[Federal Register Volume 77, Number 229 (Wednesday, November 28, 2012)]
[Notices]
[Pages 71023-71025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28798]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68282; File No. SR-NYSE-2012-63]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 123C(9)(a)(1)(ii) To Delete the Requirement That the 
Order Acceptance Cut-Off Time Cannot Be Past 4:30 p.m.

November 21, 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 
November 8, 2012, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') 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 amend NYSE Rule 123C(9)(a)(1)(ii) to 
delete the requirement that the order acceptance cut-off time cannot be 
past 4:30 p.m. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, 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 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.

[[Page 71024]]

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 123C(9)(a)(1)(ii) to delete the 
requirement that the order acceptance cut-off time cannot be past 4:30 
p.m. (or 30 minutes after the scheduled close in the case of an earlier 
close).\3\
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    \3\ The Exchange notes that parallel changes are proposed to be 
made to the rules of NYSE MKT LLC. See SR-NYSEMKT-2012-65.
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Background
    Pursuant to Rule 123C(9)(a)(1), the Exchange may suspend Rule 52 
(Hours of Operation) to resolve an extreme order imbalance that may 
result in a price dislocation at the close as a result of an order 
entered into Exchange systems, or represented to a Designated Market 
Maker (``DMM'') orally at or near the close. Rule 123C(9)(a)(1) was 
intended to be and has been invoked to attract offsetting interest in 
rare circumstances where there exists an extreme imbalance at the close 
such that a DMM is unable to close the security without significantly 
dislocating the price.
    Pursuant to Rule 123C(9)(a)(1)(ii), once it has been determined to 
suspend Rule 52 and solicit offsetting interest, the Exchange is 
responsible for soliciting such offsetting interest from both on-Floor 
and off-Floor participants. Such solicitation requests include, at a 
minimum, the security symbol, the imbalance amount and side, the last 
sale price, and an order acceptance cut-off time. The Exchange 
designates the order acceptance cut-off time, but the Rule currently 
provides that in no event shall the order acceptance cut-off time be 
later than 4:30 p.m. (or 30 minutes after the scheduled close in the 
case of an earlier close).
    Currently, the Exchange uses Trader Updates to solicit interest 
from off-Floor participants. The Exchange's Trader Updates are posted 
on the Exchange's Web site and are distributed both by RSS feed and by 
email to anyone who subscribes to receive such free updates.
    Since January 3, 2011, when the Rule, which was previously operated 
on a pilot bases, became a permanent rule, the Exchange and NYSE MKT 
LLC (``NYSE MKT''), which has an identical rule for its equity market, 
have invoked the relief available pursuant to the Rule only once, on 
September 21, 2012. In 2010, Rule 123C(9)(a)(1) was invoked only three 
times on both markets.
Proposed Amendment
    The Exchange proposes to amend Rule 123C(9)(a)(1)(ii) to delete the 
requirement that the order acceptance cut-off time shall be no later 
than 4:30 p.m., or in the case of an early scheduled close, 30 minutes 
after the closing time. The Exchange believes it is appropriate to 
delete the bright-line cut off time because it hinders the ability of 
the Exchange to ensure a fair and orderly close if adhering to the 4:30 
p.m. order acceptance cut-off time is not possible under the particular 
circumstances.
    In particular, the Exchange notes that for two of the four times 
that the rule has been invoked since 2010, the Exchange has extended 
the order acceptance cut-off time past 4:30 p.m. The reasons for the 
extensions differed, but the Exchange believes that given the rarity of 
the need to invoke the provisions of Rule 123C(9)(a)(1) in the first 
instance, together with what the Exchange has experienced in those few 
events, it is appropriate to delete the bright-line 4:30 p.m. cut-off 
time.
    For example, on February 12, 2010, due to corporate actions in 
Berkshire Hathaway (BRK) Class A and B securities, there was 
significant trading volume in those securities, including at the close. 
In the circumstances, it was determined that the most efficient manner 
to effect the close of trading in those securities was to effect the 
closing transaction in BRK-B before closing the BRK-A shares. After 
closing the BRK-B security at 4:19 p.m., the DMM assessed the shares 
eligible to be executed for the BRK-A close and determined that the 
imbalance was significant enough to invoke the procedures of Rule 
123C(9)(a)(1). Due to the complexity of the situation, the Exchange was 
not able to issue its solicitation of offsetting interest until 4:27 
p.m. Because three minutes was not sufficient time to receive incoming 
offsetting interest and close the security, the Exchange accepted order 
flow past the 4:30 p.m. order acceptance cut-off time. The Exchange 
filed with the Commission a rule proposal that permitted the temporary 
suspension of the Rule 123C(9)(a)(1)(ii) 4:30 p.m. order acceptance 
cut-off time.\4\
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    \4\ See Securities Exchange Act Release No. 61549 (Feb. 19, 
2010), 75 FR 9009 (Feb. 26, 2010) (SR-NYSE-2010-09).
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    More recently, on Friday, September 21, 2012, there was a buy 
imbalance in Weatherford International LTD (WFT) that could not be 
satisfied by sell orders on the Book. Accordingly, the Exchange invoked 
procedures pursuant to Rule 123C(9) to solicit interest from both off-
Floor and on-Floor participants to offset that imbalance. While the 
Exchange initiated publication of solicitation for such offsetting 
interest immediately following 4:00 p.m., due to delays in the 
Exchange's web and email systems, the Exchange's two solicitations of 
interest, which were sent at 4:22 p.m. and 4:28 p.m., did not leave 
Exchange systems until 4:29 p.m. and 4:35 p.m., respectively, and were 
time-stamped accordingly. Because of these delays, the Exchange 
extended the order acceptance cut-off time to 4:35 p.m., which is past 
the time prescribed in Rule 123C(9)(a)(1)(ii). By extending the order 
acceptance cut-off time to 4:35 p.m., the Exchange was able to attract 
sufficient sell-side interest to offset the buy imbalance and the stock 
was closed shortly thereafter on a transaction of 7.822 million shares, 
unchanged from the last sale price of $13.54.\5\
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    \5\ On September 27, 2012, the Exchange published a Trader 
Update that provided the public with notice of this issue: http://traderupdates.nyse.com/2012/09/weatherford_international_ltd.html.
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    Although the Exchange did not have rule authority to extend the 
order acceptance cut-off time in the WFT closing situation to 4:35 
p.m., the Exchange believes that it acted appropriately under the 
circumstances to ensure that WFT could close in a fair and orderly 
manner at a price that was not significantly dislocated from the last 
sale price. In particular, the issue that the Exchange experienced with 
respect to its web and email system was unanticipated and the Exchange 
sought to respond in a manner that protected investors and the public 
interest by ensuring a fair and orderly close.
    The Exchange believes it is appropriate to provide the Exchange 
with authority to designate an order acceptance cut-off time that is 
tailored to the particular situation, rather than have to adhere to the 
4:30 p.m. time frame. The Exchange's ultimate goal is to ensure a fair 
and orderly close in a manner that is as close to the official 4:00 
p.m. closing time as possible. However, depending on the circumstances, 
whether because of the complexity of the closing process for a 
particular security or because of a system or technology issue, 
requiring a bright-line order acceptance time may not be appropriate.
    Moreover, the Exchange believes that adhering to such a bright-line 
cut-off time could harm investors and the public. For example, in both 
the BRK-A and WFT closes, if the Exchange had adhered to the 4:30 p.m. 
cut-off time, the Exchange would not have been able to complete its 
solicitation of offsetting

[[Page 71025]]

interest. Without such offsetting interest, the Exchange had two 
alternatives, either close the stock at a price significantly 
dislocated from the last sale price, or invoke an order imbalance halt 
and not hold a closing transaction. The Exchange does not believe that 
either alternative is in the best interest of investors or the public. 
Rather, the Exchange believes that ensuring that the closing price is 
not significantly dislocated from the last sale, even if that means a 
delayed closing time, would benefit investors and the public.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \6\ of the 
Securities Exchange Act of 1934 (the ``Act''), in general, and furthers 
the objectives of Section 6(b)(5),\7\ 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, 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, and it is not designed to 
permit unfair discrimination among customers, brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that providing the Exchange 
with the authority to designate the order cut-off time as appropriately 
tailored to the particular situation removes impediments to and 
perfects the mechanism of a free and open market because it enables the 
Exchange to complete the process to solicit interest to offset an 
imbalance at the close that would otherwise result in a significant 
price dislocation. Without the relief requested herein, the Exchange 
may not be able to complete the process to solicit offsetting interest, 
which would result in either the stock closing at a dislocated price, 
or require the Exchange to invoke an order imbalance halt in the 
security. The Exchange believes such solutions could harm investors and 
the public because of either an unnecessarily dislocated closing price, 
or in the case of an imbalance halt, orders intended for the closing 
transaction would not be executed. The Exchange further believes that 
the proposed rule change would protect investors and the public 
interest because it would enable the Exchange to complete the process 
to ensure that the closing price that may be closer to the last sale 
price, rather than a closing price that is significantly dislocated 
from the last sale price.

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
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.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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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 email to [email protected]. Please include 
File Number SR-NYSE-2012-63 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-2012-63. 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 
10:00 a.m. and 3:00 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-NYSE-2012-63 and should be 
submitted on or before December 19, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28798 Filed 11-27-12; 8:45 am]
BILLING CODE 8011-01-P