Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending NYSE Rules 13, 902, 903, 904, 905 and Rule 906 To Eliminate Certain Order Types From the Off-Hours Trading Facility, 11800-11803 [E9-5931]

Download as PDF 11800 Federal Register / Vol. 74, No. 52 / Thursday, March 19, 2009 / Notices [FR Doc. E9–5978 Filed 3–18–09; 8:45 am] BILLING CODE SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59570; File No. SR–NYSE– 2009–28] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Amending NYSE Rules 13, 902, 903, 904, 905 and Rule 906 To Eliminate Certain Order Types From the Off-Hours Trading Facility March 12, 2009. 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 March 11, 2009, New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. NYSE filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. 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 Rules 13 (Definitions of Orders), 902 (Off-Hours Trading Orders), 903 (Off-Hours Transactions), 904 (Priority of Off-Hours Trading Orders), 905 (OffHours Trading Reports and Recordkeeping) and Rule 906 (Impact of Trading Halts on Off-Hours Trading) to eliminate certain order types from the off-hours trading facility. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https:// www.nyse.com. sroberts on PROD1PC70 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, the Exchange included statements concerning the purpose of, and basis for, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 2 17 VerDate Nov<24>2008 19:56 Mar 18, 2009 Jkt 217001 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 Through this filing, the Exchange seeks to amend NYSE Rules 902, 903, 904 and 906 to remove certain off-hours trading functions from the Exchange’s Crossing Session I. The Exchange is making this change in connection with certain technology upgrades it expects to begin rolling out on or about March 16, 2009. As explained more fully below, customers who previously relied on the trading functions in Crossing Session I that are being eliminated will be able to execute their off-hours trades through the NYSE MatchPoint® system. The Exchange will continue to accommodate certain types of off-hours trading (error offset trades and trades between a member and the DMM for the purpose of offsetting a market-on-close imbalance) in Crossing Session I. I. Background The Exchange initiated its Off-Hours Trading Facility in June 1991.5 In connection with its implementation, the Exchange adopted the ‘‘900’’ series of rules to govern trading, order eligibility, order entry and recordkeeping requirements. In one application of the Off-Hours Trading Facility, members and member organizations may enter orders to be executed at the NYSE closing price, that is, the price established by the last regular way sale in a security at the official closing of the 9:30 a.m. to 4 p.m. trading session (‘‘Crossing Session I’’). Orders may be entered for any Exchange-listed issue, other than a security that is subject to a trading halt at the close of the regular trading session 6 or is halted after 4 p.m. 5 See Securities Exchange Act Release No. 29237 (May 31, 1991), 56 FR 24853 (June 3, 1991) approving File Nos. SR–NYSE–90–52 and 90–53 which established the NYSE Off-Hours Trading Facility on a pilot basis. See also, Securities Exchange Act Release No. 33992 (May 2, 1994), 59 FR 23907 (May 9, 1994) approving the NYSE OffHours Trading Facility on a permanent basis. 6 This includes any market-wide trading halt instituted under Exchange Rule 80B (Trading Halts Due to Extraordinary Market Volatility). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 Crossing Session I normally runs from 4:15 p.m. to 5 p.m. on each trading day. Under Rule 902(a)(i) and (ii)(A) respectively, members may enter singlesided orders (i.e., either an order to buy or an order to sell) and coupled orders (i.e., both a buy and a sell order) into Crossing Session I. In addition, pursuant to Rule 902(b), the Exchange will migrate into Crossing Session I for possible execution any good-tilcancelled (‘‘GTC’’) orders that have been designated as eligible for execution in the Off-Hours Trading Facility.7 These types of orders entered into Crossing Session I are usually executed at the end of the Session, i.e., at 5 p.m. Rules 903 and 904 describe, in pertinent part, how orders that are entered into the off-hours trading facility establish priority, and the execution protocols for such orders. Specifically, Rule 903 provides that single-sided and migrated GTX orders are to be executed against opposite side single-sided and GTX orders in the OffHours trading Facility, while coupled orders are to be executed against the other side of the coupled order. Rule 904 provides that GTX orders retain the priority among themselves that existed when they were entered into Display Book®, while the priority of coupled orders will be determined based upon their sequence of entry into the OffHours Trading facility. Rule 905 requires that certain records be maintained by members and member organizations with respect to off-hours trading. Rule 906 outlines procedures under which Off-Hours Trading Facility orders in an NYSE-listed security may go unexecuted if such security was subject to a trading halt. II. Proposed Changes to Off-Hours Order Processing and Rule Amendments The Exchange is preparing to institute a number of technology changes to its systems that will foster more efficient and cost effective processing of orders it receives. As part of these changes, the Exchange is phasing out the SuperDOT® system and will replace it with a system referred to as Super Display Book (‘‘SDBK’’). Because the Off-Hours Trading Facility relies on the SuperDOT system for certain trade processing functions, the Exchange plans to eliminate the ability for single-sided, coupled orders and GTX to be entered or migrated into the off-hours trading facility known as 7 See NYSE Rule 13 (Definitions of Orders). GTC orders that have been designated as ‘‘Off-Hours Eligible’’ under this rule are referred to as ‘‘GTX orders.’’ E:\FR\FM\19MRN1.SGM 19MRN1 Federal Register / Vol. 74, No. 52 / Thursday, March 19, 2009 / Notices Crossing Session I, and to instead direct customers to use the NYSE’s MatchPoint system to effect those types of trades. Accordingly, the Exchange is proposing to amend Rules 902, 903, 905 and 906 and to rescind Rule 904 in its entirety to remove the provisions that relate to closing price single-sided, coupled and GTX orders. The Exchange also proposes to amend Rule 13 to remove provisions relating to GTX orders as these will no longer be supported by Exchange systems. 1. Proposed Amendments a. Rule 13 (Definitions of Orders) When the Exchange created its OffHours Trading Facility, it decided to provide a means for good-til-cancelled (GTC) orders to become automatically eligible for execution in this facility if the person or entity who had entered the GTC order so desired. This would then provide a possible source of liquidity to the Off-Hours Trading Facility, and could increase a GTC order’s chance of being executed since it could access additional liquidity that was entered into the Off-Hours Trading Facility that was not available during the Exchange’s regular trading session. At the same time, the Exchange provided that the GTC orders designated to migrate to the Off-Hours Trading Facility would return to the Display Book, and retain their original priority on Display Book, if not executed in the Off-Hours Trading Facility. This would provide a further incentive to migrate GTC orders since they would not lose their standing on the Display Book as a result of the migration. The language indicating that a goodtil-cancelled order may be designated as ‘‘Off-Hours eligible’’ and executed through the ‘‘Off-Hours Trading Facility’’ is proposed for deletion as this order type is being eliminated. The Exchange also proposes to add language to the definition of the good-tilcancelled order type to indicate that these orders are not eligible for execution in any Off-Hours Trading Facility of the Exchange. sroberts on PROD1PC70 with NOTICES b. Rule 902 (Off-Hours Trading Orders) The Exchange proposes to delete paragraph (a)(i) (Closing-Price Orders) and paragraph (a)(ii)(A) (Closing-Price Coupled Orders) in their entirety to eliminate these as order types eligible for entry and execution in the Off-Hours Trading Facility.8 Paragraph (b) 8 The Exchange is retaining the Aggregate-Price Coupled Order type, as defined in Rule 900 (OffHours Trading: Applicability and Definitions), paragraph (e)(i). This order type is specified for coupled buy and sell orders representing 15 or more VerDate Nov<24>2008 19:06 Mar 18, 2009 Jkt 217001 (Migration of Orders) is also proposed to be deleted to reflect the elimination of GTX, as that paragraph explains the migration of GTC orders from the regular hours trading session to the OffHours Trading Session. Paragraph (d) is proposed to be deleted since it explains that a migrated order (i.e., a GTX order) or a closing price order may be cancelled before execution. Paragraph (e) (Disposition of Unexecuted Orders) is proposed for deletion as it relates to migration of unexecuted GTX orders back to the Display Book if they are not executed in the Off-Hours Trading Facility, and to the fact that unexecuted closing-price orders expire if unexecuted in the Off-Hours trading Facility. References to closing-price orders and paragraphs (a)(ii) and (b) are proposed for deletion in paragraph (g) (Odd-Lots and Partial Round Lots). c. Rule 903 (Off-Hours Transactions) Paragraph (a) (Priority of Single-Sided Orders) is proposed for deletion as it relates solely to this order type, which is being eliminated. In paragraphs (b) (Priority of Coupled Orders) and (c) (Binding Nature), references to closingprice, paragraph (a)(ii) of Rule 902 and paragraph (a) of Rule 903 are proposed for deletion as they will no longer be valid references. References to singlesided and coupled closing-price orders in (d) (Executions of Orders) are also proposed for deletion. d. Rule 904 (Priority of Off-Hours Trading Orders) The Exchange proposes to delete this rule entirely. Rule 904 (Priority of OffHours Trading Orders) relates to the priority of GTX among themselves as existed when these orders were on the Display Book, and the priority of closing-price orders entered into the Off-Hours Trading Facility. e. Rule 905 (Off-Hours Trading Reports and Recordkeeping) A reference to closing price and migrated orders is proposed for deletion in paragraph (b) (Off-Hours Trading Records) of this rule. f. Rule 906 (Impact of Trading Halts on Off-Hours Trading) Paragraph (a) (Security Halts Prior to Off-Hours Trading) is proposed to be deleted in its entirety as it relates to closing-price and migrated orders, which are both being eliminated. Paragraph (b) (Corporate Developments during Off-Hours Trading Session) of the rule establishes the Exchange’s securities having a total market value of $1 million or more. These orders are entered and executed in Crossing Session II. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 11801 ability to halt trading in a security during the time it is open for Off-Hours Trading as a result of a corporate development. The Exchange proposes to delete subparagraphs (i), (ii) and (iii), which relate to closing-price and migrated GTC orders since they are being eliminated. The provision in the rule relating the permissibility of entry or the exemption from cancellation for closing price orders entered by Designated Market Makers (‘‘DMMs’’) in stocks that would otherwise be cancelled or prohibited from entry as a result of corporate developments to offset all or part of a market-on-close imbalance that existed in a stock prior to the close of the Exchange’s regular trading session is being retained.9 In these instances, the DMM and the member organization taking the other side have already agreed to trade in the stock at the closing price and this agreement is not affected by the ensuing corporate development. The Exchange is therefore proposing to add the phrase ‘‘as a result of corporate developments during the Off-Hours Trading Session’’ to paragraph (b) to complete the last sentence of the paragraph. 2. Availability of MatchPoint for OffHours Trading In the Exchange’s view these changes will not significantly affect the experience of customers who would have previously submitted orders to Crossing Session I for execution since similar functionality exists in the MatchPoint system. MatchPoint is an NYSE electronic equity-trading facility that matches aggregated orders at predetermined fixed times with prices that are derived from primary markets. There are seven matching sessions at fixed times throughout the trading day, and, of particular relevance to this filing, an after-hours matching session at 4:45 p.m. Orders in MatchPoint are executed at a single trading price (known as the ‘‘reference price’’) that, for the 4:45 match is equal to the NYSE official closing price for NYSE-listed securities and the official closing price of the primary market for all non-NYSE-listed securities.10 Customers who previously executed single-sided and coupled trades through Crossing Session I at the NYSE’s official closing price can submit single-sided and coupled orders for execution through MatchPoint. 9 These types of orders are entered pursuant to Rule 902(a)(ii)(B). 10 See, generally, NYSE Rule 1500 (NYSE MatchPointSM) and Securities Exchange Act Release No. 57058 (December 28, 2007), 73 FR 903 (January 4, 2008) approving adoption of that rule. E:\FR\FM\19MRN1.SGM 19MRN1 11802 Federal Register / Vol. 74, No. 52 / Thursday, March 19, 2009 / Notices It should be noted that certain other order types allowed under Rule 902 will not be affected by the proposed changes, although after the phase-out, the Exchange will process these trades on a different system instead of through SuperDOT. In particular, Rule 902(a)(ii)(C) permits a coupled order to be submitted in Crossing Session I to address situations where a member or member organization wishes to close out an error at the closing price on the Exchange, and the Designated Market Maker has agreed to take the other side of the error trade. NYSE Rule 902(a)(ii)(B) permits entry of coupled orders when one side of such coupled order is for the account of a specialist member organization entered in those instances in which the coupled order reflects contra side interest to offset an imbalance of market-on-close orders 11 that existed at the regular 4 p.m. close. The Exchange is not deleting these provisions from its rules, and member organizations will continue to be able to execute these trades in the same manner that they do today. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,12 in general, and furthers the objectives of Section 6(b)(5) of the Act,13 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes the proposed rule change will facilitate the timely and efficient execution of securities on the Exchange by eliminating the use of an under-utilized order types and thus ultimately serve to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition sroberts on PROD1PC70 with NOTICES 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. 11 A ‘‘market-on-close order is a market’’ order which is to be executed in its entirety at the closing price, on the Exchange, of the stock named in the order, and if not so executed, is to be treated as cancelled. See NYSE Rule 13. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(5). VerDate Nov<24>2008 17:17 Mar 18, 2009 Jkt 217001 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 Because the foregoing proposed rule change: (1) Does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) 14 of the Act and subparagraph (f)(6) of Rule 19b–4 15 thereunder. A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requests that the Commission waive the 30-day operative delay so that the Exchange can implement a number of technology changes to its system related to off-hours trading immediately. The Exchange states that the proposed rule change does not significantly affect the protection of investors or the public interest and does not impose any significant burden on competition. NYSE believes that the proposed rule change is non-controversial in that it serves to allow the Exchange to merely eliminate duplicate functions with respect to entry of off-hours orders. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.16 Because customers who previously relied on trading functions in Crossing 14 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 16 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 15 17 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 Session I will be able to execute their off-hours trades through the NYSE MatchPoint® system, the elimination of such functionality within the Exchange’s system does not appear to present any novel or significant regulatory issues or impose any significant burden on competition. For these reasons, the Commission designates the proposed rule change as operative upon filing. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rule-comments@sec.gov. Please include File Number SR–NYSE–2009–28 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR-NYSE–2009–28. 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, E:\FR\FM\19MRN1.SGM 19MRN1 Federal Register / Vol. 74, No. 52 / Thursday, March 19, 2009 / Notices 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 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–2009–28 and should be submitted on or before April 9, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–5931 Filed 3–18–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59575; File No. SR– NYSEALTR–2009–24] Self-Regulatory Organizations; NYSE Alternext U.S. LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Certificate of Formation, Amended and Restated Operating Agreement, Rules, and Company Guide To Change the Name of the Exchange to NYSE Amex LLC sroberts on PROD1PC70 with NOTICES March 13, 2009. 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 March 3, 2009, NYSE Alternext U.S. LLC (‘‘NYSEALTR’’ or the ‘‘Exchange’’) 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 NYSEALTR. The Exchange has designated this proposal as one concerned solely with the administration of the Exchange pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(3) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 17 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(3). 1 15 VerDate Nov<24>2008 17:17 Mar 18, 2009 Jkt 217001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Certificate of Formation, Amended and Restated Operating Agreement, Rules, and Company Guide to change the name of the Exchange to NYSE Amex LLC. The text of the proposed rule change is available at NYSE Alternext, the Commission’s Public Reference Room, and https://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, NYSEALTR 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. NYSEALTR 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 proposed rule change is to change the name of the Exchange to ‘‘NYSE Amex LLC.’’ At the time of the acquisition of the American Stock Exchange LLC (‘‘Amex’’) by NYSE Euronext on October 1, 2008, the name of the Exchange, as the successor entity to Amex, was initially established as ‘‘NYSE Alternext U.S. LLC.’’ After further analysis following the acquisition, the Exchange has determined that for branding purposes it would be desirable to retain some reference to the historic Amex exchange in the name of the Exchange. Specifically, the Certificate of Formation of the Exchange shall be amended to remove all references to ‘‘NYSE Alternext U.S. LLC’’ and replace them with ‘‘NYSE Amex LLC.’’ The Amended and Restated Operating Agreement of NYSE Alternext U.S. LLC shall again be amended and restated to become the Amended and Restated Operating Agreement of NYSE Amex LLC, with the word ‘‘Company’’ to be redefined to represent ‘‘NYSE Amex LLC’’ and ARTICLE I, Section 1.01 to be revised to state the name of the limited liability company as ‘‘NYSE Amex LLC.’’ In the Exchange’s Rules and its Company Guide, all references to ‘‘Alternext’’ or ‘‘Alternext US’’ will be PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 11803 replaced with the word ‘‘Amex.’’ None of the foregoing changes are substantive. Two minor non-substantive corrections to the lettering format in one rule will also be made. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) 5 of the Securities Exchange Act of 1934 (the ‘‘Act’’), in general, and furthers the objectives of Section 6(b)(5) 6 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. More specifically, changing the name of the Exchange to include a reference to the historic Amex exchange may help eliminate potential confusion among investors and assist in clarifying for them the role of the Exchange in the marketplace and the types of companies whose securities are listed here. 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 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 Because the foregoing proposed rule change is concerned solely with the administration of the Exchange, it has become effective pursuant to Section 19(b)(3)(A) of the Act 7 and subparagraph (f)(3) of Rule 19b–4 thereunder.8 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public 5 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 7 15 U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b–4(f)(3). 6 15 E:\FR\FM\19MRN1.SGM 19MRN1

Agencies

[Federal Register Volume 74, Number 52 (Thursday, March 19, 2009)]
[Notices]
[Pages 11800-11803]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-5931]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59570; File No. SR-NYSE-2009-28]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Amending NYSE Rules 13, 902, 903, 904, 905 and Rule 906 To Eliminate 
Certain Order Types From the Off-Hours Trading Facility

March 12, 2009.
    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 March 11, 2009, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. NYSE filed 
the proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rules 13 (Definitions of 
Orders), 902 (Off-Hours Trading Orders), 903 (Off-Hours Transactions), 
904 (Priority of Off-Hours Trading Orders), 905 (Off-Hours Trading 
Reports and Recordkeeping) and Rule 906 (Impact of Trading Halts on 
Off-Hours Trading) to eliminate certain order types from the off-hours 
trading facility. The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and https://
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 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
    Through this filing, the Exchange seeks to amend NYSE Rules 902, 
903, 904 and 906 to remove certain off-hours trading functions from the 
Exchange's Crossing Session I. The Exchange is making this change in 
connection with certain technology upgrades it expects to begin rolling 
out on or about March 16, 2009.
    As explained more fully below, customers who previously relied on 
the trading functions in Crossing Session I that are being eliminated 
will be able to execute their off-hours trades through the NYSE 
MatchPoint[supreg] system. The Exchange will continue to accommodate 
certain types of off-hours trading (error offset trades and trades 
between a member and the DMM for the purpose of offsetting a market-on-
close imbalance) in Crossing Session I.
I. Background
    The Exchange initiated its Off-Hours Trading Facility in June 
1991.\5\ In connection with its implementation, the Exchange adopted 
the ``900'' series of rules to govern trading, order eligibility, order 
entry and recordkeeping requirements.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 29237 (May 31, 
1991), 56 FR 24853 (June 3, 1991) approving File Nos. SR-NYSE-90-52 
and 90-53 which established the NYSE Off-Hours Trading Facility on a 
pilot basis. See also, Securities Exchange Act Release No. 33992 
(May 2, 1994), 59 FR 23907 (May 9, 1994) approving the NYSE Off-
Hours Trading Facility on a permanent basis.
---------------------------------------------------------------------------

    In one application of the Off-Hours Trading Facility, members and 
member organizations may enter orders to be executed at the NYSE 
closing price, that is, the price established by the last regular way 
sale in a security at the official closing of the 9:30 a.m. to 4 p.m. 
trading session (``Crossing Session I''). Orders may be entered for any 
Exchange-listed issue, other than a security that is subject to a 
trading halt at the close of the regular trading session \6\ or is 
halted after 4 p.m. Crossing Session I normally runs from 4:15 p.m. to 
5 p.m. on each trading day.
---------------------------------------------------------------------------

    \6\ This includes any market-wide trading halt instituted under 
Exchange Rule 80B (Trading Halts Due to Extraordinary Market 
Volatility).
---------------------------------------------------------------------------

    Under Rule 902(a)(i) and (ii)(A) respectively, members may enter 
single-sided orders (i.e., either an order to buy or an order to sell) 
and coupled orders (i.e., both a buy and a sell order) into Crossing 
Session I. In addition, pursuant to Rule 902(b), the Exchange will 
migrate into Crossing Session I for possible execution any good-til-
cancelled (``GTC'') orders that have been designated as eligible for 
execution in the Off-Hours Trading Facility.\7\ These types of orders 
entered into Crossing Session I are usually executed at the end of the 
Session, i.e., at 5 p.m.
---------------------------------------------------------------------------

    \7\ See NYSE Rule 13 (Definitions of Orders). GTC orders that 
have been designated as ``Off-Hours Eligible'' under this rule are 
referred to as ``GTX orders.''
---------------------------------------------------------------------------

    Rules 903 and 904 describe, in pertinent part, how orders that are 
entered into the off-hours trading facility establish priority, and the 
execution protocols for such orders. Specifically, Rule 903 provides 
that single-sided and migrated GTX orders are to be executed against 
opposite side single-sided and GTX orders in the Off-Hours trading 
Facility, while coupled orders are to be executed against the other 
side of the coupled order. Rule 904 provides that GTX orders retain the 
priority among themselves that existed when they were entered into 
Display Book[supreg], while the priority of coupled orders will be 
determined based upon their sequence of entry into the Off-Hours 
Trading facility.
    Rule 905 requires that certain records be maintained by members and 
member organizations with respect to off-hours trading.
    Rule 906 outlines procedures under which Off-Hours Trading Facility 
orders in an NYSE-listed security may go unexecuted if such security 
was subject to a trading halt.
II. Proposed Changes to Off-Hours Order Processing and Rule Amendments
    The Exchange is preparing to institute a number of technology 
changes to its systems that will foster more efficient and cost 
effective processing of orders it receives. As part of these changes, 
the Exchange is phasing out the SuperDOT[supreg] system and will 
replace it with a system referred to as Super Display Book (``SDBK'').
    Because the Off-Hours Trading Facility relies on the SuperDOT 
system for certain trade processing functions, the Exchange plans to 
eliminate the ability for single-sided, coupled orders and GTX to be 
entered or migrated into the off-hours trading facility known as

[[Page 11801]]

Crossing Session I, and to instead direct customers to use the NYSE's 
MatchPoint system to effect those types of trades. Accordingly, the 
Exchange is proposing to amend Rules 902, 903, 905 and 906 and to 
rescind Rule 904 in its entirety to remove the provisions that relate 
to closing price single-sided, coupled and GTX orders. The Exchange 
also proposes to amend Rule 13 to remove provisions relating to GTX 
orders as these will no longer be supported by Exchange systems.
1. Proposed Amendments
a. Rule 13 (Definitions of Orders)
    When the Exchange created its Off-Hours Trading Facility, it 
decided to provide a means for good-til-cancelled (GTC) orders to 
become automatically eligible for execution in this facility if the 
person or entity who had entered the GTC order so desired. This would 
then provide a possible source of liquidity to the Off-Hours Trading 
Facility, and could increase a GTC order's chance of being executed 
since it could access additional liquidity that was entered into the 
Off-Hours Trading Facility that was not available during the Exchange's 
regular trading session. At the same time, the Exchange provided that 
the GTC orders designated to migrate to the Off-Hours Trading Facility 
would return to the Display Book, and retain their original priority on 
Display Book, if not executed in the Off-Hours Trading Facility. This 
would provide a further incentive to migrate GTC orders since they 
would not lose their standing on the Display Book as a result of the 
migration.
    The language indicating that a good-til-cancelled order may be 
designated as ``Off-Hours eligible'' and executed through the ``Off-
Hours Trading Facility'' is proposed for deletion as this order type is 
being eliminated. The Exchange also proposes to add language to the 
definition of the good-til-cancelled order type to indicate that these 
orders are not eligible for execution in any Off-Hours Trading Facility 
of the Exchange.
b. Rule 902 (Off-Hours Trading Orders)
    The Exchange proposes to delete paragraph (a)(i) (Closing-Price 
Orders) and paragraph (a)(ii)(A) (Closing-Price Coupled Orders) in 
their entirety to eliminate these as order types eligible for entry and 
execution in the Off-Hours Trading Facility.\8\ Paragraph (b) 
(Migration of Orders) is also proposed to be deleted to reflect the 
elimination of GTX, as that paragraph explains the migration of GTC 
orders from the regular hours trading session to the Off-Hours Trading 
Session. Paragraph (d) is proposed to be deleted since it explains that 
a migrated order (i.e., a GTX order) or a closing price order may be 
cancelled before execution. Paragraph (e) (Disposition of Unexecuted 
Orders) is proposed for deletion as it relates to migration of 
unexecuted GTX orders back to the Display Book if they are not executed 
in the Off-Hours Trading Facility, and to the fact that unexecuted 
closing-price orders expire if unexecuted in the Off-Hours trading 
Facility. References to closing-price orders and paragraphs (a)(ii) and 
(b) are proposed for deletion in paragraph (g) (Odd-Lots and Partial 
Round Lots).
---------------------------------------------------------------------------

    \8\ The Exchange is retaining the Aggregate-Price Coupled Order 
type, as defined in Rule 900 (Off-Hours Trading: Applicability and 
Definitions), paragraph (e)(i). This order type is specified for 
coupled buy and sell orders representing 15 or more securities 
having a total market value of $1 million or more. These orders are 
entered and executed in Crossing Session II.
---------------------------------------------------------------------------

c. Rule 903 (Off-Hours Transactions)
    Paragraph (a) (Priority of Single-Sided Orders) is proposed for 
deletion as it relates solely to this order type, which is being 
eliminated. In paragraphs (b) (Priority of Coupled Orders) and (c) 
(Binding Nature), references to closing-price, paragraph (a)(ii) of 
Rule 902 and paragraph (a) of Rule 903 are proposed for deletion as 
they will no longer be valid references. References to single-sided and 
coupled closing-price orders in (d) (Executions of Orders) are also 
proposed for deletion.
d. Rule 904 (Priority of Off-Hours Trading Orders)
    The Exchange proposes to delete this rule entirely. Rule 904 
(Priority of Off-Hours Trading Orders) relates to the priority of GTX 
among themselves as existed when these orders were on the Display Book, 
and the priority of closing-price orders entered into the Off-Hours 
Trading Facility.
e. Rule 905 (Off-Hours Trading Reports and Recordkeeping)
    A reference to closing price and migrated orders is proposed for 
deletion in paragraph (b) (Off-Hours Trading Records) of this rule.
f. Rule 906 (Impact of Trading Halts on Off-Hours Trading)
    Paragraph (a) (Security Halts Prior to Off-Hours Trading) is 
proposed to be deleted in its entirety as it relates to closing-price 
and migrated orders, which are both being eliminated. Paragraph (b) 
(Corporate Developments during Off-Hours Trading Session) of the rule 
establishes the Exchange's ability to halt trading in a security during 
the time it is open for Off-Hours Trading as a result of a corporate 
development. The Exchange proposes to delete subparagraphs (i), (ii) 
and (iii), which relate to closing-price and migrated GTC orders since 
they are being eliminated. The provision in the rule relating the 
permissibility of entry or the exemption from cancellation for closing 
price orders entered by Designated Market Makers (``DMMs'') in stocks 
that would otherwise be cancelled or prohibited from entry as a result 
of corporate developments to offset all or part of a market-on-close 
imbalance that existed in a stock prior to the close of the Exchange's 
regular trading session is being retained.\9\ In these instances, the 
DMM and the member organization taking the other side have already 
agreed to trade in the stock at the closing price and this agreement is 
not affected by the ensuing corporate development. The Exchange is 
therefore proposing to add the phrase ``as a result of corporate 
developments during the Off-Hours Trading Session'' to paragraph (b) to 
complete the last sentence of the paragraph.
---------------------------------------------------------------------------

    \9\ These types of orders are entered pursuant to Rule 
902(a)(ii)(B).
---------------------------------------------------------------------------

2. Availability of MatchPoint for Off-Hours Trading
    In the Exchange's view these changes will not significantly affect 
the experience of customers who would have previously submitted orders 
to Crossing Session I for execution since similar functionality exists 
in the MatchPoint system. MatchPoint is an NYSE electronic equity-
trading facility that matches aggregated orders at predetermined fixed 
times with prices that are derived from primary markets. There are 
seven matching sessions at fixed times throughout the trading day, and, 
of particular relevance to this filing, an after-hours matching session 
at 4:45 p.m.
    Orders in MatchPoint are executed at a single trading price (known 
as the ``reference price'') that, for the 4:45 match is equal to the 
NYSE official closing price for NYSE-listed securities and the official 
closing price of the primary market for all non-NYSE-listed 
securities.\10\ Customers who previously executed single-sided and 
coupled trades through Crossing Session I at the NYSE's official 
closing price can submit single-sided and coupled orders for execution 
through MatchPoint.
---------------------------------------------------------------------------

    \10\ See, generally, NYSE Rule 1500 (NYSE MatchPoint\SM\) and 
Securities Exchange Act Release No. 57058 (December 28, 2007), 73 FR 
903 (January 4, 2008) approving adoption of that rule.

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[[Page 11802]]

    It should be noted that certain other order types allowed under 
Rule 902 will not be affected by the proposed changes, although after 
the phase-out, the Exchange will process these trades on a different 
system instead of through SuperDOT. In particular, Rule 902(a)(ii)(C) 
permits a coupled order to be submitted in Crossing Session I to 
address situations where a member or member organization wishes to 
close out an error at the closing price on the Exchange, and the 
Designated Market Maker has agreed to take the other side of the error 
trade. NYSE Rule 902(a)(ii)(B) permits entry of coupled orders when one 
side of such coupled order is for the account of a specialist member 
organization entered in those instances in which the coupled order 
reflects contra side interest to offset an imbalance of market-on-close 
orders \11\ that existed at the regular 4 p.m. close. The Exchange is 
not deleting these provisions from its rules, and member organizations 
will continue to be able to execute these trades in the same manner 
that they do today.
---------------------------------------------------------------------------

    \11\ A ``market-on-close order is a market'' order which is to 
be executed in its entirety at the closing price, on the Exchange, 
of the stock named in the order, and if not so executed, is to be 
treated as cancelled. See NYSE Rule 13.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\12\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\13\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest. The 
Exchange believes the proposed rule change will facilitate the timely 
and efficient execution of securities on the Exchange by eliminating 
the use of an under-utilized order types and thus ultimately serve to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b).
    \13\ 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

    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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) \14\ of the Act and subparagraph (f)(6) of Rule 
19b-4 \15\ thereunder.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the Exchange can implement a number 
of technology changes to its system related to off-hours trading 
immediately. The Exchange states that the proposed rule change does not 
significantly affect the protection of investors or the public interest 
and does not impose any significant burden on competition. NYSE 
believes that the proposed rule change is non-controversial in that it 
serves to allow the Exchange to merely eliminate duplicate functions 
with respect to entry of off-hours orders.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\16\ Because customers who previously relied on trading 
functions in Crossing Session I will be able to execute their off-hours 
trades through the NYSE MatchPoint[supreg] system, the elimination of 
such functionality within the Exchange's system does not appear to 
present any novel or significant regulatory issues or impose any 
significant burden on competition. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
---------------------------------------------------------------------------

    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2009-28 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2009-28. 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,

[[Page 11803]]

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 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-2009-28 and 
should be submitted on or before April 9, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-5931 Filed 3-18-09; 8:45 am]
BILLING CODE 8011-01-P
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