Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Rule 6.37B and the Quoting Obligations of Lead Market Makers, 70639-70640 [E7-23972]

Download as PDF Federal Register / Vol. 72, No. 238 / Wednesday, December 12, 2007 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–23970 Filed 12–11–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56908; File No. NYSEArca– 2007–121] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Rule 6.37B and the Quoting Obligations of Lead Market Makers December 5, 2007. 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 November 27, 2007, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared substantially by NYSE Arca. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca proposes to amend Exchange Rule 6.37B in order to update the quoting obligations of Lead Market Makers (‘‘LMMs’’). The text of the proposed rule change is available at NYSE Arca, the Commission’s Public Reference Room, and http:// www.nysearca.com. mstockstill on PROD1PC66 with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NYSE Arca 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. NYSE Arca has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Aug<31>2005 15:54 Dec 11, 2007 Jkt 214001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this rule change is to update the quoting obligations for LMMs, contained in NYSE Arca Rule 6.37B. In 2003, the Exchange established a continuous quoting obligation for LMMs,3 in conjunction with the introduction of its electronic trading system then known as PCX Plus.4 This obligation called for an LMM to provide continuous two sided-quotations throughout the trading day in its appointed issues. The quoting obligation was subsequently amended in 2005 5 so that an LMM needed only to supply continuous quotations for 99% of the time that the Exchange is open for trading in each issue. Under the PCX Plus system, in addition to LMMs, there were three other categories of Market Makers: Remote Market Makers, Floor Market Makers, and Supplemental Market Makers. Of these three, only Remote Market Makers had a minimum continuous quoting obligation. Given that fact that not all Market Makers had minimum quoting requirements, coupled with the fact that the Exchange had a relatively small number of registered Remote Market Makers,6 the Exchange believed that a 99% continuous quoting obligation for LMMs would serve as a mechanism to help ensure that there would be adequate liquidity in any issue, throughout the trading day. With the introduction of the Exchange’s current electronic trading platform, the OX system, in 2006, the Exchange reclassified the Remote Market Maker, Supplemental Market Maker, and Floor Market Maker into one classification, simply called Market Maker. Under rules adopted by the Exchange in conjunction with the implementation of the OX system, all Market Makers now have minimum continuous quoting obligations.7 Due to 3 See Securities Exchange Act Release No. 47838 (May 13, 2003), 68 FR 27129 (May 19, 2003) (SR– PCX–2002–36). 4 PCX Plus was replaced in 2006 by the OX system, NYSE Arca’s present electronic trading platform. 5 See Securities Exchange Act Release No. 51740 (May 25, 2005), 70 FR 32686 (June 3, 2005) (SR– PCX–2005–64). 6 At the time PCX Plus was introduced in October 2003, in addition to LMMs, there were five registered Remote Market Makers subject to continuous quoting obligations. 7 NYSE Arca Rule 6.37B(c) states that a Market Maker must provide continuous two sided PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 70639 the fact that all Market Makers now have some minimum quoting obligations, coupled with an increase in the number of Market Makers providing quotations on a continuous basis,8 the Exchange no longer believes that it necessary for an LMM to be held to a 99% quoting obligation in order for there to be adequate liquidity in a given issue. Therefore, the Exchange is proposing to update Rule 6.37B(b) by reducing an LMMs continuous quoting obligation from 99% to 90%. The Exchange also seeks to add certain exemptions to Rule 6.37B. Specifically, when determining whether a LMM has met its 90% quoting obligation, the Exchange would not consider the duration of any periods where a technical failure on the part of the Exchange prevents the LMM from providing continuous quotations. Also, the Exchange would retain the discretion to consider other exceptions to this continuous electronic quote obligation based on demonstrated legal or regulatory requirements or other mitigating circumstances. Finally, the Exchange proposes to amend the review period for this obligation, from a quarterly basis to a monthly basis. The shorter time period would allow the Exchange to better monitor an LMMs performance. The Exchange does not believe that lowering the LMM quoting obligation would adversely affect the quality of the Exchange’s markets or lead to a material decrease in liquidity. Rather, the Exchange believes its current market structure with its high rate of participation by LMMs and Market Makers permits the lowering of the quoting obligation without fear of losing liquidity.9 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,10 in general, and furthers the objectives of Section 6(b)(5) of the Act,11 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 quotations throughout the trading day in its appointed issues for 60% of the time the Exchange is open for trading in each issue. 8 As of October 31, 2007, in addition to Lead Market Makers, there were fifty-five registered Market Makers subject to continuous quoting obligations. 9 Also, the Exchange notes that NYSE Arca Rule 6.37B(d), which states that in the interest of maintaining a fair and orderly market, a Market Maker may be called upon by a Trading Official to maintain continuous quotes in one or more series of an option issue, shall continue to apply. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). E:\FR\FM\12DEN1.SGM 12DEN1 70640 Federal Register / Vol. 72, No. 238 / Wednesday, December 12, 2007 / Notices cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system. 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 The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 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 NYSE Arca consents, the Commission will: (A) By order approve such proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments 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 inspection and copying 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. Copies of the filing also will be available for inspection and copying at the principal office of NYSE Arca. 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–NYSEArca–2007–121 and should be submitted on or before January 2, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–23972 Filed 12–11–07; 8:45 am] 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: BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Certain Modifications to the Initial Listing Standards for Index-Linked Securities • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–121 on the subject line. mstockstill on PROD1PC66 with NOTICES Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2007–121. This file number should be included on the subject line if e-mail is used. To help the VerDate Aug<31>2005 15:54 Dec 11, 2007 Jkt 214001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56907; File No. SR– NYSEArca–2007–122] December 5, 2007. 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 November 28, 2007, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’), through its wholly owned subsidiary, NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’), filed with the Securities and Exchange 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(6), the Exchange’s listing standards for Equity Index-Linked Securities, CommodityLinked Securities, and Currency-Linked Securities (collectively, ‘‘Index-Linked Securities’’).3 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 amend one of the requirements of NYSE Arca Equities Rule 5.2(j)(6)(A), which sets 3 NYSE Arca Equities Rule 5.2(j)(6) defines Equity Index-Linked Securities to be securities that provide for the payment at maturity of a cash amount based on the performance of an underlying index or indexes of equity securities (an ‘‘Equity Reference Asset’’). Commodity-Linked Securities are securities that provide for the payment at maturity of a cash amount based on the performance of one or more physical commodities or commodity futures, options or other commodity derivatives or Commodity-Based Trust Shares (as defined in NYSE Arca Equities Rule 8.201), or a basket or index of any of the foregoing (a ‘‘Commodity Reference Asset’’). Currency-Linked Securities are securities that provide for the payment at maturity of a cash amount based on the performance of one or more currencies, or options or currency futures or other currency derivatives or Currency Trust Shares (as defined in NYSE Arca Equities Rule 8.202), or a basket or index of any of the foregoing (a ‘‘Currency Reference Asset,’’ and together with Equity Reference Asset and Commodity Reference Asset, collectively, a ‘‘Reference Asset’’). E:\FR\FM\12DEN1.SGM 12DEN1

Agencies

[Federal Register Volume 72, Number 238 (Wednesday, December 12, 2007)]
[Notices]
[Pages 70639-70640]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23972]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56908; File No. NYSEArca-2007-121]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Rule 6.37B and the Quoting 
Obligations of Lead Market Makers

December 5, 2007.
    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 November 27, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I, II, and III below, which 
Items have been substantially prepared substantially by NYSE Arca. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to amend Exchange Rule 6.37B in order to update 
the quoting obligations of Lead Market Makers (``LMMs''). The text of 
the proposed rule change is available at NYSE Arca, the Commission's 
Public Reference Room, and http://www.nysearca.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, NYSE Arca 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. NYSE Arca 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 purpose of this rule change is to update the quoting 
obligations for LMMs, contained in NYSE Arca Rule 6.37B.
    In 2003, the Exchange established a continuous quoting obligation 
for LMMs,\3\ in conjunction with the introduction of its electronic 
trading system then known as PCX Plus.\4\ This obligation called for an 
LMM to provide continuous two sided-quotations throughout the trading 
day in its appointed issues. The quoting obligation was subsequently 
amended in 2005 \5\ so that an LMM needed only to supply continuous 
quotations for 99% of the time that the Exchange is open for trading in 
each issue.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 47838 (May 13, 
2003), 68 FR 27129 (May 19, 2003) (SR-PCX-2002-36).
    \4\ PCX Plus was replaced in 2006 by the OX system, NYSE Arca's 
present electronic trading platform.
    \5\ See Securities Exchange Act Release No. 51740 (May 25, 
2005), 70 FR 32686 (June 3, 2005) (SR-PCX-2005-64).
---------------------------------------------------------------------------

    Under the PCX Plus system, in addition to LMMs, there were three 
other categories of Market Makers: Remote Market Makers, Floor Market 
Makers, and Supplemental Market Makers. Of these three, only Remote 
Market Makers had a minimum continuous quoting obligation. Given that 
fact that not all Market Makers had minimum quoting requirements, 
coupled with the fact that the Exchange had a relatively small number 
of registered Remote Market Makers,\6\ the Exchange believed that a 99% 
continuous quoting obligation for LMMs would serve as a mechanism to 
help ensure that there would be adequate liquidity in any issue, 
throughout the trading day.
---------------------------------------------------------------------------

    \6\ At the time PCX Plus was introduced in October 2003, in 
addition to LMMs, there were five registered Remote Market Makers 
subject to continuous quoting obligations.
---------------------------------------------------------------------------

    With the introduction of the Exchange's current electronic trading 
platform, the OX system, in 2006, the Exchange reclassified the Remote 
Market Maker, Supplemental Market Maker, and Floor Market Maker into 
one classification, simply called Market Maker. Under rules adopted by 
the Exchange in conjunction with the implementation of the OX system, 
all Market Makers now have minimum continuous quoting obligations.\7\ 
Due to the fact that all Market Makers now have some minimum quoting 
obligations, coupled with an increase in the number of Market Makers 
providing quotations on a continuous basis,\8\ the Exchange no longer 
believes that it necessary for an LMM to be held to a 99% quoting 
obligation in order for there to be adequate liquidity in a given 
issue. Therefore, the Exchange is proposing to update Rule 6.37B(b) by 
reducing an LMMs continuous quoting obligation from 99% to 90%.
---------------------------------------------------------------------------

    \7\ NYSE Arca Rule 6.37B(c) states that a Market Maker must 
provide continuous two sided quotations throughout the trading day 
in its appointed issues for 60% of the time the Exchange is open for 
trading in each issue.
    \8\ As of October 31, 2007, in addition to Lead Market Makers, 
there were fifty-five registered Market Makers subject to continuous 
quoting obligations.
---------------------------------------------------------------------------

    The Exchange also seeks to add certain exemptions to Rule 6.37B. 
Specifically, when determining whether a LMM has met its 90% quoting 
obligation, the Exchange would not consider the duration of any periods 
where a technical failure on the part of the Exchange prevents the LMM 
from providing continuous quotations. Also, the Exchange would retain 
the discretion to consider other exceptions to this continuous 
electronic quote obligation based on demonstrated legal or regulatory 
requirements or other mitigating circumstances. Finally, the Exchange 
proposes to amend the review period for this obligation, from a 
quarterly basis to a monthly basis. The shorter time period would allow 
the Exchange to better monitor an LMMs performance.
    The Exchange does not believe that lowering the LMM quoting 
obligation would adversely affect the quality of the Exchange's markets 
or lead to a material decrease in liquidity. Rather, the Exchange 
believes its current market structure with its high rate of 
participation by LMMs and Market Makers permits the lowering of the 
quoting obligation without fear of losing liquidity.\9\
---------------------------------------------------------------------------

    \9\ Also, the Exchange notes that NYSE Arca Rule 6.37B(d), which 
states that in the interest of maintaining a fair and orderly 
market, a Market Maker may be called upon by a Trading Official to 
maintain continuous quotes in one or more series of an option issue, 
shall continue to apply.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ 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

[[Page 70640]]

cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanisms of a free and open market and a national market system.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 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 NYSE Arca consents, the Commission will:
    (A) By order approve such 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2007-121 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2007-121. 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 inspection 
and copying 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. Copies of the filing also will be available for 
inspection and copying at the principal office of NYSE Arca. 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-NYSEArca-2007-121 and should 
be submitted on or before January 2, 2008.
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23972 Filed 12-11-07; 8:45 am]
BILLING CODE 8011-01-P