[Federal Register Volume 79, Number 250 (Wednesday, December 31, 2014)]
[Notices]
[Pages 78930-78932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30587]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73919; File No. SR-NYSE-2014-71]


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 July 31, 2015

December 23, 2014
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on December 18, 2014, 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\ 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 extend the operation of its New Market 
Model Pilot, currently scheduled to expire on December 31, 2014, until 
the earlier of Securities and Exchange Commission (``Commission'') 
approval to make such pilot permanent or July 31, 2015. 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.

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 extend the operation of its New Market 
Model Pilot (``NMM Pilot''),\4\ currently scheduled to

[[Page 78931]]

expire on December 31, 2014, until the earlier of Commission approval 
to make such pilot permanent or July 31, 2015.
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    \4\ 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); 63616 (December 29, 2010), 76 FR 612 
(January 5, 2011) (SR-NYSE-2010-86) (extending Pilot to August 1, 
2011); 64761 (June 28, 2011), 76 FR 39147 (July 5, 2011) (SR-NYSE-
2011-29) (extending Pilot to January 31, 2012); 66046 (December 23, 
2011), 76 FR 82340 (December 30, 2011) (SR-NYSE-2011-65) (extending 
Pilot to July 31, 2012); 67494 (July 25, 2012), 77 FR 45408 (July 
31, 2012) (SR-NYSE-2012-26) (extending Pilot to January 31, 2013); 
68558 (January 2, 2013), 78 FR 1288 (January 8, 2013) (SR-NYSE-2012-
75) (extending Pilot to July 31, 2013); 69813 (June 20, 2013), 78 FR 
38753 (June 27, 2013) (SR-NYSE-2013-43) (extending Pilot to January 
31, 2014); 71345 (January 17, 2014), 79 FR 4221 (January 24, 2014) 
(SR-NYSE-2014-01) (extending Pilot to July 31, 2014); and 72627 
(July 16, 2014), 79 FR 42598 (July 22, 2014) (SR-NYSE-2014-33) 
(extending Pilot to December 31, 2014).
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    The Exchange notes that parallel changes are proposed to be made to 
the rules of NYSE MKT LLC.\5\
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    \5\ See SR-NYSEMKT-2014-109.
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Background \6\
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    \6\ The information contained herein is a summary of the NMM 
Pilot. See supra note 4 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.\7\ 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 \8\ in 
their assigned securities and no longer have a negative obligation. 
DMMs are also no longer agents for public customer orders.\9\
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    \7\ See NYSE Rule 103.
    \8\ See NYSE Rule 104.
    \9\ 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'').\10\ 
CCS provides the Display Book[supreg] \11\ 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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    \10\ See NYSE Rule 1000.
    \11\ 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 \12\ 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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    \12\ 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 several occasions in order to prepare a rule filing seeking 
permission to make the above described changes permanent.\13\ The 
Exchange is currently still preparing such formal submission but does 
not expect that filing to be completed and approved by the Commission 
before December 31, 2014.
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    \13\ 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 July 31, 2015, in order to allow the Exchange time to 
formally submit a filing to the Commission to convert the pilot rules 
to permanent rules.
    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 section 6(b) of the Act,\14\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\15\ in particular, because 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanisms of, a free and open market and a national market 
system and, in general, to protect investors and the public interest 
and because it is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices and to promote 
just and equitable principles of trade because it seeks to extend a 
pilot program that has already been approved by the Commission. The 
Exchange believes the proposed rule change is designed to facilitate 
transactions in securities and to remove impediments to, and perfect 
the mechanisms of, a free and open market and a national market system 
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, 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. 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,\16\ the Exchange 
believes that the 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

[[Page 78932]]

Exchange believes that extending the operation of the NMM Pilot will 
enhance competition among liquidity providers and thereby improve 
execution quality on the Exchange. The Exchange will continue to 
monitor the efficacy of the program during the proposed extended pilot 
period.
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    \16\ 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 foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) \18\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, become operative for 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.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ In addition, Rule 19b-4(f)(6)(iii) 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) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay period so that the proposal 
may become operative before the pilot's expiration. 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 
December 31, 2014.
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    \20\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30-day operative delay 
period is consistent with the protection of investors and the public 
interest. Specifically, the Commission believes that the proposal would 
allow the pilot to continue uninterrupted, thereby avoiding any 
potential investor confusion that could result from the temporary 
interruption in the pilot program. For these reasons, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest, and designates the 
proposed rule change to be operative on December 31, 2014.\21\
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    \21\ For purposes only of waiving the operative delay for this 
proposal, 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 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.\22\
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    \22\ 15 U.S.C. 78s(b)(3)(C).
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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-2014-71 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-NYSE-2014-71. 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-2014-71 and should be 
submitted on or before January 21, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30587 Filed 12-30-14; 8:45 am]
BILLING CODE 8011-01-P