on a size pro-rata basis, and 
do not compete at all for the allocation of non-Directed Orders of five 
contracts or fewer.\3\ For orders of five contracts or fewer, they are 
allocated on a rotating basis (i.e., a round robin) to a Specialist or 
e-Specialist in the

[[Page 32158]]

Specialist Pool. After the Specialist Pool, non-Customer interest has 
next priority on a size pro-rata basis.
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    \3\ Under the rule, the Specialist's pro-rata allocation may 
receive additional weighting as determined by the Exchange.
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    The Exchange proposes to enhance competition amongst the Specialist 
Pool participants by designating one of the participants to be the 
Primary Specialist. The Primary Specialist will be determined using 
objective evaluation of the relative quote performance of each 
Specialist and e-Specialist. The evaluation will be conducted on a 
quarterly basis and would include one or more of the following factors: 
time and size at the NBBO, average quote width, average quote size, and 
the relative share of electronic volume in a given class of options.\4\ 
The Exchange will issue a Regulatory Bulletin at least five business 
days prior to each evaluation period with the evaluation criteria, 
including the relative weighting of each factor.
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    \4\ Notwithstanding the quarterly evaluation timeframe noted 
above, the first evaluation period may be longer or shorter than a 
calendar quarter, depending on the approval date of this filing. As 
noted above, the Exchange will announce the evaluation criteria and 
relative weighting of each factor at least 5 business days prior to 
that period and subsequent quarterly periods.
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    The Exchange believes that providing for a Primary Specialist to be 
designated based on competitive quote performance will encourage 
tighter and more liquid markets, and thus provide better markets for 
all investors. The Exchange notes that the Primary Specialist, like all 
Specialists on the Exchange today, would continue to be eligible to 
receive Directed Orders under Rule 964NY(b)(2)(B), but would continue 
to be subject to the restrictions in that provision, including the 
limitation on receiving no more than 40% of a Directed Order. Moreover, 
as is currently the case today, if the Primary Specialist were to 
receive a Directed Order under Rule 964NY(b)(2)(B), the Specialist 
Pool, including the Primary Specialist, would be ineligible to receive 
an allocation from that order and the NYSE Amex System would move to 
the next step in the allocation process--size pro rata allocation 
pursuant to Rule 964NY(b)(2)(D).
    Under the proposed rule change, the Primary Specialist (instead of 
the Specialist) would receive any additional weighting in the size pro 
rata allocation amongst Specialist Pool participants. This additional 
weighting would be determined by the Exchange, as is currently the case 
now. Additionally, under the proposal, rather than a round robin 
allocation of non-Directed Orders for five contracts or fewer, all such 
orders would be allocated to the Primary Specialist after any 
allocation to Customers, not to exceed the size of their quote, 
provided the Primary Specialist is quoting at the NBBO.\5\ If the 
Primary Specialist's quote size is less than the order of five 
contracts or fewer, any remaining contracts after the Primary 
Specialist receives its allocation will be allocated in accordance with 
Rule 964NY(b)(2)(D) (i.e., size pro rata).
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    \5\ The Exchange proposes to eliminate the round robin for such 
orders.
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    In addition, as is the case under the current rule for the 
Specialist Pool, if the Primary Specialist is not quoting at the NBBO 
at the time the order for five or fewer contracts arrives, then the 
order will be executed in accordance with the provision of Rule 
964NY(b)(2)(D).
    Finally, the Exchange proposes to correct a typographical error in 
Rule 964.2NY(b)(3)(A) by changing the word ``on'' to ``one''.
    NYSE Amex will not implement this rule change until such time that 
ATP Holders have been notified via Regulatory Bulletin.

Compliance Date

    The Exchange plans to issue a notice announcing the compliance date 
of the rule change within 90 days from the effective date of the rule 
change.
2. Statutory Basis
    The Exchange believes that this proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\6\ 
in general, and furthers the objectives of Section 6(b)(5) of the Act 
\7\ in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, promote just and equitable principles 
of trade, 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. In particular, the proposed rule 
change seeks to enhance quote competition amongst Specialist Pool 
participants. Increasing quote competition should lead to narrower 
spreads and more liquid markets and thus benefit investors. Narrower 
spreads and more liquid markets should attract more order flow to the 
Exchange, enhancing price discovery and generally benefiting all 
participants on the Exchange. The Exchange further believes that the 
proposed rule change would be not be unfairly discriminatory in 
allocating orders of 5 contracts or fewer to the Primary Specialist 
because it uses objective standards to determine the Primary 
Specialist, and re-evaluates Specialist performance on a quarterly 
basis. In this respect, all Specialists compete on a quarterly basis to 
be designated the Primary Specialist based on objective standards that 
are published prior to each quarter in which Specialist performance is 
measured, and accordingly, all Specialists have the opportunity to be 
designated the Primary Specialist.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 45 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 or disapprove the 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. 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 email to [email protected]. Please include 
File Number SR-NYSEAmex-2012-31 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.


[[Page 32159]]


All submissions should refer to File Number SR-NYSEAmex-2012-31. This 
file number should be included on the subject line if email 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. The text of the proposed rule change is available on 
the Commission's Web site at http://www.sec.gov. 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-2012-31 and should be submitted on or before June 21, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-13148 Filed 5-30-12; 8:45 am]
BILLING CODE 8011-01-P