[Federal Register Volume 79, Number 140 (Tuesday, July 22, 2014)]
[Notices]
[Pages 42595-42597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17148]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72624; File No. SR-NYSEMKT-2014-59]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending NYSE MKT Rule 
500--Equities To Extend the Operation of the Pilot Program That Allows 
``UTP Securities'' To Be Traded on the Exchange Pursuant to a Grant of 
Unlisted Trading Privileges Until the Earlier of Securities and 
Exchange Commission Approval To Make Such Pilot Permanent or December 
31, 2014

July 16, 2014.
    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 3, 2014, NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') 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 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.
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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 MKT Rule 500--Equities to 
extend the operation of the pilot program that allows ``UTP 
Securities'' to be traded on the Exchange pursuant to a grant of 
unlisted trading privileges. The pilot program is currently scheduled 
to expire on July 31, 2014; the Exchange proposes to extend it until 
the earlier of Securities and Exchange Commission (``Commission'') 
approval to make such pilot permanent or December 31, 2014. 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, on the 
Commission's Web site at www.sec.gov, 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.

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 NYSE MKT Rule 500--Equities to 
extend the operation of the pilot program that allows ``UTP 
Securities'' to be traded on the Exchange pursuant to a grant of 
unlisted trading privileges.\4\ The pilot program is currently 
scheduled to expire on July 31, 2014; the Exchange proposes to extend 
it until the earlier of Commission approval to make such pilot 
permanent or December 31, 2014.
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    \4\ ``UTP Securities'' is included within the definition of 
``security'' as that term is used in the NYSE MKT Equities Rules. 
See NYSE MKT Rule 3--Equities. In accordance with this definition, 
UTP Securities are admitted to dealings on the Exchange on an 
``issued,'' ``when issued,'' or ``when distributed'' basis. See NYSE 
MKT Rule 501--Equities.
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    NYSE MKT Rules 500-525--Equities, as a pilot program, govern the 
trading of any ``UTP Securities'' on the Exchange pursuant to unlisted 
trading privileges (``UTP Pilot Program'').\5\ The Exchange hereby 
seeks to extend the operation of the UTP Pilot Program, currently 
scheduled to expire on July 31, 2014, until the earlier of Commission 
approval to make such pilot permanent or December 31, 2014.
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    \5\ See Securities Exchange Act Release No. 62479 (July 9, 
2010), 75 FR 41264 (July 15, 2010) (SR-NYSEAmex-2010-31). See also 
Securities Exchange Act Release Nos. 62857 (September 7, 2010), 75 
FR 55837 (September 14, 2010) (SR-NYSEAmex-2010-89); 63601 (December 
22, 2010), 75 FR 82117 (December 29, 2010) (SR-NYSEAmex-2010-124); 
64746 (June 24, 2011), 76 FR 38446 (June 30, 2011) (SR-NYSEAmex-
2011-45); 66040 (December 23, 2011), 76 FR 82324 (December 30, 2011) 
(SR-NYSEAmex-2011-104); 67497 (July 25, 2012), 77 FR 45404 (July 31, 
2012) (SR-NYSEMKT-2012-25); 68561 (January 2, 2013), 78 FR 1290 
(January 8, 2013) (SR-NYSEMKT-2012-86); 69814 (June 20, 2013), 78 FR 
38762 (June 27, 2013) (SR-NYSEMKT-2013-53); and 71363 (January 21, 
2014), 79 FR 4373 (January 27, 2014) (SR-NYSEMKT-2014-01). The UTP 
Pilot Program was originally limited to securities listed on the 
Nasdaq Stock Market LLC (``Nasdaq Securities''), but the Exchange 
recently expanded the UTP Pilot Program beyond Nasdaq Securities. 
See Securities Exchange Act Release No. 71952 (April 16, 2014), 79 
FR 22558 (April 22, 2014) (SR-NYSEMKT-2014-32).
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    The UTP Pilot Program includes any security, other than a security 
that is listed on the Exchange, that (i) is designated as an ``eligible 
security''

[[Page 42596]]

pursuant to the ``UTP Plan,'' \6\ (ii) has been admitted to dealings on 
the Exchange pursuant to a grant of unlisted trading privileges in 
accordance with Section 12(f) of the Act,\7\ and (iii) if it is an 
``Exchange Traded Product'' (``ETP'') that does not have any component 
security that is listed or traded on the Exchange or the New York Stock 
Exchange LLC (``NYSE''); provided, however, that the Invesco 
PowerShares QQQTM (the ``QQQ''TM) may be admitted 
to dealings on the Exchange pursuant to a grant of unlisted trading 
privileges although one or more component securities of the QQQ may be 
listed or traded on the Exchange or the NYSE, subject to the conditions 
of Rule 504(b)(5)--Equities.
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    \6\ With respect to Nasdaq Securities, the term ``UTP Plan'' 
means the Joint Self-Regulatory Organization Plan Governing the 
Collection, Consolidation and Dissemination of Quotation and 
Transaction Information for Nasdaq-listed Securities Traded on 
Exchanges on an Unlisted Trading Privilege Basis, as amended from 
time to time, filed with and approved by the Commission. See 
Securities Exchange Act Release No. 70953 (November 27, 2013), 78 FR 
72932 (December 4, 2013) (File No. S7-24-89). The Exchange's 
predecessor, the American Stock Exchange LLC, joined the UTP Plan in 
2001. See Securities Exchange Act Release No. 55647 (April 19, 
2007), 72 FR 20891 (April 26, 2007) (File No. S7-24-89). In March 
2009, the Exchange changed its name to NYSE Amex LLC, and, in May 
2012, the Exchange subsequently changed its name to NYSE MKT LLC. 
See Securities Exchange Act Release Nos. 59575 (March 13, 2009), 74 
FR 11803 (March 19, 2009) (SR-NYSEALTR-2009-24) and 67037 (May 21, 
2012), 77 FR 31415 (May 25, 2012) (SR-NYSEAmex-2012-32). With 
respect to all other UTP Securities, the term ``UTP Plan'' means the 
Consolidated Tape Association Plan for the Dissemination of Last 
Sale Prices of Transactions in Eligible Securities, as amended from 
time to time, filed with and approved by the Commission. See 
Securities Exchange Act Release No. 10787 (May 10, 1974), 39 FR 
17799 (May 20, 1974) (declaring the CTA Plan effective). See also 
Securities Exchange Release No. 70794 (October 31, 2013), 78 FR 
66789 (November 6, 2013) (SR-CTA-2013-05).
    \7\ 15 U.S.C. 78l.
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    The Exchange notes that its New Market Model Pilot (``NMM Pilot''), 
which, among other things, eliminated the function of specialists on 
the Exchange and created a new category of market participant, the 
Designated Market Maker (``DMM''),\8\ is also scheduled to end on July 
31, 2014.\9\ The timing of the operation of the UTP Pilot Program was 
designed to correspond to that of the NMM Pilot. In approving the UTP 
Pilot Program, the Commission acknowledged that the rules relating to 
DMM benefits and duties in trading Nasdaq Securities on the Exchange 
pursuant to the UTP Pilot Program are consistent with the Act \10\ and 
noted the similarity to the NMM Pilot, particularly with respect to DMM 
obligations and benefits \11\--the Exchange considers the same to be 
true with respect to all UTP Securities, including for ETPs that are 
included in the UTP Pilot Program. Furthermore, the UTP Pilot Program 
rules pertaining to the assignment of securities to DMMs are 
substantially similar to the rules implemented through the NMM 
Pilot.\12\ The Exchange has similarly filed to extend the operation of 
the NMM Pilot until the earlier of Commission approval to make the NMM 
Pilot permanent or December 31, 2014.\13\
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    \8\ See NYSE MKT Rule 103--Equities.
    \9\ See Securities Exchange Act Release No. 60758 (October 1, 
2009), 74 FR 51639 (October 7, 2009) (SR-NYSEAmex-2009-65). See also 
Securities Exchange Act Release Nos. 61030 (November 19, 2009), 74 
FR 62365 (November 27, 2009) (SR-NYSEAmex-2009-83); 61725 (March 17, 
2010), 75 FR 14223 (March 24, 2010) (SR-NYSEAmex-2010-28); 62820 
(September 1, 2010), 75 FR 54935 (September 9, 2010) (SR-NYSEAmex-
2010-86); 63615 (December 29, 2010), 76 FR 611 (January 5, 2011) 
(SR-NYSEAmex-2010-123); 64773 (June 29, 2011), 76 FR 39453 (July 6, 
2011) (SR-NYSEAmex-2011-43); 66042 (December 23, 2011), 76 FR 82326 
(December 30, 2011) (SR-NYSEAmex-2011-102); 67495 (July 25, 2012), 
77 FR 45406 (July 31, 2012) (SR-NYSEMKT-2012-21); 68559 (January 2, 
2013), 78 FR 1286 (January 8, 2013) (SR-NYSEMKT-2012-84); 69812 
(June 20, 2013), 78 FR 38766 (June 27, 2013) (SR-NYSEMKT-2013-51); 
and 71342 (January 17, 2014), 79 FR 4197 (January 24, 2014) (SR-
NYSEMKT-2014-02).
    \10\ 15 U.S.C. 78.
    \11\ See SR-NYSEAmex-2010-31, supra note 5, at 41271.
    \12\ Id.
    \13\ See SR-NYSEMKT-2014-57.
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    Extension of the UTP Pilot Program in tandem with the NMM Pilot, 
both from July 31, 2014 until the earlier of Commission approval to 
make such pilots permanent or December 31, 2014, will provide for the 
uninterrupted trading of UTP Securities on the Exchange on an unlisted 
trading privileges basis and thus continue to encourage the additional 
utilization of, and interaction with, the Exchange, and provide market 
participants with improved price discovery, increased liquidity, more 
competitive quotes and greater price improvement for UTP Securities.
    The proposed change is not otherwise intended to address any other 
issues and the Exchange is not aware of any problems that member 
organizations would have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange. In particular, 
the Exchange believes that its proposal to extend the UTP Pilot Program 
is consistent with (i) Section 6(b) of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(5) of the Act,\15\ 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; (ii) Section 
11A(a)(1) of the Act,\16\ in that it seeks to ensure the economically 
efficient execution of securities transactions and fair competition 
among brokers and dealers and among exchange markets; and (iii) Section 
12(f) of the Act,\17\ which governs the trading of securities pursuant 
to unlisted trading privileges consistent with the maintenance of fair 
and orderly markets, the protection of investors and the public 
interest, and the impact of extending the existing markets for such 
securities.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 15 U.S.C. 78k-1(a)(1).
    \17\ 15 U.S.C. 78l(f).
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    Specifically, the Exchange believes that extending the UTP Pilot 
Program would provide for the uninterrupted trading of UTP Securities 
on the Exchange on an unlisted trading privileges basis and thus 
continue to encourage the additional utilization of, and interaction 
with, the Exchange, thereby providing market participants with 
additional price discovery, increased liquidity, more competitive 
quotes and potentially greater price improvement for UTP Securities. 
Additionally, under the UTP Pilot Program, UTP Securities trade on the 
Exchange pursuant to rules governing the trading of Exchange-Listed 
securities that previously have been approved by the Commission. 
Accordingly, this proposed rule change would permit the Exchange to 
extend the effectiveness of the UTP Pilot Program in tandem with the 
NMM Pilot, which the Exchange has similarly proposed to extend until 
the earlier of Commission approval to make such pilot permanent or 
December 31, 2014.\18\
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    \18\ See supra note13.
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    Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition. For these reasons, the Exchange 
believes that the proposal is consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\19\ the Exchange 
believes that the

[[Page 42597]]

proposed rule change would not impose any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
The Exchange believes that extending the UTP Pilot Program will promote 
competition in the trading of UTP Securities and thereby provide market 
participants with opportunities for improved price discovery, increased 
liquidity, more competitive quotes, and greater price improvement.
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    \19\ 15 U.S.C. 78f(b)(8).
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting the services it offers and the 
requirements it imposes to remain competitive with other U.S. equity 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment.

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 \20\ and Rule 19b-4(f)(6) thereunder.\21\ 
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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    \20\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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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    A proposed rule change filed under Rule 19b-4(f)(6) \22\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\23\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Exchange stated that 
an immediate operative date is necessary in order to immediately 
implement the proposed rule change so that member organizations could 
continue to benefit from the pilot program without interruption after 
July 31, 2014.
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because such waiver would allow the pilot to continue uninterrupted, 
thereby avoiding any potential investor confusion that could result 
from the temporary interruption in the pilot program. Further, the 
Commission notes that because the proposed rule change was filed on an 
immediately effective basis on July 3, 2014, the fact that the current 
pilot program does not expire until July 31, 2014 will afford 
interested parties the opportunity to comment on the proposal before 
the Exchange requires it to become operative. For this reason, the 
Commission designates the proposed rule change to be operative July 31, 
2014.\24\
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    \24\ 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 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-NYSEMKT-2014-59 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2014-59. 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 publicly available. All 
submissions should refer to File Number SR-NYSEMKT-2014-59 and should 
be submitted on or before August 12, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Kevin M. O'Neill,
Deputy Secretary.
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    \25\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-17148 Filed 7-21-14; 8:45 am]
BILLING CODE 8011-01-P