Self-Regulatory Organizations; NYSE Alternext US LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Amending Rule 123C To Provide the Exchange With the Ability To Temporarily Suspend Certain Exchange Requirements Relating to the Closing of Securities at the Exchange, 10334-10339 [E9-4963]

Download as PDF 10334 Federal Register / Vol. 74, No. 45 / Tuesday, March 10, 2009 / Notices investors and the public interest to ensure that the closing price at the Exchange is not significantly dislocated from the last sale price by virtue of an extreme order imbalance at or near the close. 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 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 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 (https://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 such filing also will be available for inspection and copying at the principal offices 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–2009–18 and should be submitted on or before March 31, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–4964 Filed 3–9–09; 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 Alternext US LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Amending Rule 123C To Provide the Exchange With the Ability To Temporarily Suspend Certain Exchange Requirements Relating to the Closing of Securities at the Exchange • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml ); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2009–18 on the subject line. Paper Comments SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59488; File No. SR– NYSEALTR–2009–15] March 3, 2009. • Send paper comments in triplicate Pursuant to Section 19(b)(1) 1 of the to Elizabeth M. Murphy, Secretary, Securities Exchange Act of 1934 (the Securities and Exchange Commission, ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 100 F Street, NE., Washington, DC notice is hereby given that, on February 20549–1090. All submissions should refer to File 17 17 CFR 200.30–3(a)(12). Number SR–NYSE–2009–18. This file 1 15 U.S.C.78s(b)(1). 2 15 U.S.C. 78a. number should be included on the 3 17 CFR 240.19b–4. subject line if e-mail is used. To help the VerDate Nov<24>2008 15:20 Mar 09, 2009 Jkt 217001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 20, 2009, NYSE Alternext US LLC (‘‘Exchange’’ or ‘‘NYSE Alternext’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. On March 2, 2009, the Exchange filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 123C to provide the Exchange with the ability to temporarily suspend certain Exchange requirements relating to the closing of securities at the Exchange. The text of the proposed rule change is available at https://www.nyse.com, the Exchange, and 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 is proposing to amend Rule 123C—NYSE Alternext Equities to provide the Exchange with the ability to temporarily suspend certain rule requirements at the close when extreme order imbalances may cause significant dislocation to the closing price. The amendments proposed for Rule 123C— NYSE Alternext Equities are similar in substance [to] current Rule 48 extreme market volatility condition at the close provisions. With this rule filing, the Exchange proposes to delete those provisions from Rule 48 and add them in modified form to Rule 123C. The Exchange also proposes to amend Rule 48(c)(2) to conform the rule to the actual E:\FR\FM\10MRN1.SGM 10MRN1 Federal Register / Vol. 74, No. 45 / Tuesday, March 10, 2009 / Notices practice of how the Exchange notifies the Commission staff when a Rule 48 condition has been declared.4 Background As described more fully in a related rule filing,5 NYSE Euronext acquired The Amex Membership Corporation (‘‘AMC’’) pursuant to an Agreement and Plan of Merger, dated January 17, 2008 (the ‘‘Merger’’). In connection with the Merger, the Exchange’s predecessor, the American Stock Exchange LLC (‘‘Amex’’), a subsidiary of AMC, became a subsidiary of NYSE Euronext and was renamed NYSE Alternext U.S. LLC (‘‘NYSE Alternext’’ or the ‘‘Exchange’’), and continues to operate as a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended (the ‘‘Act’’).6 The effective date of the Merger was October 1, 2008. In connection with the Merger, on December 1, 2008, the Exchange relocated all equities trading conducted on the Exchange legacy trading systems and facilities located at 86 Trinity Place, New York, New York, to trading systems and facilities located at 11 Wall Street, New York, New York (the ‘‘Equities Relocation’’). The Exchange’s equity trading systems and facilities at 11 Wall Street (the ‘‘NYSE Alternext Trading Systems’’) are operated by the NYSE on behalf of the Exchange.7 As part of the Equities Relocation, NYSE Alternext adopted NYSE Rules 1– 1004, subject to such changes as necessary to apply the Rules to the Exchange, as the NYSE Alternext Equities Rules to govern trading on the NYSE Alternext Trading Systems.8 The NYSE Alternext Equities Rules, which 4 The purpose of the proposed rule changes is to amend Rules 48 and 123C—NYSE Alternext Equities to conform with proposed amendments to corresponding NYSE Rules 48 and 123C submitted in a companion filing by the New York Stock Exchange LLC (‘‘NYSE’’). See SR–NYSE–2009–18, formally submitted February 19, 2009. 5 See Securities Exchange Act Release No. 58673 (September 29, 2008), 73 FR 57707 (October 3, 2008) (SR–NYSE–2008–60 and SR–Amex 2008–62) (approving the Merger). 6 15 U.S.C. 78f. 7 See Securities Exchange Act Release No. 58705 (October 1, 2008), 73 FR 58995 (October 8, 2008) (SR–Amex 2008–63) (approving the Equities Relocation). 8 See Securities Exchange Act Release No. 58705 (October 1, 2008), 73 FR 58995 (October 8, 2008) (SR–Amex 2008–63); Securities Exchange Act Release No. 58833 (October 22, 2008), 73 FR 64642 (October 30, 2008) (SR–NYSE–2008–106); Securities Exchange Act Release No. 58839 (October 23, 2008), 73 FR 64645 (October 30, 2008) (SR– NYSEALTR–2008–03); Securities Exchange Act Release No. 59022 (November 26, 2008), 73 FR 73683 (December 3, 2008) (SR–NYSEALTR–2008– 10); and Securities Exchange Act Release No. 59027 (November 28, 2008), 73 FR 73681 (December 3, 2008) (SR–NYSEALTR–2008–11). VerDate Nov<24>2008 15:20 Mar 09, 2009 Jkt 217001 became operative on December 1, 2008, are substantially identical to the current NYSE Rules 1–1004 and the Exchange continues to update the NYSE Alternext Equities Rules as necessary to conform with rule changes to corresponding NYSE Rules filed by the NYSE. Current Rule 48—NYSE Alternext Equities Rule 48—NYSE Alternext Equities provides the Exchange with the ability to suspend certain rules at the close when extremely high market volatility could negatively affect the ability to ensure a fair and orderly close. This provision of Rule 48 is temporary and will end on March 27, 2009.9 Rule 48 now includes the close of trading as a time when a qualified Exchange officer would be permitted to declare an extreme market volatility condition. In such event, the Exchange could temporarily suspend Rules 52 (Hours of Operation) and 123C(1) and (2) (Market on the Close Policy and Expiration Policy), provided that certain requirements are met. To enable a qualified Exchange officer to declare a Rule 48 condition at the close, Rule 48(c) includes that a qualified Exchange officer may consider the volatility during that day’s trading session and evidence of significant order imbalances across the market at the close for purposes of determining whether to declare an extreme market volatility condition at the close. Under Rule 48, an extreme market volatility condition at the close is a separate event and must be considered in light of the facts and circumstances leading to the close. A Rule 48 condition at the open of trading does not extend to the close; a qualified Exchange officer needs to make an independent determination to invoke Rule 48 at the close regardless of whether Rule 48 was invoked at the open. Such a Rule 48 condition at the close must be declared by a qualified Exchange officer before the scheduled close of trading. Once an extreme market volatility condition at the close has been declared Floor wide, under Rule 48(b)(2)(A), the Exchange may temporarily suspend Rule 52 on a security-by-security basis so that interest can be solicited and entered into Exchange systems to offset an imbalance in a security that may be present after the scheduled close of trading. During an extreme market volatility condition, interest may be solicited—including interest that may not have been present prior to 4 p.m.— to offset any imbalance that may exist as of 4 p.m. (or earlier, in the case of an earlier scheduled close).10 If offsetting interest is received in response to such solicitation, rather than have the DMM represent such offsetting interest in the close pursuant to Rule 902, such interest could be entered by the DMM directly into Exchange systems on behalf of the member or member organization representing such interest. Because Exchange systems do not allow for the electronic entry of orders after 4 p.m., such interest must be represented manually by a Floor broker in the closing auction process and entered into Exchange systems by the DMM by no later than 4 p.m.11 The entry of any orders after 4 p.m. pursuant to the rule must be under the supervision and approval of a Floor Governor.12 To ensure a complete audit trail, any offsetting interest entered after 4 p.m. during an extreme market volatility condition must also be entered into the Front End Systemic Capture database (‘‘FESC’’), as required by Rule 123— NYSE Alternext Equities. Because such interest may not have been known until after 4 p.m., under Rule 48(b)(2)(A)(iii), a Floor broker may represent such offsetting interest after 4 p.m. without first entering the details of the order into FESC, as required by Rule 123, so long as such orders are entered into FESC on an ‘‘as of’’ basis immediately following execution of the order. During an extreme market volatility condition at the close, the Exchange also has the ability to temporarily suspend, on a security-by-security basis, the Rule 123C(1) and (2) requirements that MOC and LOC orders that are legitimate errors cannot be cancelled or reduced after 3:50 p.m. Under Rule 48(b)(2)(B), only an erroneous MOC or LOC that would cause significant closing price dislocation for a particular security could be considered for cancellation. In other words, an MOC or LOC order that is as a result of a legitimate error that would have no impact on the closing price could not take advantage of the proposed temporary suspension, even in an extreme market volatility condition. If it is determined that such an MOC/ LOC legitimate error would significantly dislocate the close, such order can be cancelled or reduced at any time up until that particular security has closed. To further ensure that the ability to cancel an MOC or LOC order after 3:50 is not abused, under Rule 48(b)(2)(B)(iii), such an order can be cancelled or reduced only with the supervision and approval of both an Executive Floor Governor and a 10 See Rule 48(b)(2)(A)(i). Rule 48(b)(2)(A)(ii). 12 See Rule 48(b)(2)(A)(iv). 11 See 9 See PO 00000 Rule 48.10. Frm 00118 Fmt 4703 Sfmt 4703 10335 E:\FR\FM\10MRN1.SGM 10MRN1 10336 Federal Register / Vol. 74, No. 45 / Tuesday, March 10, 2009 / Notices qualified Exchange officer. In the event an Executive Floor Governor is not available, a Floor Governor’s approval must be obtained. Proposed Amendments to Rule 123C— NYSE Alternext Equities The Exchange believes that the temporary provisions to Rule 48 provide the Exchange with invaluable tools to ensure a fair and orderly close during extreme situations. However, the Exchange does not believe that a Floorwide condition needs to be present in order to warrant the use of these tools. The Exchange therefore proposes to adopt the amendments to Rule 48 on a permanent basis by deleting those provisions from Rule 48 and moving them to Rule 123C—NYSE Alternext Equities. As part of the amendments to Rule 123C, the Exchange further proposes modifying the terms of the temporary suspensions by permitting the Exchange to invoke such relief on a security-by-security basis without first declaring a Floor-wide extreme market volatility condition and codifying certain practices for the entry of orders after 4 p.m. A. Relocating Temporary Suspensions to Rule 123C As noted above, the Rule 48 extreme market volatility at the close conditions are temporary and will end on March 27, 2009. Under current Rule 48, the Exchange must first declare a Floorwide extreme market volatility condition before it can consider, on a security-by-security basis, whether to temporarily suspend either Rule 52 or Rule 123C(1) or (2). Because the temporary suspensions are already granted on a security-by-security basis, the Exchange does not believe that going forward it needs to first declare a Floorwide event in order to provide relief on an individual security basis. Indeed, the need for declaring a Floor-wide extreme market volatility condition before 4 p.m. could hamper the ability of the Exchange to invoke the temporary suspensions when they are needed most. For example, during normal market conditions that would not otherwise warrant a Rule 48 condition at the close, Exchange systems may receive a large market order in a security at 3:59:59 p.m. Such a large order entered so near to the close could cause the type of extreme imbalance that would merit a temporary suspension of Rule 52, yet such relief would be unavailable because overall market conditions did not require a Rule 48 condition. The Exchange therefore believes that the ability to temporarily suspend rules at VerDate Nov<24>2008 15:20 Mar 09, 2009 Jkt 217001 the close should be part of Rule 123C— NYSE Alternext Equities, which governs the closing process at the Exchange, and be available on a security-by-security basis, even after 4 p.m.13 The Exchange therefore proposes deleting the extreme market volatility at the close condition from Rule 48. In deleting the provisions of Rule 48 condition at the close and moving those temporary suspensions to Rule 123C, the Exchange proposes certain modifications to the application of the temporary suspensions. These modifications are designed to provide clarity of how this tool should be used. Namely, the ability to temporarily suspend Exchange rules at the close should be used sparingly and only in extreme situations. The Exchange therefore proposes to qualify that temporary suspensions under proposed Rule 123C(8) are intended to be used to prevent a closing price dislocation that may result from an order entered into Exchange systems, or represented to a DMM orally at or near the close, that may result in an extreme order imbalance at or near the close.14 In such case, as with Rule 48, the rules that may be suspended are Rule 52—NYSE Alternext Equities (Hours of Operation) and Rules 123C(1) and (2)—NYSE Alternext Equities (Market on the Close Policy and Expiration Policy). B. Temporary Suspension of Rule 52— NYSE Alternext Equities As with Rule 48, the Exchange proposes to provide for the ability to temporarily suspend Rule 52 for the sole purpose of allowing the entry of orders after 4 p.m. to offset an extreme order imbalance at the close. As proposed, the process replaces the more cumbersome Rule 902 process, whereby the DMM represents interest on behalf of a Floor broker in the close on a riskless basis and then enters a coupled order in Crossing Session I to liquidate the DMM position taken on behalf of the Floor broker.15 With respect to the temporary suspension of Rule 52, the Exchange proposes to adopt without change the language of Rule 48(b)(2)(A)(i) and (iii) (proposed as Rule 123C(8)(a)(1)(i) and (v)). These provisions concern, respectively, the purpose of soliciting orders after 4 p.m. and the use of the FESC system on an ‘‘as of’’ basis following execution of an order. The Exchange proposes to codify as Rule 123C(8)(a)(1)(ii) that when 13 See proposed Rule 123C(8)(c). proposed Rule 123C(8)(a). 15 See Rules 902(a)(ii)(B) and 903(d)(ii). 14 See PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 soliciting orders to offset an imbalance in a security that may exist after 4 p.m., such interest will be solicited from offFloor participants directly and via their Floor broker representatives.16 Such solicitation requests shall be transmitted electronically both off-Floor and onFloor and shall include, at a minimum, information about the security symbol, the imbalance amount and side, the last sale price, and an order acceptance cutoff time. As proposed, the order acceptance cut-off time included in the solicitation request would be a time period designated by the Exchange. Because the goal is to close Exchange-listed securities as close to the closing bell as possible, such time period will generally be no longer than five minutes. As in Rule 48(b)(2)(A)(ii), 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 scheduled close). The Exchange includes this 4:30 p.m. time period as an outside limit and it is not intended to provide a 30-minute window within which to receive offsetting interest, or that the Exchange seeks to close securities at 4:30 p.m. Rather, as proposed, if a solicitation request is transmitted at 4:02 p.m., the Exchange generally would include an order acceptance cut-off time of five minutes, requiring all offsetting interest to be received by 4:07 p.m. so that the DMM can close the security on or about 4:07 p.m. In the rare circumstance that a solicitation request is not transmitted until 4:27 p.m., the order acceptance cut-off time would be 4:30 p.m., and not a five-minute period. The 4:30 p.m. end time is therefore included to ensure that this proposed temporary suspension of Rule 52 would not be used to extend the close indefinitely. The Exchange also proposes adding conditions on the type of order that may be entered in response to such a solicitation request. As proposed in Rule 123C(8)(a)(1)(iii), any offsetting interest received in response to a solicitation request must be a limit order priced no worse than the last sale and irrevocable. Therefore, if there is a buy imbalance, the offsetting interest must be sell orders priced no lower than the last sale price, or if there is a sell imbalance, the offsetting interest must be buy orders priced no higher than the 16 Interest is solicited from off-Floor participants via NYSE Trader Update Messages, which is an NYSE product with over 2,000 subscribers that provides a wide range of up-to-the minute notices of particular interest to the professional trading community about both NYSE and NYSE Alternext Equities. NYSE Trader Updates provide messages both via email and on an RSS subscription basis. E:\FR\FM\10MRN1.SGM 10MRN1 Federal Register / Vol. 74, No. 45 / Tuesday, March 10, 2009 / Notices last sale price. The Exchange believes that these conditions are necessary to ensure that the offsetting interest received is simply that: interest that is intended to offset the existing imbalance to ensure that the closing price is not too far dislocated from the last sale. The Exchange does not believe that this process should be used to re-open the auction market or to permit the imbalance to swing in the opposite direction. The Exchange also proposes to add to the rule certain parameters regarding the timing of the closing of a security when such offsetting interest is solicited. As proposed in Rule 123C(8)(a)(1)(iv), in such circumstances, the DMM should close the security the earlier of the order acceptance cut-off time or if the imbalance is paired off at or reasonably contiguous to the last sale price. The Exchange believes that this provision will enable the DMM to arrange for a fair and orderly close that is as close to 4 p.m. as possible. For example, if the Exchange receives a limited response to the solicitation request, the DMM would have up to the order acceptance cut-off time for orders to be entered. If, however, the DMM receives sufficient interest before the order acceptance cutoff time to close the security either at the last sale price, or at a reasonably contiguous price to the last sale price, the DMM could close the security earlier. As proposed, a reasonably contiguous price refers to a price point that is within cents of the last sale price, and would be a price point that during a regular closing auction would not be considered a dislocating closing price as compared to the last sale price. As discussed in more detail below in subsection D, such closings would be subject to approval of either an Executive Floor Governor or qualified NYSE Euronext staff employee and supervision of a qualified Exchange Officer, as defined in Rule 48(d). The Exchange believes that the parameters on when to close the security are necessary to ensure that securities trading at the Exchange close as near to 4 p.m. as possible, notwithstanding the fact that the Exchange seeks additional offsetting interest after 4 p.m. In either case, the Exchange proposes that any offsetting interest entered after 4 p.m., but before the DMM closes the security, would trade on parity.17 As discussed in 17 The Exchange notes that all MOC and marketable LOC orders entered before 4:00 p.m. that otherwise would have participated in the close will continue to participate in the close. Because the MOC/LOC imbalance dictates the closing price (see Rule 123C(3)), any additional interest solicited after 4:00 p.m. under proposed Rule 123C(8)(a)(1) is VerDate Nov<24>2008 15:20 Mar 09, 2009 Jkt 217001 greater detail in the NYSE’s proposal to adopt the Next Generation Market Model,18 under the Exchange’s parity model, Exchange systems will divide the size of the executing order by the number of participants. The DMM and each Floor broker are each considered a single participant. A Floor broker that represents multiple orders gets parity for the aggregate of orders. With parity, the total number of shares to be allocated to each participant will be distributed equally among the participants where possible and executions will be allocated in round lots. In the event the number of shares to be executed at the price point is insufficient to allocate round lots to all the participants eligible to receive an execution at the price point, the Exchange systems will create an allocation wheel of the eligible participants at the price point and the available shares will be distributed to the participants in turn. If the DMM closes the security before the order acceptance cut-off time, any interest received before closing the security would trade on parity with other interest, including the DMM’s interest at the close. The Exchange also proposes to maintain, as in Rule 48(b)(2)(A)(ii), that any offsetting interest must be represented by a Floor broker. Exchange systems do not have the capability to receive electronic interest after 4 p.m. As with any technology, it would be possible to reconfigure Exchange systems to accept orders electronically after 4 p.m. However, such technology changes would be costly and would divert resources away from other necessary technology changes that are already scheduled. Therefore, even if the Exchange could make such technology changes, they likely could not be implemented until mid to late 2009, and at great cost. The benefit, however, to implementing such a technology change would be limited. The temporary suspension of Rule 52 to attract offsetting interest is intended to be used for extreme, and likely rare circumstances where there exists such a large imbalance at the close that the DMM could not close the security without significantly dislocating the price of the security. The Exchange notes that this has been a period of historic market volatility; the Exchange therefore expects that in times of calmer simply to ensure that the existing imbalance of MOC and marketable LOC orders can be filled at a price that does not cause a significant price dislocation from the last sale price. 18 See SEC Release No. 58845 (Oct. 24, 2008), 73 FR 64379 (Oct. 29, 2008) (SR-NYSE–2008–46). PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 10337 markets, the relief requested would be used in even rarer circumstances. The Exchange further notes that requiring Floor brokers to represent such offsetting interest does not unfairly discriminate against any market participants. The requirement to use a Floor broker, who would be acting only as an agent, does not deny anyone access to trading at the Exchange. It simply requires an agent as intermediary. Indeed, during the inherently manual process of closing a security, using a Floor broker to represent offsetting interest will provide customers with the most up-to-date information about the closing process in such a scenario. Moreover, the imbalance that would warrant such a temporary suspension would likely be of such a size that the type of customers that would be able to meaningfully and timely respond to such a solicitation request are sophisticated market participants who likely already have, or could easily arrange for, a relationship with a Floor broker to represent orders on their behalf. Such sophisticated participants have the wherewithal to enter into arrangements with Floor brokers that are financially competitive with entering orders directly into Exchange systems, e.g., via reduced commissions or pass through of Floor broker rebates. The Exchange therefore believes that the time and cost that would be necessary to reconfigure Exchange systems to electronically accept orders after 4 p.m. for this limited purpose far outweighs any benefit that may accrue from such technology changes. In any event, the Exchange believes that more information is necessary before the Exchange undertakes to implement any such technology change. The Exchange therefore proposes that six months after the approval of this proposed rule change, the Exchange will provide the Commission with information regarding how many times a Rule 52 temporary suspension under proposed Rule 123C(8)(a)(1) has been invoked. At that time, both the Exchange and the Commission can make a more informed decision of whether the benefit in accepting orders electronically after 4 p.m. outweighs the costs associated with making such changes. To provide both the Exchange and the Commission with time to evaluate the proposed rule, the Exchange proposes that Rule 123C(8)(a)(1) be approved on a Pilot basis to end six months after the approval date of this filing. E:\FR\FM\10MRN1.SGM 10MRN1 10338 Federal Register / Vol. 74, No. 45 / Tuesday, March 10, 2009 / Notices C. Temporary Suspension of Rule 123C(1) and (2) The Exchange proposes to adopt permanently the provisions of Rule 48(b)(2)(B) as proposed Rule 123C(8)(a)(2), without any change. Therefore, as with Rule 48, the Exchange would have the ability to temporarily suspend, on a security-bysecurity basis, the Rule 123C(1) and (2) requirements that MOC and LOC orders that are legitimate errors cannot be cancelled or reduced after 3:50 p.m. The same conditions that were adopted as part of Rule 48 would apply here as well, i.e. , that only an erroneous MOC or LOC that would cause significant closing price dislocation for a particular security could be considered for cancellation and that if it is determined that such an MOC/LOC legitimate error would dislocate the close, such order can be cancelled or reduced at any time up until that particular security has closed. As discussed below, the Exchange proposes to move Rule 48(b)(2)(B)(iii) to proposed Rule 123C(8)(b). D. Parameters for Obtaining Temporary Rule Suspensions The Exchange further proposes codifying the practices concerning how a temporary suspension under proposed Rule 123C(8)(a) would be invoked and who should be involved. As proposed in Rule 123C(8)(b), only the DMM assigned to a particular security may request a temporary suspension under proposed section 8(a) of the Rule. The Exchange believes that because the DMM is responsible for facilitating the close of trading of securities registered to that DMM, including supplying liquidity if needed, the DMM is in the unique position to know whether he or she would need additional interest to ensure a fair or orderly close. To ensure that such temporary suspensions are not invoked indiscriminately, the Exchange further proposes that any such determination, as well as any entry or cancellation of orders or closing of a security under proposed Rule 123C(8)(a), must be approved by either an Executive Floor Governor or a qualified NYSE Euronext employee, as defined in Rule 46(b)(v)— NYSE Alternext Equities. The Exchange also proposes requiring that any temporary suspensions under proposed Rule 123C(8)(a) should be under the supervision of a qualified Exchange Officer, as defined in Rule 48(d). These requirements are identical to the requirement under Rule 48(b)(2)(B)(iii), but more stringent than the current requirement under Rule VerDate Nov<24>2008 15:20 Mar 09, 2009 Jkt 217001 48(b)(2)(A)(iv), which requires only the supervision of a Floor Governor. The Exchange believes that these heightened approval and supervision requirements will ensure that, as contemplated by the proposed rule, only extreme situations such as when a late-arriving order would cause significant price dislocation at the close would result in a temporary suspension of Exchange rules at the close. To assist the DMM and officials, proposed Rule 123C(8)(b) identifies a number of factors that may be considered when making such a determination. Such factors include, but are not limited to, when the order(s) that impacted the imbalance were entered into Exchange systems or orally represented to the DMM, the impact of such order(s) on the closing price of the security, the volatility of the security during the trading session, and the ability of the DMM to commit capital to dampen the price dislocation. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 19 that an Exchange have rules that are designed 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. As noted above, the proposed rule is intended to be used in extreme circumstances when a large order imbalance or order entered in error could cause a closing price to be far dislocated from the last sale price. The rule is therefore intended to protect investors and the public interest to ensure that the closing price at the Exchange is not significantly dislocated from the last sale price by virtue of an extreme order imbalance at or near the close. Proposed Amendment to Rule 48(c)(2)— NYSE Alternext Equities In addition to the above-described amendments, the Exchange also proposes to amend Rule 48(c)(2), which concerns the method by which the Exchange notifies Commission staff when it declares a Rule 48 extreme market volatility condition. The current rule provides that the qualified Exchange officer will make a reasonable effort to consult with Commission staff before declaring an extreme market volatility condition and granting a suspension of the Exchange rules or procedures. In the event that the qualified Exchange officer cannot reach the Commission staff, the qualified Exchange officer will, as promptly as practicable in the circumstances, inform the Commission staff of such declaration. Given the limited relief that can be granted during a Rule 48 condition— certain Floor Official approvals are suspended and mandatory indications can be suspended—the Exchange believes that the requirement to consult with Commission staff before declaring an extreme market volatility condition imposes an undue burden on regulatory resources. Accordingly, the Exchange proposes to amend Rule 48(c)(2) to delete the requirement that the qualified Exchange officer undertake reasonable efforts to consult with Commission staff before declaring an extreme market volatility condition. As required by the rule, the Exchange will continue to inform the Commission staff, as promptly as practicable under the circumstances, when it has declared a Rule 48 extreme market volatility condition. 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. PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 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 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 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: 19 15 E:\FR\FM\10MRN1.SGM U.S.C. 78f(b)(5). 10MRN1 Federal Register / Vol. 74, No. 45 / Tuesday, March 10, 2009 / Notices Electronic Comments SMALL BUSINESS ADMINISTRATION • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to Please include File Number SRNYSEALTR–2009–15 on the subject line. [TeleSoft Partners II SBIC, L.P.; License No. 09/79–0432] Notice Seeking Exemption Under Section 312 of the Small Business Investment Act, Conflicts of Interest Notice is hereby given that TeleSoft Partners II SBIC, L.P., 950 Tower Lane, Suite 1600, Foster City, CA 94404, a Paper Comments Federal Licensee under the Small Business Investment Act of 1958, as • Send paper comments in triplicate amended (‘‘the Act’’), in connection to Elizabeth M. Murphy, Secretary, with the financing of a small concern, Securities and Exchange Commission, has sought an exemption under Section 100 F Street, NE., Washington, DC 312 of the Act and Section 107.730, 20549–1090. Financings which Constitute Conflicts All submissions should refer to File of Interest of the Small Business Number SR–NYSEALTR–2009–15. This Administration (‘‘SBA’’) Rules and file number should be included on the Regulations (13 CFR 107.730). TeleSoft subject line if e-mail is used. To help the Partners II SBIC, L.P. proposes to Commission process and review your provide equity financing to Calient comments more efficiently, please use Networks, Inc., 2665 North First Street, only one method. The Commission will Suite 204, San Jose, CA 95134. The post all comments on the Commission’s financing is contemplated for working capital and general corporate purposes. Internet Web site (https://www.sec.gov/ The financing is brought within the rules/sro.shtml). Copies of the purview of section107.730(a)(1) of the submission, all subsequent Regulations because TeleSoft Partners II, amendments, all written statements L.P., TeleSoft Partners II QP, L.P. and with respect to the proposed rule TeleSoft NP Employee Fund, L.L.C, all change that are filed with the Associates of TeleSoft Partners II SBIC, Commission, and all written L.P., in the aggregate own more than ten communications relating to the percent of Calient Networks, Inc. proposed rule change between the Therefore, this transaction is Commission and any person, other than considered a financing of an Associate those that may be withheld from the requiring an exemption. Notice is public in accordance with the hereby given that any interested person provisions of 5 U.S.C. 552, will be may submit written comments on the available for inspection and copying in transaction within fifteen days of the the Commission’s Public Reference date of this publication to the Acting Room, 100 F Street, NE., Washington, Associate Administrator for Investment, DC 20549, on official business days U.S. Small Business Administration, between the hours of 10 a.m. and 3 p.m. 409 Third Street, SW., Washington, DC Copies of such filing also will be 20416. available for inspection and copying at Dated: February 25, 2009. the principal offices of the Exchange. Harry Haskins, All comments received will be posted Acting Associate Administrator for without change; the Commission does Investment. not edit personal identifying [FR Doc. E9–4986 Filed 3–9–09; 8:45 am] information from submissions. You BILLING CODE 8025–01–P should submit only information that you wish to make available publicly. All submissions should refer to File DEPARTMENT OF STATE Number SR–NYSEALTR–2009–15 and should be submitted on or before March [Public Notice 6541] 31, 2009. Advisory Committee on International For the Commission, by the Division of Economic Policy; Notice of Committee Trading and Markets, pursuant to delegated Renewal authority.20 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–4963 Filed 3–9–09; 8:45 am] BILLING CODE 8011–01–P 20 17 CFR 200.30–3(a)(12). VerDate Nov<24>2008 15:20 Mar 09, 2009 Jkt 217001 Renewal of Advisory Committee. The Department of State has renewed the Charter of the Advisory Committee on International Economic Policy. The Committee serves in a solely advisory capacity concerning major issues and problems in international economic PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 10339 policy. The Committee provides information and advice on the effective integration of economic interests into overall foreign policy and on the Department of State’s role in advancing American commercial interests in a competitive global economy. The Committee also appraises the role and limits of international economic institutions and advises on the formulation of U.S. economic policy and positions. This Committee includes representatives of American organizations and institutions having an interest in international economic policy, including representatives of American business, labor unions, public interest groups, and trade and professional associations. The Committee meets at least annually to advise the Department on the full range of international economic policies and issues. For further information, please call Nancy Smith-Nissley, Senior Coordinator, Office of Economic Policy Analysis and Public Diplomacy, Economic, Energy and Business Affairs Bureau, U.S. Department of State, at (202) 647–1682. March 2, 2009. Sandra Clark, Director, Office of Economic Policy Analysis and Public Diplomacy, Bureau of Economic, Energy and Business Affairs, Department of State. [FR Doc. E9–5072 Filed 3–9–09; 8:45 am] BILLING CODE 4710–07–P DEPARTMENT OF STATE [Public Notice 6515] Notice of Closed Meeting of the Cultural Property Advisory Committee In accordance with the provisions of the Convention on Cultural Property Implementation Act (19 U.S.C. 2601 et seq.) (the Act) there will be a meeting of the Cultural Property Advisory Committee on Tuesday, March 24, from approximately 9 a.m. to 5 p.m., and on Wednesday, March 25, from approximately 9 a.m. to 1 p.m., at the Department of State, Annex 44, Room 840, 301 4th St., SW., Washington, DC. At this meeting the Committee will carry out its interim review function with respect to the Memorandum of Understanding Between the Government of the United States of America and the Government of the Republic of Nicaragua Concerning the Imposition of Import Restrictions on Archaeological Material from the PreHispanic Cultures of Nicaragua. The E:\FR\FM\10MRN1.SGM 10MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 74, Number 45 (Tuesday, March 10, 2009)]
[Notices]
[Pages 10334-10339]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-4963]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59488; File No. SR-NYSEALTR-2009-15]


Self-Regulatory Organizations; NYSE Alternext US LLC; Notice of 
Filing of Proposed Rule Change, as Modified by Amendment No. 1, 
Amending Rule 123C To Provide the Exchange With the Ability To 
Temporarily Suspend Certain Exchange Requirements Relating to the 
Closing of Securities at the Exchange

March 3, 2009.
    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 February 20, 2009, NYSE Alternext US LLC (``Exchange'' 
or ``NYSE Alternext'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. On March 2, 2009, the Exchange filed Amendment 
No. 1 to the proposed rule change. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend Rule 123C to provide the Exchange 
with the ability to temporarily suspend certain Exchange requirements 
relating to the closing of securities at the Exchange.
    The text of the proposed rule change is available at https://
www.nyse.com, the Exchange, and 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 is proposing to amend Rule 123C--NYSE Alternext 
Equities to provide the Exchange with the ability to temporarily 
suspend certain rule requirements at the close when extreme order 
imbalances may cause significant dislocation to the closing price. The 
amendments proposed for Rule 123C--NYSE Alternext Equities are similar 
in substance [to] current Rule 48 extreme market volatility condition 
at the close provisions. With this rule filing, the Exchange proposes 
to delete those provisions from Rule 48 and add them in modified form 
to Rule 123C. The Exchange also proposes to amend Rule 48(c)(2) to 
conform the rule to the actual

[[Page 10335]]

practice of how the Exchange notifies the Commission staff when a Rule 
48 condition has been declared.\4\
---------------------------------------------------------------------------

    \4\ The purpose of the proposed rule changes is to amend Rules 
48 and 123C--NYSE Alternext Equities to conform with proposed 
amendments to corresponding NYSE Rules 48 and 123C submitted in a 
companion filing by the New York Stock Exchange LLC (``NYSE''). See 
SR-NYSE-2009-18, formally submitted February 19, 2009.
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Background
    As described more fully in a related rule filing,\5\ NYSE Euronext 
acquired The Amex Membership Corporation (``AMC'') pursuant to an 
Agreement and Plan of Merger, dated January 17, 2008 (the ``Merger''). 
In connection with the Merger, the Exchange's predecessor, the American 
Stock Exchange LLC (``Amex''), a subsidiary of AMC, became a subsidiary 
of NYSE Euronext and was renamed NYSE Alternext U.S. LLC (``NYSE 
Alternext'' or the ``Exchange''), and continues to operate as a 
national securities exchange registered under Section 6 of the 
Securities Exchange Act of 1934, as amended (the ``Act'').\6\ The 
effective date of the Merger was October 1, 2008.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707 (October 3, 2008) (SR-NYSE-2008-60 and SR-Amex 
2008-62) (approving the Merger).
    \6\ 15 U.S.C. 78f.
---------------------------------------------------------------------------

    In connection with the Merger, on December 1, 2008, the Exchange 
relocated all equities trading conducted on the Exchange legacy trading 
systems and facilities located at 86 Trinity Place, New York, New York, 
to trading systems and facilities located at 11 Wall Street, New York, 
New York (the ``Equities Relocation''). The Exchange's equity trading 
systems and facilities at 11 Wall Street (the ``NYSE Alternext Trading 
Systems'') are operated by the NYSE on behalf of the Exchange.\7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex 2008-63) (approving 
the Equities Relocation).
---------------------------------------------------------------------------

    As part of the Equities Relocation, NYSE Alternext adopted NYSE 
Rules 1-1004, subject to such changes as necessary to apply the Rules 
to the Exchange, as the NYSE Alternext Equities Rules to govern trading 
on the NYSE Alternext Trading Systems.\8\ The NYSE Alternext Equities 
Rules, which became operative on December 1, 2008, are substantially 
identical to the current NYSE Rules 1-1004 and the Exchange continues 
to update the NYSE Alternext Equities Rules as necessary to conform 
with rule changes to corresponding NYSE Rules filed by the NYSE.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 58705 (October 1, 
2008), 73 FR 58995 (October 8, 2008) (SR-Amex 2008-63); Securities 
Exchange Act Release No. 58833 (October 22, 2008), 73 FR 64642 
(October 30, 2008) (SR-NYSE-2008-106); Securities Exchange Act 
Release No. 58839 (October 23, 2008), 73 FR 64645 (October 30, 2008) 
(SR-NYSEALTR-2008-03); Securities Exchange Act Release No. 59022 
(November 26, 2008), 73 FR 73683 (December 3, 2008) (SR-NYSEALTR-
2008-10); and Securities Exchange Act Release No. 59027 (November 
28, 2008), 73 FR 73681 (December 3, 2008) (SR-NYSEALTR-2008-11).
---------------------------------------------------------------------------

Current Rule 48--NYSE Alternext Equities
    Rule 48--NYSE Alternext Equities provides the Exchange with the 
ability to suspend certain rules at the close when extremely high 
market volatility could negatively affect the ability to ensure a fair 
and orderly close. This provision of Rule 48 is temporary and will end 
on March 27, 2009.\9\
---------------------------------------------------------------------------

    \9\ See Rule 48.10.
---------------------------------------------------------------------------

    Rule 48 now includes the close of trading as a time when a 
qualified Exchange officer would be permitted to declare an extreme 
market volatility condition. In such event, the Exchange could 
temporarily suspend Rules 52 (Hours of Operation) and 123C(1) and (2) 
(Market on the Close Policy and Expiration Policy), provided that 
certain requirements are met.
    To enable a qualified Exchange officer to declare a Rule 48 
condition at the close, Rule 48(c) includes that a qualified Exchange 
officer may consider the volatility during that day's trading session 
and evidence of significant order imbalances across the market at the 
close for purposes of determining whether to declare an extreme market 
volatility condition at the close. Under Rule 48, an extreme market 
volatility condition at the close is a separate event and must be 
considered in light of the facts and circumstances leading to the 
close. A Rule 48 condition at the open of trading does not extend to 
the close; a qualified Exchange officer needs to make an independent 
determination to invoke Rule 48 at the close regardless of whether Rule 
48 was invoked at the open. Such a Rule 48 condition at the close must 
be declared by a qualified Exchange officer before the scheduled close 
of trading.
    Once an extreme market volatility condition at the close has been 
declared Floor wide, under Rule 48(b)(2)(A), the Exchange may 
temporarily suspend Rule 52 on a security-by-security basis so that 
interest can be solicited and entered into Exchange systems to offset 
an imbalance in a security that may be present after the scheduled 
close of trading. During an extreme market volatility condition, 
interest may be solicited--including interest that may not have been 
present prior to 4 p.m.--to offset any imbalance that may exist as of 4 
p.m. (or earlier, in the case of an earlier scheduled close).\10\ If 
offsetting interest is received in response to such solicitation, 
rather than have the DMM represent such offsetting interest in the 
close pursuant to Rule 902, such interest could be entered by the DMM 
directly into Exchange systems on behalf of the member or member 
organization representing such interest. Because Exchange systems do 
not allow for the electronic entry of orders after 4 p.m., such 
interest must be represented manually by a Floor broker in the closing 
auction process and entered into Exchange systems by the DMM by no 
later than 4 p.m.\11\ The entry of any orders after 4 p.m. pursuant to 
the rule must be under the supervision and approval of a Floor 
Governor.\12\
---------------------------------------------------------------------------

    \10\ See Rule 48(b)(2)(A)(i).
    \11\ See Rule 48(b)(2)(A)(ii).
    \12\ See Rule 48(b)(2)(A)(iv).
---------------------------------------------------------------------------

    To ensure a complete audit trail, any offsetting interest entered 
after 4 p.m. during an extreme market volatility condition must also be 
entered into the Front End Systemic Capture database (``FESC''), as 
required by Rule 123--NYSE Alternext Equities. Because such interest 
may not have been known until after 4 p.m., under Rule 
48(b)(2)(A)(iii), a Floor broker may represent such offsetting interest 
after 4 p.m. without first entering the details of the order into FESC, 
as required by Rule 123, so long as such orders are entered into FESC 
on an ``as of'' basis immediately following execution of the order.
    During an extreme market volatility condition at the close, the 
Exchange also has the ability to temporarily suspend, on a security-by-
security basis, the Rule 123C(1) and (2) requirements that MOC and LOC 
orders that are legitimate errors cannot be cancelled or reduced after 
3:50 p.m. Under Rule 48(b)(2)(B), only an erroneous MOC or LOC that 
would cause significant closing price dislocation for a particular 
security could be considered for cancellation. In other words, an MOC 
or LOC order that is as a result of a legitimate error that would have 
no impact on the closing price could not take advantage of the proposed 
temporary suspension, even in an extreme market volatility condition. 
If it is determined that such an MOC/LOC legitimate error would 
significantly dislocate the close, such order can be cancelled or 
reduced at any time up until that particular security has closed. To 
further ensure that the ability to cancel an MOC or LOC order after 
3:50 is not abused, under Rule 48(b)(2)(B)(iii), such an order can be 
cancelled or reduced only with the supervision and approval of both an 
Executive Floor Governor and a

[[Page 10336]]

qualified Exchange officer. In the event an Executive Floor Governor is 
not available, a Floor Governor's approval must be obtained.
Proposed Amendments to Rule 123C--NYSE Alternext Equities
    The Exchange believes that the temporary provisions to Rule 48 
provide the Exchange with invaluable tools to ensure a fair and orderly 
close during extreme situations. However, the Exchange does not believe 
that a Floor-wide condition needs to be present in order to warrant the 
use of these tools. The Exchange therefore proposes to adopt the 
amendments to Rule 48 on a permanent basis by deleting those provisions 
from Rule 48 and moving them to Rule 123C--NYSE Alternext Equities. As 
part of the amendments to Rule 123C, the Exchange further proposes 
modifying the terms of the temporary suspensions by permitting the 
Exchange to invoke such relief on a security-by-security basis without 
first declaring a Floor-wide extreme market volatility condition and 
codifying certain practices for the entry of orders after 4 p.m.

A. Relocating Temporary Suspensions to Rule 123C

    As noted above, the Rule 48 extreme market volatility at the close 
conditions are temporary and will end on March 27, 2009. Under current 
Rule 48, the Exchange must first declare a Floor-wide extreme market 
volatility condition before it can consider, on a security-by-security 
basis, whether to temporarily suspend either Rule 52 or Rule 123C(1) or 
(2). Because the temporary suspensions are already granted on a 
security-by-security basis, the Exchange does not believe that going 
forward it needs to first declare a Floor-wide event in order to 
provide relief on an individual security basis. Indeed, the need for 
declaring a Floor-wide extreme market volatility condition before 4 
p.m. could hamper the ability of the Exchange to invoke the temporary 
suspensions when they are needed most.
    For example, during normal market conditions that would not 
otherwise warrant a Rule 48 condition at the close, Exchange systems 
may receive a large market order in a security at 3:59:59 p.m. Such a 
large order entered so near to the close could cause the type of 
extreme imbalance that would merit a temporary suspension of Rule 52, 
yet such relief would be unavailable because overall market conditions 
did not require a Rule 48 condition. The Exchange therefore believes 
that the ability to temporarily suspend rules at the close should be 
part of Rule 123C--NYSE Alternext Equities, which governs the closing 
process at the Exchange, and be available on a security-by-security 
basis, even after 4 p.m.\13\ The Exchange therefore proposes deleting 
the extreme market volatility at the close condition from Rule 48.
---------------------------------------------------------------------------

    \13\ See proposed Rule 123C(8)(c).
---------------------------------------------------------------------------

    In deleting the provisions of Rule 48 condition at the close and 
moving those temporary suspensions to Rule 123C, the Exchange proposes 
certain modifications to the application of the temporary suspensions. 
These modifications are designed to provide clarity of how this tool 
should be used. Namely, the ability to temporarily suspend Exchange 
rules at the close should be used sparingly and only in extreme 
situations.
    The Exchange therefore proposes to qualify that temporary 
suspensions under proposed Rule 123C(8) are intended to be used to 
prevent a closing price dislocation that may result from an order 
entered into Exchange systems, or represented to a DMM orally at or 
near the close, that may result in an extreme order imbalance at or 
near the close.\14\ In such case, as with Rule 48, the rules that may 
be suspended are Rule 52--NYSE Alternext Equities (Hours of Operation) 
and Rules 123C(1) and (2)--NYSE Alternext Equities (Market on the Close 
Policy and Expiration Policy).
---------------------------------------------------------------------------

    \14\ See proposed Rule 123C(8)(a).
---------------------------------------------------------------------------

B. Temporary Suspension of Rule 52--NYSE Alternext Equities

    As with Rule 48, the Exchange proposes to provide for the ability 
to temporarily suspend Rule 52 for the sole purpose of allowing the 
entry of orders after 4 p.m. to offset an extreme order imbalance at 
the close. As proposed, the process replaces the more cumbersome Rule 
902 process, whereby the DMM represents interest on behalf of a Floor 
broker in the close on a riskless basis and then enters a coupled order 
in Crossing Session I to liquidate the DMM position taken on behalf of 
the Floor broker.\15\
---------------------------------------------------------------------------

    \15\ See Rules 902(a)(ii)(B) and 903(d)(ii).
---------------------------------------------------------------------------

    With respect to the temporary suspension of Rule 52, the Exchange 
proposes to adopt without change the language of Rule 48(b)(2)(A)(i) 
and (iii) (proposed as Rule 123C(8)(a)(1)(i) and (v)). These provisions 
concern, respectively, the purpose of soliciting orders after 4 p.m. 
and the use of the FESC system on an ``as of'' basis following 
execution of an order.
    The Exchange proposes to codify as Rule 123C(8)(a)(1)(ii) that when 
soliciting orders to offset an imbalance in a security that may exist 
after 4 p.m., such interest will be solicited from off-Floor 
participants directly and via their Floor broker representatives.\16\ 
Such solicitation requests shall be transmitted electronically both 
off-Floor and on-Floor and shall include, at a minimum, information 
about the security symbol, the imbalance amount and side, the last sale 
price, and an order acceptance cut-off time.
---------------------------------------------------------------------------

    \16\ Interest is solicited from off-Floor participants via NYSE 
Trader Update Messages, which is an NYSE product with over 2,000 
subscribers that provides a wide range of up-to-the minute notices 
of particular interest to the professional trading community about 
both NYSE and NYSE Alternext Equities. NYSE Trader Updates provide 
messages both via email and on an RSS subscription basis.
---------------------------------------------------------------------------

    As proposed, the order acceptance cut-off time included in the 
solicitation request would be a time period designated by the Exchange. 
Because the goal is to close Exchange-listed securities as close to the 
closing bell as possible, such time period will generally be no longer 
than five minutes. As in Rule 48(b)(2)(A)(ii), 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 scheduled close). 
The Exchange includes this 4:30 p.m. time period as an outside limit 
and it is not intended to provide a 30-minute window within which to 
receive offsetting interest, or that the Exchange seeks to close 
securities at 4:30 p.m. Rather, as proposed, if a solicitation request 
is transmitted at 4:02 p.m., the Exchange generally would include an 
order acceptance cut-off time of five minutes, requiring all offsetting 
interest to be received by 4:07 p.m. so that the DMM can close the 
security on or about 4:07 p.m. In the rare circumstance that a 
solicitation request is not transmitted until 4:27 p.m., the order 
acceptance cut-off time would be 4:30 p.m., and not a five-minute 
period. The 4:30 p.m. end time is therefore included to ensure that 
this proposed temporary suspension of Rule 52 would not be used to 
extend the close indefinitely.
    The Exchange also proposes adding conditions on the type of order 
that may be entered in response to such a solicitation request. As 
proposed in Rule 123C(8)(a)(1)(iii), any offsetting interest received 
in response to a solicitation request must be a limit order priced no 
worse than the last sale and irrevocable. Therefore, if there is a buy 
imbalance, the offsetting interest must be sell orders priced no lower 
than the last sale price, or if there is a sell imbalance, the 
offsetting interest must be buy orders priced no higher than the

[[Page 10337]]

last sale price. The Exchange believes that these conditions are 
necessary to ensure that the offsetting interest received is simply 
that: interest that is intended to offset the existing imbalance to 
ensure that the closing price is not too far dislocated from the last 
sale. The Exchange does not believe that this process should be used to 
re-open the auction market or to permit the imbalance to swing in the 
opposite direction.
    The Exchange also proposes to add to the rule certain parameters 
regarding the timing of the closing of a security when such offsetting 
interest is solicited. As proposed in Rule 123C(8)(a)(1)(iv), in such 
circumstances, the DMM should close the security the earlier of the 
order acceptance cut-off time or if the imbalance is paired off at or 
reasonably contiguous to the last sale price. The Exchange believes 
that this provision will enable the DMM to arrange for a fair and 
orderly close that is as close to 4 p.m. as possible. For example, if 
the Exchange receives a limited response to the solicitation request, 
the DMM would have up to the order acceptance cut-off time for orders 
to be entered. If, however, the DMM receives sufficient interest before 
the order acceptance cut-off time to close the security either at the 
last sale price, or at a reasonably contiguous price to the last sale 
price, the DMM could close the security earlier. As proposed, a 
reasonably contiguous price refers to a price point that is within 
cents of the last sale price, and would be a price point that during a 
regular closing auction would not be considered a dislocating closing 
price as compared to the last sale price. As discussed in more detail 
below in subsection D, such closings would be subject to approval of 
either an Executive Floor Governor or qualified NYSE Euronext staff 
employee and supervision of a qualified Exchange Officer, as defined in 
Rule 48(d).
    The Exchange believes that the parameters on when to close the 
security are necessary to ensure that securities trading at the 
Exchange close as near to 4 p.m. as possible, notwithstanding the fact 
that the Exchange seeks additional offsetting interest after 4 p.m. In 
either case, the Exchange proposes that any offsetting interest entered 
after 4 p.m., but before the DMM closes the security, would trade on 
parity.\17\ As discussed in greater detail in the NYSE's proposal to 
adopt the Next Generation Market Model,\18\ under the Exchange's parity 
model, Exchange systems will divide the size of the executing order by 
the number of participants. The DMM and each Floor broker are each 
considered a single participant. A Floor broker that represents 
multiple orders gets parity for the aggregate of orders. With parity, 
the total number of shares to be allocated to each participant will be 
distributed equally among the participants where possible and 
executions will be allocated in round lots. In the event the number of 
shares to be executed at the price point is insufficient to allocate 
round lots to all the participants eligible to receive an execution at 
the price point, the Exchange systems will create an allocation wheel 
of the eligible participants at the price point and the available 
shares will be distributed to the participants in turn. If the DMM 
closes the security before the order acceptance cut-off time, any 
interest received before closing the security would trade on parity 
with other interest, including the DMM's interest at the close.
---------------------------------------------------------------------------

    \17\ The Exchange notes that all MOC and marketable LOC orders 
entered before 4:00 p.m. that otherwise would have participated in 
the close will continue to participate in the close. Because the 
MOC/LOC imbalance dictates the closing price (see Rule 123C(3)), any 
additional interest solicited after 4:00 p.m. under proposed Rule 
123C(8)(a)(1) is simply to ensure that the existing imbalance of MOC 
and marketable LOC orders can be filled at a price that does not 
cause a significant price dislocation from the last sale price.
    \18\ See SEC Release No. 58845 (Oct. 24, 2008), 73 FR 64379 
(Oct. 29, 2008) (SR-NYSE-2008-46).
---------------------------------------------------------------------------

    The Exchange also proposes to maintain, as in Rule 48(b)(2)(A)(ii), 
that any offsetting interest must be represented by a Floor broker. 
Exchange systems do not have the capability to receive electronic 
interest after 4 p.m. As with any technology, it would be possible to 
reconfigure Exchange systems to accept orders electronically after 4 
p.m. However, such technology changes would be costly and would divert 
resources away from other necessary technology changes that are already 
scheduled. Therefore, even if the Exchange could make such technology 
changes, they likely could not be implemented until mid to late 2009, 
and at great cost.
    The benefit, however, to implementing such a technology change 
would be limited. The temporary suspension of Rule 52 to attract 
offsetting interest is intended to be used for extreme, and likely rare 
circumstances where there exists such a large imbalance at the close 
that the DMM could not close the security without significantly 
dislocating the price of the security. The Exchange notes that this has 
been a period of historic market volatility; the Exchange therefore 
expects that in times of calmer markets, the relief requested would be 
used in even rarer circumstances.
    The Exchange further notes that requiring Floor brokers to 
represent such offsetting interest does not unfairly discriminate 
against any market participants. The requirement to use a Floor broker, 
who would be acting only as an agent, does not deny anyone access to 
trading at the Exchange. It simply requires an agent as intermediary. 
Indeed, during the inherently manual process of closing a security, 
using a Floor broker to represent offsetting interest will provide 
customers with the most up-to-date information about the closing 
process in such a scenario.
    Moreover, the imbalance that would warrant such a temporary 
suspension would likely be of such a size that the type of customers 
that would be able to meaningfully and timely respond to such a 
solicitation request are sophisticated market participants who likely 
already have, or could easily arrange for, a relationship with a Floor 
broker to represent orders on their behalf. Such sophisticated 
participants have the wherewithal to enter into arrangements with Floor 
brokers that are financially competitive with entering orders directly 
into Exchange systems, e.g., via reduced commissions or pass through of 
Floor broker rebates.
    The Exchange therefore believes that the time and cost that would 
be necessary to reconfigure Exchange systems to electronically accept 
orders after 4 p.m. for this limited purpose far outweighs any benefit 
that may accrue from such technology changes. In any event, the 
Exchange believes that more information is necessary before the 
Exchange undertakes to implement any such technology change. The 
Exchange therefore proposes that six months after the approval of this 
proposed rule change, the Exchange will provide the Commission with 
information regarding how many times a Rule 52 temporary suspension 
under proposed Rule 123C(8)(a)(1) has been invoked. At that time, both 
the Exchange and the Commission can make a more informed decision of 
whether the benefit in accepting orders electronically after 4 p.m. 
outweighs the costs associated with making such changes. To provide 
both the Exchange and the Commission with time to evaluate the proposed 
rule, the Exchange proposes that Rule 123C(8)(a)(1) be approved on a 
Pilot basis to end six months after the approval date of this filing.

[[Page 10338]]

C. Temporary Suspension of Rule 123C(1) and (2)

    The Exchange proposes to adopt permanently the provisions of Rule 
48(b)(2)(B) as proposed Rule 123C(8)(a)(2), without any change. 
Therefore, as with Rule 48, the Exchange would have the ability to 
temporarily suspend, on a security-by-security basis, the Rule 123C(1) 
and (2) requirements that MOC and LOC orders that are legitimate errors 
cannot be cancelled or reduced after 3:50 p.m. The same conditions that 
were adopted as part of Rule 48 would apply here as well, i.e. , that 
only an erroneous MOC or LOC that would cause significant closing price 
dislocation for a particular security could be considered for 
cancellation and that if it is determined that such an MOC/LOC 
legitimate error would dislocate the close, such order can be cancelled 
or reduced at any time up until that particular security has closed. As 
discussed below, the Exchange proposes to move Rule 48(b)(2)(B)(iii) to 
proposed Rule 123C(8)(b).

D. Parameters for Obtaining Temporary Rule Suspensions

    The Exchange further proposes codifying the practices concerning 
how a temporary suspension under proposed Rule 123C(8)(a) would be 
invoked and who should be involved. As proposed in Rule 123C(8)(b), 
only the DMM assigned to a particular security may request a temporary 
suspension under proposed section 8(a) of the Rule. The Exchange 
believes that because the DMM is responsible for facilitating the close 
of trading of securities registered to that DMM, including supplying 
liquidity if needed, the DMM is in the unique position to know whether 
he or she would need additional interest to ensure a fair or orderly 
close.
    To ensure that such temporary suspensions are not invoked 
indiscriminately, the Exchange further proposes that any such 
determination, as well as any entry or cancellation of orders or 
closing of a security under proposed Rule 123C(8)(a), must be approved 
by either an Executive Floor Governor or a qualified NYSE Euronext 
employee, as defined in Rule 46(b)(v)--NYSE Alternext Equities. The 
Exchange also proposes requiring that any temporary suspensions under 
proposed Rule 123C(8)(a) should be under the supervision of a qualified 
Exchange Officer, as defined in Rule 48(d).
    These requirements are identical to the requirement under Rule 
48(b)(2)(B)(iii), but more stringent than the current requirement under 
Rule 48(b)(2)(A)(iv), which requires only the supervision of a Floor 
Governor. The Exchange believes that these heightened approval and 
supervision requirements will ensure that, as contemplated by the 
proposed rule, only extreme situations such as when a late-arriving 
order would cause significant price dislocation at the close would 
result in a temporary suspension of Exchange rules at the close. To 
assist the DMM and officials, proposed Rule 123C(8)(b) identifies a 
number of factors that may be considered when making such a 
determination. Such factors include, but are not limited to, when the 
order(s) that impacted the imbalance were entered into Exchange systems 
or orally represented to the DMM, the impact of such order(s) on the 
closing price of the security, the volatility of the security during 
the trading session, and the ability of the DMM to commit capital to 
dampen the price dislocation.
Proposed Amendment to Rule 48(c)(2)--NYSE Alternext Equities
    In addition to the above-described amendments, the Exchange also 
proposes to amend Rule 48(c)(2), which concerns the method by which the 
Exchange notifies Commission staff when it declares a Rule 48 extreme 
market volatility condition.
    The current rule provides that the qualified Exchange officer will 
make a reasonable effort to consult with Commission staff before 
declaring an extreme market volatility condition and granting a 
suspension of the Exchange rules or procedures. In the event that the 
qualified Exchange officer cannot reach the Commission staff, the 
qualified Exchange officer will, as promptly as practicable in the 
circumstances, inform the Commission staff of such declaration.
    Given the limited relief that can be granted during a Rule 48 
condition--certain Floor Official approvals are suspended and mandatory 
indications can be suspended--the Exchange believes that the 
requirement to consult with Commission staff before declaring an 
extreme market volatility condition imposes an undue burden on 
regulatory resources. Accordingly, the Exchange proposes to amend Rule 
48(c)(2) to delete the requirement that the qualified Exchange officer 
undertake reasonable efforts to consult with Commission staff before 
declaring an extreme market volatility condition. As required by the 
rule, the Exchange will continue to inform the Commission staff, as 
promptly as practicable under the circumstances, when it has declared a 
Rule 48 extreme market volatility condition.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \19\ that an Exchange have rules that 
are designed 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. As noted above, the proposed rule is 
intended to be used in extreme circumstances when a large order 
imbalance or order entered in error could cause a closing price to be 
far dislocated from the last sale price. The rule is therefore intended 
to protect investors and the public interest to ensure that the closing 
price at the Exchange is not significantly dislocated from the last 
sale price by virtue of an extreme order imbalance at or near the 
close.
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    \19\ 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 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 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:

[[Page 10339]]

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to
     Please include File Number SR-NYSEALTR-2009-15 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-NYSEALTR-2009-15. 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 (https://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 such filing also will be available for 
inspection and copying at the principal offices 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-NYSEALTR-2009-15 and should 
be submitted on or before March 31, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-4963 Filed 3-9-09; 8:45 am]
BILLING CODE 8011-01-P

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