Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval to a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Amending NYSE Amex Equities Rule 70 in Order To Update d-Quote Functionality and Provide for e-Quotes To Peg to the National Best Bid or Offer, 64105-64107 [E9-28999]

Download as PDF Federal Register / Vol. 74, No. 233 / Monday, December 7, 2009 / Notices In addition, the changes proposed in Amendment No. 1, discussed in Part III • Send paper comments in triplicate above, seek to clarify the proposed to Elizabeth M. Murphy, Secretary, handling of d-Quotes with a filed price Securities and Exchange Commission, outside the BBO. The proposal as Station Place, 100 F Street, NE., modified by Amendment No. 1 does not Washington, DC 20549–1090. differ materially from the proposal as All submissions should refer to File described in the Notice and the Number SR–NYSE–2009–106. This file Commission believes the revision helps number should be included on the clarify the proposed operation of dsubject line if e-mail is used. To help the Quotes. Commission process and review your In light of the foregoing, the comments more efficiently, please use Commission finds good cause, only one method. The Commission will consistent with Section 19(b)(2) of the post all comments on the Commission’s Act,13 to approve the proposed rule Internet Web site (https://www.sec.gov/ change, as modified by Amendment No. rules/sro.shtml). Copies of the 1, on an accelerated basis. 12 all subsequent submission, VI. Conclusion amendments, all written statements with respect to the proposed rule It is therefore ordered, pursuant to change that are filed with the Section 19(b)(2) of the Act,14 that the Commission, and all written proposed rule change (SR–NYSE–2009– communications relating to the 106), as modified by Amendment No. 1, proposed rule change between the be, and hereby is, approved on an Commission and any person, other than accelerated basis. those that may be withheld from the For the Commission, by the Division of public in accordance with the Trading and Markets, pursuant to delegated provisions of 5 U.S.C. 552, will be authority.15 available for inspection and copying in Florence E. Harmon, the Commission’s Public Reference Deputy Secretary. Room, on official business days between [FR Doc. E9–28998 Filed 12–4–09; 8:45 am] the hours of 10 a.m. and 3 p.m. Copies BILLING CODE 8011–01–P of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments SECURITIES AND EXCHANGE received will be posted without change; COMMISSION the Commission does not edit personal [Release No. 34–61081; File No. SR– identifying information from NYSEAmex–2009–76] submissions. You should submit only information that you wish to make Self-Regulatory Organizations; NYSE available publicly. All submissions Amex LLC; Notice of Filing of should refer to File Number SR–NYSE– Amendment No. 1 and Order Granting 2009–106 and should be submitted on Accelerated Approval to a Proposed or before December 28, 2009. Rule Change, as Modified by V. Accelerated Approval of Proposed Amendment No. 1 Thereto, Amending Rule Change, as Modified by NYSE Amex Equities Rule 70 in Order Amendment No. 1 To Update d-Quote Functionality and Provide for e-Quotes To Peg to the The Commission also finds good National Best Bid or Offer cause to approve the proposed rule change, as modified by Amendment December 1, 2009. No. 1, prior to the thirtieth day after publication in the Federal Register. The I. Introduction Commission notes that no comments On October 26, 2009, NYSE Amex were received during the 21-day LLC (‘‘NYSE Amex’’ or the ‘‘Exchange’’), comment period allotted for the initial filed with the Securities and Exchange proposal. The Commission notes that Commission (‘‘Commission’’), pursuant the Exchange’s representation that the to Section 19(b)(1) of the Securities proposal seeks to replace functionality Exchange Act of 1934 (‘‘Act’’) 1 and Rule that was previously eliminated. In 19b–4 thereunder,2 a proposed rule addition, in this case, accelerated change to amend NYSE Amex Equities approval of the proposed rule change Rule 70 in order to update d-Quote will permit the Exchange to implement functionality and provide for e-Quotes systems changes related to the proposed 13 15 U.S.C. 78s(b)(2). rule change in a timely fashion. erowe on DSK5CLS3C1PROD with NOTICES Paper Comments 14 15 12 The text of the proposed rule change is available on the Commission’s Web site at https:// www.sec.gov. VerDate Nov<24>2008 14:05 Dec 04, 2009 Jkt 220001 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 15 17 PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 64105 to peg to the National best bid or offer. The proposed rule change was published for comment in the Federal Register on November 3, 2009.3 NYSE Amex filed Amendment No. 1 to the proposed rule change on November 19, 2009.4 The Commission received no comment letters on the proposed rule change. This notice and order provides notice of filing of Amendment No. 1 to the proposed rule change, and grants accelerated approval to the proposed rule change, as modified by Amendment No. 1. II. Description of the Proposed Rule, as Modified by Amendment No. 1 Background 5 NYSE Amex Equities Rule 70.25 governs the entry, validation, and execution of bids and offers represented electronically by a Floor broker on the Floor of the Exchange that include discretionary instructions as to size and/ or price.6 The discretionary instructions that a Floor broker may include with an e-Quote can relate to the price range within which the e-Quote may trade and the number of shares to which the discretionary price instruction applies. D–Quote functionality is available for both displayed and reserve interest. In particular, NYSE Amex Equities Rule 70.25(a) provides that d-Quotes are eligible for execution only when they are at or join the existing Exchange BBO, would establish a new Exchange BBO, or at the opening and closing transactions. Under current rules, dQuotes at or joining the Exchange BBO may be displayed or undisplayed interest. In addition, NYSE Amex Equities Rule 70.25(d)(ii) currently provides that, once it has been activated, a d-Quote will automatically execute against a contra-side order if the contra-side order’s price is within the discretionary pricing instructions and the contra-side order’s size meets any minimum or maximum size requirements that have been set for the d-Quote. NYSE Amex Equities Rule 70.26 provides for the entry, validation, and execution of an e-Quote that remains available for execution at the Exchange 3 See Securities Exchange Act Release No. 60887 (October 27, 2009), 74 FR 56899 (‘‘Notice’’). 4 The text of Amendment No. 1 is available on the Exchange’s Web site (https://www.nyse.com), at the Exchange, and at the Commission’s Public Reference Room. 5 The Notice contains additional discussion and examples regarding the current operation of dQuotes and e-Quotes. See supra note 3. 6 For purposes of these rules, floor broker agency interest files (that is, electronic bids or offers from the Floor) are referred to as ‘‘e-Quotes.’’ E-quotes that include discretionary instructions are referred to a ‘‘d-Quotes.’’ E:\FR\FM\07DEN1.SGM 07DEN1 64106 Federal Register / Vol. 74, No. 233 / Monday, December 7, 2009 / Notices BBO as the Exchange BBO moves. Floor brokers are able to designate a range of prices within which their e-Quotes and d-Quotes will peg and, as long as the Exchange BBO is within that range, the e-Quote and d-Quote will be included in the quote. erowe on DSK5CLS3C1PROD with NOTICES Proposed Amendments 7 D–Quotes Active When Their Filed Price Is Not at the Exchange BBO The Exchange proposes to amend NYSE Amex Equities Rule 70.25(a)(ii) to provide that d-Quotes would be active and available to execute whenever incoming interest satisfies the discretionary instructions, without regard to whether the d-Quote’s filed price is or becomes the Exchange BBO. The Exchange also proposes to add clarifying language to NYSE Amex Equities Rule 70.25(a)(i) to provide that d-Quotes that exercise discretion would be considered non-displayable interest for purposes of NYSE Amex Equities Rule 72, and to amend NYSE Amex Equities Rule 70.25(d)(i) (as proposed NYSE Amex Equities Rule 70.25(e)(i)) to provide that a d-Quote with discretionary pricing instructions above the best bid if a buy order or below the best offer if a sell order would seek to secure the largest execution for the dQuote using the least amount of price discretion to exercise at or above the bid if a buy order or at or below the offer if a sell order. The Exchange proposes to further clarify that a d-Quote with discretionary pricing instructions equal to or less than the best bid if a buy order or equal to or greater than the best offer if a sell order would extend to its maximum discretion. The Exchange states that the proposed d-Quote functionality would provide Floor brokers with functionality that is similar to functionality that was previously available to Floor brokers on the New York Stock Exchange, via CAP– DI orders, when the New York Stock Exchange operated in a manual auction.8 In addition, the Exchange notes that the proposed functionality would allow d-Quotes to interact with interest (such as fully dark reserve interest) that did not exist when dQuotes were first introduced, and which would otherwise be unable to easily interact with under the current rules. The Exchange believes that the d-Quote functionality proposed in this rule filing therefore would enable d-Quotes to trade with all willing contra-side 7 The Notice contains additional discussion and examples regarding the proposed operation of dQuotes and e-Quotes. See supra note 3. 8 The Notice contains a discussion regarding CAP–DI orders. See supra note 3. VerDate Nov<24>2008 14:05 Dec 04, 2009 Jkt 220001 liquidity, including reserve interest. In this way, the Exchange believes that the proposed changes will allow the brokers’ tools to keep pace with the ways in which trading on the Exchange has evolved. Minimum Trade Size (‘‘MTS’’) Instruction for d-Quotes The Exchange also proposes to add a new subsection to NYSE Amex Equities Rule 70.25 to provide that a Floor broker may include additional discretionary instructions with a d-Quote such that the d-Quote would only execute if the designated MTS is met. Currently, dQuotes may include instructions of a minimum size requirement that would trigger discretionary pricing, but such requirement would not guarantee a minimum execution size (e.g., if there is other interest on the same side as the dQuote that can trade with a contra-side order that meets the d-Quote’s minimum size requirement). As proposed, if the amount of an execution that would be allocated to a d-Quote is less than the MTS quantity, the d-Quote would not be eligible to participate in the execution and will not compete with other same-side interest from other Floor brokers. Additionally, MTS instructions would not be active at the open or close. NYSE Amex Equities Rule 70.25(a)(vi) provides that same-side d-Quotes from the same Floor broker do not compete with each other for executions allocated to that Floor broker, as they would if from different Floor brokers, when the d-Quote with the most aggressive price range executes first. The Exchange proposes to add new paragraph (d)(ii) to NYSE Amex Equities Rule 70.25 such that when a Floor broker designates an MTS for a d-Quote, such d-Quote may compete with other same-side d-Quotes from the same Floor broker by improving the price if necessary to satisfy its MTS. Pegging to the NBBO Currently, a pegging e-Quote or dQuote is activated at the Exchange BBO and, subject to its price range, moves when the Exchange BBO moves. Under current rules, pegging e-Quotes and dQuotes cannot be the sole interest at the Exchange BBO, but must peg to other non-pegging interest at the Exchange BBO. Accordingly, under current rules and functionality, pegging e-Quotes are unable to set the Exchange BBO. The Exchange proposes that pegging e-Quotes and d-Quotes would peg to the NBBO rather than the Exchange BBO. As a result, a pegging e-Quote or dQuote may set the Exchange BBO, even if there is no other displayed bid or offer PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 at the Exchange at that price. Accordingly, the Exchange proposes to amend NYSE Amex Equities Rule 70.26(vi) to provide that pegging eQuotes or d-Quotes may be entitled to priority pursuant to NYSE Amex Equities Rule 72 if such e-Quote or dQuote sets the Exchange BBO. Under the Exchange’s proposal and similar to its current rule, if the NBBO moves, the pegging e-Quote or d-Quote would move to follow the NBBO, provided that the NBBO is in the price range of the pegging e-Quote or d-Quote. In addition, a pegging e-Quote or d-Quote would never set the NBBO. III. Discussion and Commission’s Findings After careful review of the proposed rule change, as amended, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.9 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,10 which requires, among other things, that exchange rules be 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, protect investors and the public interest. The Exchange stated in its filing that it believes that the updates to Floor broker functionality meet such goals because they should ensure that customer orders eligible to trade will execute against willing contra-side liquidity. In particular, d-Quotes that are active outside the Exchange BBO provide Floor brokers with functionality to replace the now defunct CAP–DI functionality and permit d-Quotes to better participate in sweeps or to execute against reserve interest. The addition of the MTS instruction provides investors with the ability to ensure that an execution will not be fragmented and therefore should promote larger-sized executions. In addition, the Exchange stated in its filing that it believes that the proposed change to provide for e-Quotes and dQuotes to peg to the NBBO should ensure that investors’ orders will be executed in the best market because 9 In approving this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(5). E:\FR\FM\07DEN1.SGM 07DEN1 Federal Register / Vol. 74, No. 233 / Monday, December 7, 2009 / Notices more liquidity will be available at the NBBO. The Commission notes that the proposal to allow d-Quotes to be active when their filed price is inferior to the BBO should contribute to market depth by making the Floor brokers’ d-Quote liquidity available for execution in a greater number of situations. The proposal to permit minimum trade size instructions for d-Quotes should allow Floor brokers additional flexibility in the handling of their orders without adversely affecting the executions of other market participants, since Floor brokers would remain subject to the existing parity allocation rules.11 Finally, the proposal to peg d-Quotes to the NBBO rather than the BBO should contribute to market quality by providing additional liquidity at the NBBO, thus encouraging the tightening of spreads to the NBBO on the Exchange. For the foregoing reasons, the Commission finds the proposed rule change is consistent with the Act. 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, 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 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– NYSEAmex–2009–76 and should be submitted on or before December 28, 2009. IV. Solicitation of Comments V. Accelerated Approval of Proposed Rule Change, as modified by Amendment No. 1 erowe on DSK5CLS3C1PROD with NOTICES Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 1, including whether Amendment No. 1 is consistent with the Act. Comments may be submitted by any of the following methods: The Commission also finds good cause to approve the proposed rule change, as modified by Amendment No.1, prior to the thirtieth day after publication in the Federal Register. The Electronic Comments Commission notes that no comments were received during the 21-day • Use the Commission’s Internet comment period allotted for the initial comment form (https://www.sec.gov/ proposal. The Commission notes that rules/sro.shtml); or • Send an e-mail to rulethe Exchange’s representation that the comments@sec.gov. Please include File proposal seeks to replace functionality No. SR–NYSEAmex–2009–76 on the that was previously eliminated. In subject line. addition, in this case, accelerated approval of the proposed rule change Paper Comments will permit the Exchange to implement • Send paper comments in triplicate systems changes related to the proposed to Elizabeth M. Murphy, Secretary, rule change in a timely fashion. Securities and Exchange Commission, In addition, the changes proposed in Station Place, 100 F Street, NE., Amendment No. 1, discussed in Part III Washington, DC 20549–1090. above, seek to clarify the proposed All submissions should refer to File Number SR–NYSEAmex–2009–76. This handling of d-Quotes with a filed price outside the BBO. The proposal as file number should be included on the subject line if e-mail is used. To help the modified by Amendment No. 1 does not differ materially from the proposal as Commission process and review your described in the Notice and the comments more efficiently, please use only one method. The Commission will Commission believes the revision helps post all comments on the Commission’s clarify the proposed operation of dQuotes. Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the In light of the foregoing, the submission, 12 all subsequent Commission finds good cause, amendments, all written statements consistent with Section 19(b)(2) of the with respect to the proposed rule Act,13 to approve the proposed rule change, as modified by Amendment No. 11 See NYSE Amex Equities Rule 72. 1, on an accelerated basis. 12 The text of the proposed rule change is available on the Commission’s Web site at https:// www.sec.gov. VerDate Nov<24>2008 14:05 Dec 04, 2009 Jkt 220001 13 15 PO 00000 U.S.C. 78s(b)(2). Frm 00063 Fmt 4703 Sfmt 4703 64107 VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change (SR–NYSEAmex– 2009–76), as modified by Amendment No. 1, be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–28999 Filed 12–4–09; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61070; File No. SR– NASDAQ–2009–100] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify Pricing for NASDAQ’s Portal Reference Database November 30, 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 November 16, 2009, The NASDAQ Stock Market LLC (the ‘‘NASDAQ Exchange’’ or ‘‘NASDAQ’’) 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 NASDAQ Exchange. The NASDAQ Exchange has designated the proposed rule change as constituting a non-controversial rule change under Rule 19b–4(f)(6) under the Act,3 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 the Substance of the Proposed Rule Change The NASDAQ Exchange is proposing to modify and simplify pricing for NASDAQ’s Portal Reference Database. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are in brackets. * * * * * 14 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 240.19b-4(f)(6). 15 17 E:\FR\FM\07DEN1.SGM 07DEN1

Agencies

[Federal Register Volume 74, Number 233 (Monday, December 7, 2009)]
[Notices]
[Pages 64105-64107]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-28999]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61081; File No. SR-NYSEAmex-2009-76]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Amendment No. 1 and Order Granting Accelerated Approval to a Proposed 
Rule Change, as Modified by Amendment No. 1 Thereto, Amending NYSE Amex 
Equities Rule 70 in Order To Update d-Quote Functionality and Provide 
for e-Quotes To Peg to the National Best Bid or Offer

December 1, 2009.

I. Introduction

    On October 26, 2009, NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange''), filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Amex Equities Rule 70 in order to 
update d-Quote functionality and provide for e-Quotes to peg to the 
National best bid or offer. The proposed rule change was published for 
comment in the Federal Register on November 3, 2009.\3\ NYSE Amex filed 
Amendment No. 1 to the proposed rule change on November 19, 2009.\4\ 
The Commission received no comment letters on the proposed rule change. 
This notice and order provides notice of filing of Amendment No. 1 to 
the proposed rule change, and grants accelerated approval to the 
proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60887 (October 27, 
2009), 74 FR 56899 (``Notice'').
    \4\ The text of Amendment No. 1 is available on the Exchange's 
Web site (https://www.nyse.com), at the Exchange, and at the 
Commission's Public Reference Room.
---------------------------------------------------------------------------

II. Description of the Proposed Rule, as Modified by Amendment No. 1 
Background \5\
---------------------------------------------------------------------------

    \5\ The Notice contains additional discussion and examples 
regarding the current operation of d-Quotes and e-Quotes. See supra 
note 3.
---------------------------------------------------------------------------

    NYSE Amex Equities Rule 70.25 governs the entry, validation, and 
execution of bids and offers represented electronically by a Floor 
broker on the Floor of the Exchange that include discretionary 
instructions as to size and/or price.\6\ The discretionary instructions 
that a Floor broker may include with an e-Quote can relate to the price 
range within which the e-Quote may trade and the number of shares to 
which the discretionary price instruction applies. D-Quote 
functionality is available for both displayed and reserve interest.
---------------------------------------------------------------------------

    \6\ For purposes of these rules, floor broker agency interest 
files (that is, electronic bids or offers from the Floor) are 
referred to as ``e-Quotes.'' E-quotes that include discretionary 
instructions are referred to a ``d-Quotes.''
---------------------------------------------------------------------------

    In particular, NYSE Amex Equities Rule 70.25(a) provides that d-
Quotes are eligible for execution only when they are at or join the 
existing Exchange BBO, would establish a new Exchange BBO, or at the 
opening and closing transactions. Under current rules, d-Quotes at or 
joining the Exchange BBO may be displayed or undisplayed interest. In 
addition, NYSE Amex Equities Rule 70.25(d)(ii) currently provides that, 
once it has been activated, a d-Quote will automatically execute 
against a contra-side order if the contra-side order's price is within 
the discretionary pricing instructions and the contra-side order's size 
meets any minimum or maximum size requirements that have been set for 
the d-Quote.
    NYSE Amex Equities Rule 70.26 provides for the entry, validation, 
and execution of an e-Quote that remains available for execution at the 
Exchange

[[Page 64106]]

BBO as the Exchange BBO moves. Floor brokers are able to designate a 
range of prices within which their e-Quotes and d-Quotes will peg and, 
as long as the Exchange BBO is within that range, the e-Quote and d-
Quote will be included in the quote.

Proposed Amendments \7\
---------------------------------------------------------------------------

    \7\ The Notice contains additional discussion and examples 
regarding the proposed operation of d-Quotes and e-Quotes. See supra 
note 3.
---------------------------------------------------------------------------

D-Quotes Active When Their Filed Price Is Not at the Exchange BBO
    The Exchange proposes to amend NYSE Amex Equities Rule 70.25(a)(ii) 
to provide that d-Quotes would be active and available to execute 
whenever incoming interest satisfies the discretionary instructions, 
without regard to whether the d-Quote's filed price is or becomes the 
Exchange BBO.
    The Exchange also proposes to add clarifying language to NYSE Amex 
Equities Rule 70.25(a)(i) to provide that d-Quotes that exercise 
discretion would be considered non-displayable interest for purposes of 
NYSE Amex Equities Rule 72, and to amend NYSE Amex Equities Rule 
70.25(d)(i) (as proposed NYSE Amex Equities Rule 70.25(e)(i)) to 
provide that a d-Quote with discretionary pricing instructions above 
the best bid if a buy order or below the best offer if a sell order 
would seek to secure the largest execution for the d-Quote using the 
least amount of price discretion to exercise at or above the bid if a 
buy order or at or below the offer if a sell order. The Exchange 
proposes to further clarify that a d-Quote with discretionary pricing 
instructions equal to or less than the best bid if a buy order or equal 
to or greater than the best offer if a sell order would extend to its 
maximum discretion.
    The Exchange states that the proposed d-Quote functionality would 
provide Floor brokers with functionality that is similar to 
functionality that was previously available to Floor brokers on the New 
York Stock Exchange, via CAP-DI orders, when the New York Stock 
Exchange operated in a manual auction.\8\ In addition, the Exchange 
notes that the proposed functionality would allow d-Quotes to interact 
with interest (such as fully dark reserve interest) that did not exist 
when d-Quotes were first introduced, and which would otherwise be 
unable to easily interact with under the current rules. The Exchange 
believes that the d-Quote functionality proposed in this rule filing 
therefore would enable d-Quotes to trade with all willing contra-side 
liquidity, including reserve interest. In this way, the Exchange 
believes that the proposed changes will allow the brokers' tools to 
keep pace with the ways in which trading on the Exchange has evolved.
---------------------------------------------------------------------------

    \8\ The Notice contains a discussion regarding CAP-DI orders. 
See supra note 3.
---------------------------------------------------------------------------

Minimum Trade Size (``MTS'') Instruction for d-Quotes
    The Exchange also proposes to add a new subsection to NYSE Amex 
Equities Rule 70.25 to provide that a Floor broker may include 
additional discretionary instructions with a d-Quote such that the d-
Quote would only execute if the designated MTS is met. Currently, d-
Quotes may include instructions of a minimum size requirement that 
would trigger discretionary pricing, but such requirement would not 
guarantee a minimum execution size (e.g., if there is other interest on 
the same side as the d-Quote that can trade with a contra-side order 
that meets the d-Quote's minimum size requirement). As proposed, if the 
amount of an execution that would be allocated to a d-Quote is less 
than the MTS quantity, the d-Quote would not be eligible to participate 
in the execution and will not compete with other same-side interest 
from other Floor brokers. Additionally, MTS instructions would not be 
active at the open or close.
    NYSE Amex Equities Rule 70.25(a)(vi) provides that same-side d-
Quotes from the same Floor broker do not compete with each other for 
executions allocated to that Floor broker, as they would if from 
different Floor brokers, when the d-Quote with the most aggressive 
price range executes first. The Exchange proposes to add new paragraph 
(d)(ii) to NYSE Amex Equities Rule 70.25 such that when a Floor broker 
designates an MTS for a d-Quote, such d-Quote may compete with other 
same-side d-Quotes from the same Floor broker by improving the price if 
necessary to satisfy its MTS.
Pegging to the NBBO
    Currently, a pegging e-Quote or d-Quote is activated at the 
Exchange BBO and, subject to its price range, moves when the Exchange 
BBO moves. Under current rules, pegging e-Quotes and d-Quotes cannot be 
the sole interest at the Exchange BBO, but must peg to other non-
pegging interest at the Exchange BBO. Accordingly, under current rules 
and functionality, pegging e-Quotes are unable to set the Exchange BBO.
    The Exchange proposes that pegging e-Quotes and d-Quotes would peg 
to the NBBO rather than the Exchange BBO. As a result, a pegging e-
Quote or d-Quote may set the Exchange BBO, even if there is no other 
displayed bid or offer at the Exchange at that price. Accordingly, the 
Exchange proposes to amend NYSE Amex Equities Rule 70.26(vi) to provide 
that pegging e-Quotes or d-Quotes may be entitled to priority pursuant 
to NYSE Amex Equities Rule 72 if such e-Quote or d-Quote sets the 
Exchange BBO. Under the Exchange's proposal and similar to its current 
rule, if the NBBO moves, the pegging e-Quote or d-Quote would move to 
follow the NBBO, provided that the NBBO is in the price range of the 
pegging e-Quote or d-Quote. In addition, a pegging e-Quote or d-Quote 
would never set the NBBO.

III. Discussion and Commission's Findings

    After careful review of the proposed rule change, as amended, the 
Commission finds that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\9\ In particular, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\10\ which requires, among other things, 
that exchange rules be 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, protect investors 
and the public interest. The Exchange stated in its filing that it 
believes that the updates to Floor broker functionality meet such goals 
because they should ensure that customer orders eligible to trade will 
execute against willing contra-side liquidity. In particular, d-Quotes 
that are active outside the Exchange BBO provide Floor brokers with 
functionality to replace the now defunct CAP-DI functionality and 
permit d-Quotes to better participate in sweeps or to execute against 
reserve interest. The addition of the MTS instruction provides 
investors with the ability to ensure that an execution will not be 
fragmented and therefore should promote larger-sized executions. In 
addition, the Exchange stated in its filing that it believes that the 
proposed change to provide for e-Quotes and d-Quotes to peg to the NBBO 
should ensure that investors' orders will be executed in the best 
market because

[[Page 64107]]

more liquidity will be available at the NBBO.
---------------------------------------------------------------------------

    \9\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission notes that the proposal to allow d-Quotes to be 
active when their filed price is inferior to the BBO should contribute 
to market depth by making the Floor brokers' d-Quote liquidity 
available for execution in a greater number of situations. The proposal 
to permit minimum trade size instructions for d-Quotes should allow 
Floor brokers additional flexibility in the handling of their orders 
without adversely affecting the executions of other market 
participants, since Floor brokers would remain subject to the existing 
parity allocation rules.\11\ Finally, the proposal to peg d-Quotes to 
the NBBO rather than the BBO should contribute to market quality by 
providing additional liquidity at the NBBO, thus encouraging the 
tightening of spreads to the NBBO on the Exchange. For the foregoing 
reasons, the Commission finds the proposed rule change is consistent 
with the Act.
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    \11\ See NYSE Amex Equities Rule 72.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether Amendment No. 1 
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 No. SR-NYSEAmex-2009-76 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEAmex-2009-76. 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, \12\ 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, 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 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-NYSEAmex-2009-76 and should 
be submitted on or before December 28, 2009.
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    \12\ The text of the proposed rule change is available on the 
Commission's Web site at https://www.sec.gov.
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V. Accelerated Approval of Proposed Rule Change, as modified by 
Amendment No. 1

    The Commission also finds good cause to approve the proposed rule 
change, as modified by Amendment No.1, prior to the thirtieth day after 
publication in the Federal Register. The Commission notes that no 
comments were received during the 21-day comment period allotted for 
the initial proposal. The Commission notes that the Exchange's 
representation that the proposal seeks to replace functionality that 
was previously eliminated. In addition, in this case, accelerated 
approval of the proposed rule change will permit the Exchange to 
implement systems changes related to the proposed rule change in a 
timely fashion.
    In addition, the changes proposed in Amendment No. 1, discussed in 
Part III above, seek to clarify the proposed handling of d-Quotes with 
a filed price outside the BBO. The proposal as modified by Amendment 
No. 1 does not differ materially from the proposal as described in the 
Notice and the Commission believes the revision helps clarify the 
proposed operation of d-Quotes.
    In light of the foregoing, the Commission finds good cause, 
consistent with Section 19(b)(2) of the Act,\13\ to approve the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.
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    \13\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NYSEAmex-2009-76), as 
modified by Amendment No. 1, be, and hereby is, approved on an 
accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-28999 Filed 12-4-09; 8:45 am]
BILLING CODE 8011-01-P
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