Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NYSE Amex LLC Adopting New Rule 107B-NYSE Amex Equities To Establish a New Class of NYSE Amex Equities Market Participants Referred to as “Supplemental Liquidity Providers” or “SLPs”, 2573-2578 [2010-637]
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Federal Register / Vol. 75, No. 10 / Friday, January 15, 2010 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEAmex–2010–01 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.
jlentini on DSKJ8SOYB1PROD with NOTICES
All submissions should refer to File
Number SR–NYSEAmex–2010–01. This
file number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal 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 publicly available. All
submissions should refer to File
Number SR–NYSEAmex–2010–01 and
should be submitted on or before
February 5, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–638 Filed 1–14–10; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–61308; File No. SR–
NYSEAmex-2009–98]
January 7, 2010.
Proposed Rule 107B—NYSE Amex
Equities is based on NYSE Rule 107B.
The New York Stock Exchange LLC
(‘‘NYSE’’) adopted NYSE Rule 107B
governing SLPs as a six-month pilot
program commencing in November
2008, which was subsequently extended
to March 30, 2010.4
Proposed Rule 107B—NYSE Amex
Equities tracks NYSE Rule 107B in its
entirety, subject to such changes as are
necessary to apply the Rule to the
Exchange.5 In addition, the Exchange
proposes to adopt Rule 107B—NYSE
Amex Equities as a pilot program
commencing on the date the Rule is
filed with the Commission and
continuing until March 30, 2010, the
date NYSE’s SLP pilot program expires.
The Exchange will extend the duration
of its SLP pilot program as needed to
track the NYSE’s SLP pilot program and
will file for permanent approval at the
same time as the NYSE.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on December
30, 2009, NYSE Amex LLC (the
‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt new
Rule 107B—NYSE Amex Equities
(‘‘Supplemental Liquidity Providers’’) to
establish, as a pilot program, a new class
of NYSE Amex Equities market
participants referred to as
‘‘Supplemental Liquidity Providers’’ or
‘‘SLPs’’. 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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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1. Purpose
The purpose of the proposed rule
change is to adopt new Rule 107B—
NYSE Amex Equities (‘‘Supplemental
Liquidity Providers’’) to establish, as a
pilot program, a new class of NYSE
Amex Equities market participants
referred to as ‘‘Supplemental Liquidity
Providers’’ or ‘‘SLPs’’.
1 15
CFR 200.30–3(a)(12).
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NYSE
Amex LLC Adopting New Rule 107B—
NYSE Amex Equities To Establish a
New Class of NYSE Amex Equities
Market Participants Referred to as
‘‘Supplemental Liquidity Providers’’ or
‘‘SLPs’’
BILLING CODE 8011–01–P
7 17
2573
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Background
Proposed Rule 107B—NYSE Amex
Equities
With this rule filing, the Exchange is
proposing a pilot program to establish a
new class of market participants:
Supplemental Liquidity Providers
(‘‘SLP’’). SLPs will supplement the
liquidity provided by Designated Market
4 See Securities Exchange Act Release Nos. 58877
(October 29, 2008), 73 FR 65904 (November 5, 2008)
(SR–NYSE–2008–108) (adopting SLP pilot
program); 59869 (May 6, 2009), 74 FR 22796 (May
14, 2009) (SR–NYSE–2009–46) (extending SLP pilot
program until October 1, 2009); 60756 (October 1,
2009), 74 FR 51628 (October 7, 2009) (SR–NYSE–
2009–100) (extending SLP pilot program until
November 30, 2009) and SR–NYSE–2009–119
(extending SLP pilot program until March 30,
2010).
5 Notably, the Exchange proposes to change the
descriptions of the ‘‘SLP Liaison Committee’’ and
the ‘‘SLP Panel’’ contained in parts (d)(1) and (j)(2)
of the Rule, as well as the procedures for
withdrawal in part (e), to match the proper
corporate relationship between the various
constituents described therein. The Exchange’s SLP
program would also include both listed and
‘‘traded’’ securities, i.e., securities admitted to
trading on the Exchange pursuant to a grant of
unlisted trading privileges (‘‘UTP’’) (see part (g)(1)
of the Rule).
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Makers (‘‘DMMs’’). SLPs may only enter
orders electronically from off the Floor
of the Exchange and may only enter
such orders directly into Exchange
systems and facilities designated for this
purpose. All SLP orders must only be
for the proprietary account of the SLP
member organization. Thus, an SLP will
not handle orders from public
customers or otherwise act on an agency
basis. They will have a 5% average
quoting requirement per assigned
security. Additionally, if an SLP posts
displayed or non-displayed liquidity in
its assigned securities that results in an
execution, the Exchange will pay the
SLP a financial rebate.
By establishing this new class of
market participant, the Exchange is
seeking to provide incentives for
quoting and to add competition to the
existing group of liquidity providers. By
requiring SLPs to quote at the NBB or
the NBO a percentage of the regular
trading day in their assigned securities,
and by paying a rebate when the SLP’s
interest results in an execution, the
Exchange is rewarding aggressive
liquidity providers in the market. The
Exchange believes that this rebate
program will encourage the additional
utilization of, and interaction with, the
Exchange’s marketplace and provide
customers with the premier venue for
price discovery, liquidity, competitive
quotes and price improvement.
Responsibilities of the Supplemental
Liquidity Provider
SLP’s 5% Average Quoting Requirement
An SLP is required to maintain a bid
or an offer at the NBB or NBO (e.g., the
‘‘inside’’) averaging at least 5% of the
trading day for each assigned security in
round lots in order to maintain its status
as an SLP. If an SLP fails to meet the
quoting requirement for three
consecutive months, the Exchange may
revoke the SLP status pursuant to
Section (i)(1)(C)(iii) of the proposed
Rule.
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SLP’s 3% Average or More Quoting
Requirement for Rebate Purposes
If an SLP posts liquidity in its
assigned securities that results in an
execution, the Exchange will pay the
SLP a financial rebate of $0.0020 per
share priced at or above $1.00, and
$0.0005 per share priced below $1.00,
provided the SLP meets its monthly
quoting requirement for rebates
averaging at least 3% at the NBB or the
NBO in its assigned securities in round
lots (see Section (i) (‘‘Non-Regulatory
Penalties’’) and Section (f) (‘‘Calculation
of Quoting Requirements’’) of the
proposed Rule). Meeting the 3% average
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17:34 Jan 14, 2010
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quoting requirement for rebates does not
satisfy the 5% average quoting
requirement which SLPs must meet in
order to remain in the SLP program. The
rebate calculation is described in more
detail below.
A member organization that acts as an
SLP is not permitted to act as a DMM
on the Floor of the Exchange in the
same security. Thus, a member
organization that acts as a DMM on the
Floor may not also act as an SLP in
those securities registered to the DMM
unit.
Like all other member organizations
of the Exchange, an SLP must abide by
Exchange and SEC rules and regulations
and must deal in a manner consistent
with just and equitable principles of
trade. SLPs are subject to regulatory
oversight by the Exchange and FINRA.
Assigned Securities
During the proposed SLP pilot
program, the SLP Liaison Committee, as
defined in Section (d)(1) of the proposed
Rule, will initially assign a cross section
of Exchange-listed and/or traded
securities to each SLP. The SLP Liaison
Committee will determine which
securities will be assigned to an SLP
and the number of securities assigned to
each SLP. The Exchange’s SLP program
will include both listed and traded
securities, as it is in the process of
submitting a separate filing to permit it
to trade Nasdaq-listed securities on a
UTP basis. See, e.g., NYSE Amex Trader
Notice, dated September 8, 2009.
The Exchange believes that the SLP
pilot program will provide the Exchange
with a unique opportunity to monitor
the success of the SLP incentives by
starting with a cross section of
securities. By doing so, the Exchange
will be better equipped to address actual
and potential administrative and
operational problems without
unnecessary risk to the Exchange and to
its customers. The SLP pilot program
will also provide the Exchange with the
opportunity to identify and address any
such problems and make beneficial
changes to the SLP program.
In addition to its usefulness to the
Exchange, the SLP pilot program will
provide the SLPs with essential
practical experience with the new
program and enable the SLPs to become
proficient in the SLP role before
expanding the assigned securities to
include all Exchange-listed or traded
securities.
The SLP Liaison Committee, in its
discretion, will assign one or more SLPs
to each security depending upon the
trading activity of the security. The SLP
Liaison Committee will likely assign a
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greater number of SLPs to more actively
traded securities.
Qualifications of the Supplemental
Liquidity Provider
A member organization of the
Exchange must have the following
qualifications in order to obtain SLP
status:
(1) Adequate technology to support
electronic trading through the related
systems and facilities of the Exchange
and report qualifying trading activity to
Exchange systems utilizing unique and
separate mnemonics specifically
dedicated to SLP trading activity;
(2) Adequate trading infrastructure to
support SLP trading activity, which
includes support staff to maintain
operational efficiencies in the SLP
program and adequate administrative
staff to manage the member
organization’s SLP program;
(3) Quoting performance that
demonstrates an ability to meet the 5%
quoting requirement in each assigned
security;
(4) A disciplinary history that is
consistent with just and equitable
business practices; and
(5) The business unit of the member
organization acting as an SLP must have
in place adequate information barriers
between the SLP unit and the member
organization’s customer, research and
investment banking business.
Adequate Technology for Trading and
Reporting: Because the SLP will only be
permitted to trade electronically from
off the Floor of the Exchange, a member
organization’s off-Floor technology must
be fully automated to accommodate the
Exchange’s trading and reporting
systems that are relevant to operating as
an SLP. If a member organization is
unable to support the relevant electronic
trading and reporting systems of the
Exchange for SLP trading activity, it will
not qualify as an SLP.
Adequate Trading Infrastructure:
Upon applying for status as an SLP, a
member organization must have
adequate trading infrastructure, which
includes support staff to maintain
operational efficiencies in the SLP
program and adequate administrative
staff to manage the member
organization’s SLP program.
Quoting Performance: Upon applying
for SLP status, a member organization’s
ability to meet the 5% quoting
requirement may be demonstrated by
past and/or current trading activity. If
an applicant has not demonstrated an
ability to meet the 5% quoting
requirement to the satisfaction of the
SLP Liaison Committee, the applicant
may not qualify as an SLP.
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Disciplinary History: Upon applying
for SLP status, a member organization’s
disciplinary history must reflect
conduct that is consistent with just and
equitable business practices.
Information Barriers: The business
unit of the SLP that submits orders on
behalf of the member organization must
have in place adequate information
barriers between the SLP unit and the
member organization’s customer,
research and investment banking
business.
jlentini on DSKJ8SOYB1PROD with NOTICES
SLP Application Process
To become an SLP, a member
organization must submit an SLP
application form with all supporting
documentation to the SLP Liaison
Committee. The SLP Liaison Committee
will determine whether an applicant is
qualified to become an SLP based on the
qualifications described in Section (c) of
the proposed Rule (‘‘Qualifications of a
Supplemental Liquidity Provider’’). The
qualifications focus on the adequacy of
the applicant’s trading and reporting
technology and trading infrastructure.
The applicant’s disciplinary history will
be considered as well.
After submission of the SLP
application form and supporting
documentation, the SLP Liaison
Committee will notify the applicant
member organization of its decision. If
an applicant is approved by the SLP
Liaison Committee to receive SLP
status, the applicant must establish
connectivity with relevant Exchange
systems and facilities.
The processing of all applications
may be suspended when the SLP
Liaison Committee has determined that
there is a sufficient number of SLPs
assigned to each eligible security in the
SLP program (see Section (g)(2) of the
proposed Rule).
If an applicant is disapproved or
‘‘disqualified,’’ pursuant to Section (i)(2)
of the proposed Rule, by the SLP
Liaison Committee, such applicant may
request an appeal of such disapproval or
disqualification by the SLP Panel as
provided in Section (j) (‘‘Appeal of NonRegulatory Penalties’’) of this Rule,
and/or reapply for SLP status three (3)
months after the month in which the
applicant received disapproval or
disqualification notice from the
Exchange (see Section (d)(6) of the
proposed Rule).
Voluntary Withdrawal of SLP Status
An SLP may withdraw from the status
of an SLP at any time by giving notice
to the SLP Liaison Committee, the
Market Surveillance Division of NYSE
Regulation, Inc. and NYSE Euronext
employees of the Operations Division
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17:34 Jan 14, 2010
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(see Section (e) (‘‘Voluntary Withdrawal
of Supplemental Liquidity Provider
Status’’ of the proposed Rule). However,
withdrawal of SLP status will not
become effective until the withdrawing
SLP’s assigned securities are reassigned
to other SLPs. After the notice of
withdrawal is received by the SLP
Liaison Committee, the Market
Surveillance Division and the
Operations Division, the SLP Liaison
Committee will reassign said securities
as soon as practicable but no later than
30 days of the date said notice is
received by the SLP Liaison Committee,
the Market Surveillance Division and
the Operations Division. In the event the
reassignment of securities takes longer
than the 30-day period, the withdrawing
SLP will have no obligations under this
Rule 107B–NYSE Amex Equities and
will not be held responsible for any
matters concerning its previously
assigned SLP securities upon
termination of this 30-day period.
Quoting Requirements of the
Supplemental Liquidity Provider
In order to maintain SLP status, an
SLP is required to maintain a bid or an
offer at the NBB or NBO on the
Exchange averaging at least 5% of the
trading day in round lots for each
assigned security.6 While the SLP may
provide displayed and non-displayed
liquidity (e.g., reserve and dark orders),
the 5% average quoting requirement can
only be satisfied when an SLP posts
displayed liquidity in its assigned
securities in round lots at the NBB or
the NBO. Thus, non-displayed liquidity
will not be counted as credit towards
the 5% quoting requirement.
Additionally, tick sensitive orders (i.e.,
‘‘Sell Plus,’’ ‘‘Buy Minus’’ (see Rule 13)
and ‘‘Buy Minus Zero Plus’’) will not be
counted as credit towards the 5%
quoting requirement.
In order for an SLP to be entitled to
a rebate, an SLP must post liquidity on
the Exchange that executes against
incoming orders and meet the monthly
minimum quoting requirement
averaging at least 3% at the NBB or the
NBO in round lots in its assigned
securities (see Section (b) (‘‘Financial
Rebates for Executed Transactions’’) in
the proposed Rule). If the SLP does not
meet a minimum monthly quoting
requirement averaging at least 3%, an
SLP will not be entitled to a rebate on
executed volume in that given month in
that particular affected security (see
Section (i) (‘‘non-Regulatory Penalties’’)
of the proposed Rule).
The SLP is not subject to any
minimum or maximum quoting size
6 See
PO 00000
Exhibit 5, Section (a) of the proposed Rule.
Frm 00101
Fmt 4703
Sfmt 4703
2575
requirement apart from the requirement
that an order be for at least one round
lot (see Section (f)(2) of the proposed
Rule).
An SLP must use its SLP mnemonic
when trading as an SLP in its assigned
securities in order to obtain credit for
their SLP trading activity (see Section
(f)(2) of the proposed Rule). Quoting and
rebate credit will be measured only by
using the SLP’s unique mnemonics
specifically designated for SLP trading
activity.
Calculation of the Quoting
Requirements
The SLP’s quoting requirements will
not be in effect in the first month the
SLP operates as an SLP. The Exchange
will provide the SLP with a one-month
grace period to allow preparation time
for the SLP. Therefore, this quoting
requirement will not take effect until the
second month of an SLP’s operation as
an SLP.
Beginning with the second month an
SLP is operating as an SLP, an SLP must
satisfy the 5% quoting requirement for
each assigned security.7 The SLP
Liaison Committee will determine
whether an SLP has met its quoting
requirement for the trading days 8 in a
calendar month by calculating the
following:
(1) The ‘‘Daily NBB Quoting
Percentage’’ by determining the
percentage of time an SLP has at least
one round lot of displayed interest in an
Exchange bid at the NBB during each
trading day for a calendar month;
(2) The ‘‘Daily NBO Quoting
Percentage’’ by determining the
percentage of time an SLP has at least
one round lot of displayed interest in an
Exchange offer at the NBO during each
trading day for a calendar month;
(3) The ‘‘Average Daily NBBO Quoting
Percentage’’ for each trading day by
summing the ‘‘Daily NBB Quoting
Percentage’’ and the ‘‘Daily NBO
Quoting Percentage’’ in each assigned
security then dividing such sum by two;
and
(4) The ‘‘Monthly Average NBBO
Quoting Percentage’’ for each assigned
security by summing the security’s
‘‘Average Daily NBBO Quoting
7 NYSE Euronext’s Strategic Analysis Department
will be responsible for generating SLP performance
data and providing such data to the SLP Liaison
Committee in order to determine which SLPs are
meeting their quoting requirements and are eligible
for financial rebates.
8 For purposes of Section (f)(1) of the proposed
rule text (Exhibit 5), ‘‘trading day’’ shall mean any
day on which the Exchange is scheduled to be open
for business. Days on which the Exchange closes
prior to 4 p.m. (Eastern Time) for any reason, which
may include any regulatory halt or trading halt,
shall be considered a trading day.
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Percentages’’ for each trading day in a
calendar month then dividing the
resulting sum by the total number of
trading days in such calendar month.
Trading days
NBB
Example of Quoting Requirement
Calculation
Below is an example of a quoting
requirement calculation. For purposes
of this example, it is assumed that SLP
No. 1 has two assigned securities, A and
B, and that there were 5 trading days in
the selected calendar month.
The ‘‘Average Daily NBBO Quoting
Percentage’’ for SLP No. 1 is calculated
for each security by summing the daily
NBB and NBO of each security for that
day and dividing that number by two:
Calculation of ‘‘Average Daily NBBO Quoting Percentage’’ for SLP No. 1
NBO
‘‘Average Daily
NBBO Quoting
Percentage’’
Security A
T1
T2
T3
T4
T5
.................
.................
.................
.................
.................
4%
3%
4%
6%
5%
6%
5%
4%
8%
5%
4%
3%
4%
6%
5%
+
+
+
+
+
6%
5%
4%
8%
5%
=
=
=
=
=
10% divided by 2 = 5% .................................................................
8% divided by 2 = 4% ...................................................................
8% divided by 2 = 4% ...................................................................
14% divided by 2 = 7% .................................................................
10% divided by 2 = 5% .................................................................
5%
4%
4%
7%
5%
Security B
T1
T2
T3
T4
T5
.................
.................
.................
.................
.................
5%
4%
6%
7%
9%
7%
6%
8%
9%
9%
The ‘‘Monthly Average NBBO Quoting
Percentage’’ for each security is then
calculated by summing the security’s
5%
4%
6%
7%
9%
+
+
+
+
+
7%
6%
8%
9%
9%
=
=
=
=
=
12%
10%
14%
16%
18%
divided
divided
divided
divided
divided
by
by
by
by
by
2
2
2
2
2
=
=
=
=
=
6%
5%
7%
8%
9%
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
‘‘Average Daily NBBO Quoting
Percentages’’ for all five trading days of
the calendar month and then dividing
the resulting total by the number of
trading days in the calendar month (in
this instance 5).
‘‘Average Daily NBBO Quoting Percentage’’
Calculation of ‘‘Monthly Average NBBO Quoting Percentage’’ for SLP No. 1
T1
T2
T3
T4
6%
5%
7%
8%
9%
T5
‘‘Monthly
Average
NBBO
Quoting
Percentage’’
Security A
5%
4%
4%
7%
5%
5% + 4% + 4% + 7% + 5% = 25% divided by 5 = 5% .......................................
5%
Security B
6%
5%
7%
8%
9%
jlentini on DSKJ8SOYB1PROD with NOTICES
Financial Rebates for Executed
Transactions
When an SLP posts liquidity,
displayed or non-displayed, on the
Exchange in its SLP assigned securities
and such liquidity is executed against
an incoming order, the SLP will receive
a financial rebate for that executed
transaction provided the SLP has met it
rebate quoting requirement averaging at
least 3% at the NBB or the NBO in each
assigned security pursuant to Section
(i)(1)(A) and (B) (‘‘Non-Regulatory
Penalties’’). An SLP will only receive a
rebate when it has met the monthly 3%
or better quoting requirement in its
assigned securities and the SLP’s posted
displayed or non-displayed liquidity
results in an execution.
SLP Rebate Calculation
The SLP rebate will be $0.0020 per
share priced at or above $1.00, and
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6% + 5% + 7% + 8% + 9% = 35% divided by 5 = 7% .......................................
$0.0005 per share priced below $1.00,
for executions when the SLP provides
liquidity.9 The rebate will be paid for
displayed and non-displayed orders
provided that the SLP meets the quoting
requirement averaging 3% or more at
the NBB or NBO in its assigned
securities for a given month. If an SLP
does not meet the average quoting
requirement described above, such SLP
will not be entitled to a rebate. As
discussed previously, if an SLP does not
meet its quoting requirement averaging
5% at the NBB or the NBO for each
assigned security for 3 consecutive
months, such SLP may be disqualified
from SLP status. The Exchange will
9 The Exchange will file a separate fee filing with
the SEC pursuant to the provisions of Section 19b–
4 that will outline the SLP rebate program described
above. The calculation and amount of the SLP
rebate will be published in the NYSE Amex
Equities Price List, available on the Exchange’s Web
site.
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7%
track the volume and quoting
requirement of SLPs by their designated
SLP mnemonics.
Except for the rebate, all other SLP
fees are the same as existing customer
fees on the Exchange (see the NYSE
Amex Equities Price List on the
Exchange Web site).
SLP Parity With Other Market
Participants Pursuant to Rule 72—NYSE
Amex Equities
Exchange systems are responsible for
share allocation and create interest files
for each market participant. Individual
Floor brokers and the DMM registered
in a security each constitute single
participants. All off-Floor orders entered
in Exchange systems at the Exchange
BBO together constitute a single
participant (‘‘Book Participant’’) for the
purpose of share allocation. SLP orders
will be in the ‘‘Book Participant’’
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category pursuant to Rule 72—NYSE
Amex Equities.
Market Data and Trading Information
Available to the SLP
The universe of trading information
and market data available to the SLP
will include market data published by
the Exchange and all other automated
trading centers (as defined in Rule 600
of Regulation NMS), trading information
published on the Consolidated Tape and
on the NYSE Amex OpenBook®.10 Thus,
the SLP will have the same published
trading information and market data
that all other Exchange customers have
available to them.
Non-Regulatory Penalties
If an SLP fails to meet the 5% quoting
requirement for any assigned security,
the SLP may be subject to nonregulatory penalties imposed by the SLP
Liaison Committee (see Section (i) of the
proposed Rule). Such non-regulatory
penalties include: (1) Denial of the
financial rebate; (2) removal of one or
more assigned securities from the SLP;
and (3) disqualification. These nonregulatory penalties and the conditions
under which such penalties are imposed
may be appealed by an SLP as provided
in Section (j) (‘‘Appeal of a NonRegulatory Penalty’’) of the proposed
Rule and described in more detail
below.
Penalties for Quoting Less Than 5% in
a Given Calendar Month
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In a given calendar month, if an SLP
maintains a quote at the NBB or NBO
averaging 3% of the trading day, but less
than the average of 5% of the trading
day in any assigned security, the SLP
will receive a financial rebate for that
calendar month for executed
transactions in that particular security
as described in Section (b) (‘‘Rebates for
Executed Transactions’’) of the proposed
Rule. Failure to meet the 5% quoting
requirement for each assigned security
in that month will be counted towards
the three-month disqualification period
provided in paragraph (i)(C) of the
proposed Rule.
In a given calendar month, if an SLP
maintains a quote at the NBB or the
NBO averaging less than 3% of the
regular trading day in an assigned
security, the SLP will not receive the
financial rebate for that month for
10 The NYSE Amex OpenBook® is provided by
the Exchange to vendors and customers in two
modes. The first displays the depth of the market
refreshed every five seconds. The second displays
the depth of the market in real time. NYSE Amex
OpenBook® discloses limit order interest at the
price at the best bid and offer and at prices below
the best bid and above the best offer.
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17:34 Jan 14, 2010
Jkt 220001
2577
transactions executed in that particular
assigned security. The failure to meet
the 5% quoting requirement for any
assigned security in that month will also
be counted towards the three-month
disqualification period.
If an SLP fails to meet the 5% quoting
requirement for three consecutive
calendar months in any assigned
security, the SLP Liaison Committee
may, in its discretion, take the following
non-regulatory action:
(1) Revoke the assignment of the
affected security(ies);
(2) Revoke the assignment of an
additional, unaffected security from an
SLP; or
(3) Disqualify a member
organization’s status as an SLP.
designee of the CRO, and two (2)
officers of the Exchange designated by
the NYSE Euronext Head of the U.S.
Markets Division.
The SLP Panel will review the facts of
the subject non-regulatory penalty and
render a decision as to the correctness
of the decision to impose the penalty.
The SLP Panel may overturn or modify
an action taken by the SLP Liaison
Committee, and all determinations by
the SLP Panel will constitute final
action by the Exchange on the disputed
matter.
Disqualification Determinations
In the second calendar month that an
SLP fails to meet the 5% quoting
requirement, the SLP Liaison Committee
will notify the SLP in writing that the
SLP may be disqualified if it fails to
meet the quoting requirement the third
consecutive month.11 If the SLP fails to
meet the 5% quoting requirement for a
third consecutive month, the SLP may
be disqualified from SLP status.
When disqualification determinations
are made, the SLP Liaison Committee
will provide a disqualification notice to
the member organization informing the
member organization of its
disqualification as an SLP.
If a member organization is
disqualified from its status as an SLP
pursuant to Section (i)(1)(C)(iii) of the
proposed Rule, the member organization
may appeal the disqualification
pursuant to Section (j) (‘‘Appeal of a
Non-Regulatory Penalties’’) of the
proposed Rule, or re-apply for SLP
status in accordance with Section (d)(6)
(‘‘Re-application for SLP Status’’) of the
proposed Rule. However, the reapplication process may not begin until
three calendar months after the month
in which the member organization
received its disqualification notice.
Proposed amendments to Rule 2A—
NYSE Amex Equities
In conjunction with the adoption of
Rule 107B—NYSE Amex Equities, the
Exchange also proposes to amend Rule
2A(c)—NYSE Amex Equities to
accommodate the Exchange’s authority
to approve or disapprove the
designation of a member or member
organization as an SLP.
Appeal of Non-Regulatory Penalties
An SLP may request an appeal of the
decision to impose a non-regulatory
penalty as provided in Section (j) of the
proposed Rule. Upon receiving a request
for an appeal, a panel of NYSE Euronext
employees referred to as the ‘‘SLP Panel’’
will review the decision to impose nonregulatory penalties. The SLP Panel
shall consist of the Exchange’s Chief
Regulatory Officer (‘‘CRO’’), or a
11 The SLP Liaison Committee will be responsible
for issuing the letter to an SLP that fails to meet its
quoting requirement for three consecutive months.
It will also be responsible for advising an SLP of
its eligibility or ineligibility to become an SLP.
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Frm 00103
Fmt 4703
Sfmt 4703
Regulatory Oversight of SLPs
Member organizations that act as SLPs
will be subject to regulatory oversight by
the Exchange and FINRA.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with,
and furthers the objectives of, Section
6(b)(5) of the Act,12 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 proposed rule
change also supports the principles of
Section 11A(a)(1) 13 of the Act in that it
seeks to ensure the economically
efficient execution of securities
transactions and fair competition among
brokers and dealers and among
exchange markets.
The Exchange believes that the
proposed Rule is consistent with these
principles in that it seeks to establish a
new class of market participant that will
provide additional liquidity to the
market and add competition to the
existing group of liquidity providers.
The Exchange believes that by requiring
an SLP to quote at the NBB or the NBO
a percentage of the regular trading day
in their assigned securities, and by
paying an SLP a rebate when its posted
interest results in an execution, the
Exchange is rewarding aggressive
liquidity providers in the market, and
12 15
13 15
E:\FR\FM\15JAN1.SGM
U.S.C. 78f(b)(5).
U.S.C. 78k–1(a)(1).
15JAN1
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Federal Register / Vol. 75, No. 10 / Friday, January 15, 2010 / Notices
by doing so, the Exchange will
encourage the additional utilization of,
and interaction with, the NYSE Amex
Equities market and provide customers
with the premier venue for price
discovery, liquidity, competitive quotes
and price improvement.
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 14 and Rule
19b–4(f)(6) thereunder.15 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.16
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,
14 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
16 In addition, Rule 19b–4(f)(6) requires a selfregulatory organization to give the Commission
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.
jlentini on DSKJ8SOYB1PROD with NOTICES
15 17
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17:34 Jan 14, 2010
Jkt 220001
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–637 Filed 1–14–10; 8:45 am]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEAmex–2009–98 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–NYSEAmex–2009–98. 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,17 all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room, 100 F Street, NE, Washington, DC
20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal 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 publicly available. All
submissions should refer to File
Number SR–NYSEAmex–2009–98 and
should be submitted on or before
February 5, 2010.
17 The text of the proposed rule change is
available on the Commission’s Web site at https://
www.sec.gov.
18 17 CFR 200.30–3(a)(12).
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BILLING CODE 8011–01–P
OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
2010 Special 301 Review: Identification
of Countries Under Section 182 of the
Trade Act of 1974: Request for Public
Comment and Announcement of
Public Hearing
AGENCY: Office of the United States
Trade Representative.
ACTION: Request for written submissions
from the public and announcement of
public hearing.
SUMMARY: Section 182 of the Trade Act
of 1974 (Trade Act) (19 U.S.C. 2242)
requires the United States Trade
Representative (USTR) to identify
countries that deny adequate and
effective protection of intellectual
property rights (IPR) or deny fair and
equitable market access to U.S. persons
who rely on intellectual property
protection. (The provisions of Section
182 are commonly referred to as the
‘‘Special 301’’ provisions of the Trade
Act.). The USTR is required to
determine which, if any, of these
countries should be identified as
Priority Foreign Countries. Acts,
policies, or practices that are the basis
of a country’s identification as a Priority
Foreign Country can be subject to the
procedures set out in sections 301–305
of the Trade Act.
In addition, USTR has created a
‘‘Priority Watch List’’ and ‘‘Watch List’’
to assist the Administration in pursuing
the goals of the Special 301 provisions.
Placement of a trading partner on the
Priority Watch List or Watch List
indicates that particular problems exist
in that country with respect to IPR
protection, enforcement, or market
access for persons relying on
intellectual property. Trading partners
placed on the Priority Watch List are the
focus of increased bilateral attention
concerning the problem areas.
USTR chairs an interagency team that
reviews information from many sources,
and that consults with and makes
recommendations to the USTR on issues
arising under Special 301. Written
submissions from interested persons are
a key source of information for the
Special 301 review process. In 2010,
USTR through the Special 301
E:\FR\FM\15JAN1.SGM
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]]>Agencies
[Federal Register Volume 75, Number 10 (Friday, January 15, 2010)]
[Notices]
[Pages 2573-2578]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-637]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61308; File No. SR-NYSEAmex-2009-98]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NYSE Amex LLC Adopting New
Rule 107B--NYSE Amex Equities To Establish a New Class of NYSE Amex
Equities Market Participants Referred to as ``Supplemental Liquidity
Providers'' or ``SLPs''
January 7, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on December 30, 2009, NYSE Amex LLC (the ``Exchange'' or
``NYSE Amex'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt new Rule 107B--NYSE Amex Equities
(``Supplemental Liquidity Providers'') to establish, as a pilot
program, a new class of NYSE Amex Equities market participants referred
to as ``Supplemental Liquidity Providers'' or ``SLPs''. 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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to adopt new Rule 107B--
NYSE Amex Equities (``Supplemental Liquidity Providers'') to establish,
as a pilot program, a new class of NYSE Amex Equities market
participants referred to as ``Supplemental Liquidity Providers'' or
``SLPs''.
Background
Proposed Rule 107B--NYSE Amex Equities is based on NYSE Rule 107B.
The New York Stock Exchange LLC (``NYSE'') adopted NYSE Rule 107B
governing SLPs as a six-month pilot program commencing in November
2008, which was subsequently extended to March 30, 2010.\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release Nos. 58877 (October 29,
2008), 73 FR 65904 (November 5, 2008) (SR-NYSE-2008-108) (adopting
SLP pilot program); 59869 (May 6, 2009), 74 FR 22796 (May 14, 2009)
(SR-NYSE-2009-46) (extending SLP pilot program until October 1,
2009); 60756 (October 1, 2009), 74 FR 51628 (October 7, 2009) (SR-
NYSE-2009-100) (extending SLP pilot program until November 30, 2009)
and SR-NYSE-2009-119 (extending SLP pilot program until March 30,
2010).
---------------------------------------------------------------------------
Proposed Rule 107B--NYSE Amex Equities tracks NYSE Rule 107B in its
entirety, subject to such changes as are necessary to apply the Rule to
the Exchange.\5\ In addition, the Exchange proposes to adopt Rule
107B--NYSE Amex Equities as a pilot program commencing on the date the
Rule is filed with the Commission and continuing until March 30, 2010,
the date NYSE's SLP pilot program expires. The Exchange will extend the
duration of its SLP pilot program as needed to track the NYSE's SLP
pilot program and will file for permanent approval at the same time as
the NYSE.
---------------------------------------------------------------------------
\5\ Notably, the Exchange proposes to change the descriptions of
the ``SLP Liaison Committee'' and the ``SLP Panel'' contained in
parts (d)(1) and (j)(2) of the Rule, as well as the procedures for
withdrawal in part (e), to match the proper corporate relationship
between the various constituents described therein. The Exchange's
SLP program would also include both listed and ``traded''
securities, i.e., securities admitted to trading on the Exchange
pursuant to a grant of unlisted trading privileges (``UTP'') (see
part (g)(1) of the Rule).
---------------------------------------------------------------------------
Proposed Rule 107B--NYSE Amex Equities
With this rule filing, the Exchange is proposing a pilot program to
establish a new class of market participants: Supplemental Liquidity
Providers (``SLP''). SLPs will supplement the liquidity provided by
Designated Market
[[Page 2574]]
Makers (``DMMs''). SLPs may only enter orders electronically from off
the Floor of the Exchange and may only enter such orders directly into
Exchange systems and facilities designated for this purpose. All SLP
orders must only be for the proprietary account of the SLP member
organization. Thus, an SLP will not handle orders from public customers
or otherwise act on an agency basis. They will have a 5% average
quoting requirement per assigned security. Additionally, if an SLP
posts displayed or non-displayed liquidity in its assigned securities
that results in an execution, the Exchange will pay the SLP a financial
rebate.
By establishing this new class of market participant, the Exchange
is seeking to provide incentives for quoting and to add competition to
the existing group of liquidity providers. By requiring SLPs to quote
at the NBB or the NBO a percentage of the regular trading day in their
assigned securities, and by paying a rebate when the SLP's interest
results in an execution, the Exchange is rewarding aggressive liquidity
providers in the market. The Exchange believes that this rebate program
will encourage the additional utilization of, and interaction with, the
Exchange's marketplace and provide customers with the premier venue for
price discovery, liquidity, competitive quotes and price improvement.
Responsibilities of the Supplemental Liquidity Provider
SLP's 5% Average Quoting Requirement
An SLP is required to maintain a bid or an offer at the NBB or NBO
(e.g., the ``inside'') averaging at least 5% of the trading day for
each assigned security in round lots in order to maintain its status as
an SLP. If an SLP fails to meet the quoting requirement for three
consecutive months, the Exchange may revoke the SLP status pursuant to
Section (i)(1)(C)(iii) of the proposed Rule.
SLP's 3% Average or More Quoting Requirement for Rebate Purposes
If an SLP posts liquidity in its assigned securities that results
in an execution, the Exchange will pay the SLP a financial rebate of
$0.0020 per share priced at or above $1.00, and $0.0005 per share
priced below $1.00, provided the SLP meets its monthly quoting
requirement for rebates averaging at least 3% at the NBB or the NBO in
its assigned securities in round lots (see Section (i) (``Non-
Regulatory Penalties'') and Section (f) (``Calculation of Quoting
Requirements'') of the proposed Rule). Meeting the 3% average quoting
requirement for rebates does not satisfy the 5% average quoting
requirement which SLPs must meet in order to remain in the SLP program.
The rebate calculation is described in more detail below.
A member organization that acts as an SLP is not permitted to act
as a DMM on the Floor of the Exchange in the same security. Thus, a
member organization that acts as a DMM on the Floor may not also act as
an SLP in those securities registered to the DMM unit.
Like all other member organizations of the Exchange, an SLP must
abide by Exchange and SEC rules and regulations and must deal in a
manner consistent with just and equitable principles of trade. SLPs are
subject to regulatory oversight by the Exchange and FINRA.
Assigned Securities
During the proposed SLP pilot program, the SLP Liaison Committee,
as defined in Section (d)(1) of the proposed Rule, will initially
assign a cross section of Exchange-listed and/or traded securities to
each SLP. The SLP Liaison Committee will determine which securities
will be assigned to an SLP and the number of securities assigned to
each SLP. The Exchange's SLP program will include both listed and
traded securities, as it is in the process of submitting a separate
filing to permit it to trade Nasdaq-listed securities on a UTP basis.
See, e.g., NYSE Amex Trader Notice, dated September 8, 2009.
The Exchange believes that the SLP pilot program will provide the
Exchange with a unique opportunity to monitor the success of the SLP
incentives by starting with a cross section of securities. By doing so,
the Exchange will be better equipped to address actual and potential
administrative and operational problems without unnecessary risk to the
Exchange and to its customers. The SLP pilot program will also provide
the Exchange with the opportunity to identify and address any such
problems and make beneficial changes to the SLP program.
In addition to its usefulness to the Exchange, the SLP pilot
program will provide the SLPs with essential practical experience with
the new program and enable the SLPs to become proficient in the SLP
role before expanding the assigned securities to include all Exchange-
listed or traded securities.
The SLP Liaison Committee, in its discretion, will assign one or
more SLPs to each security depending upon the trading activity of the
security. The SLP Liaison Committee will likely assign a greater number
of SLPs to more actively traded securities.
Qualifications of the Supplemental Liquidity Provider
A member organization of the Exchange must have the following
qualifications in order to obtain SLP status:
(1) Adequate technology to support electronic trading through the
related systems and facilities of the Exchange and report qualifying
trading activity to Exchange systems utilizing unique and separate
mnemonics specifically dedicated to SLP trading activity;
(2) Adequate trading infrastructure to support SLP trading
activity, which includes support staff to maintain operational
efficiencies in the SLP program and adequate administrative staff to
manage the member organization's SLP program;
(3) Quoting performance that demonstrates an ability to meet the 5%
quoting requirement in each assigned security;
(4) A disciplinary history that is consistent with just and
equitable business practices; and
(5) The business unit of the member organization acting as an SLP
must have in place adequate information barriers between the SLP unit
and the member organization's customer, research and investment banking
business.
Adequate Technology for Trading and Reporting: Because the SLP will
only be permitted to trade electronically from off the Floor of the
Exchange, a member organization's off-Floor technology must be fully
automated to accommodate the Exchange's trading and reporting systems
that are relevant to operating as an SLP. If a member organization is
unable to support the relevant electronic trading and reporting systems
of the Exchange for SLP trading activity, it will not qualify as an
SLP.
Adequate Trading Infrastructure: Upon applying for status as an
SLP, a member organization must have adequate trading infrastructure,
which includes support staff to maintain operational efficiencies in
the SLP program and adequate administrative staff to manage the member
organization's SLP program.
Quoting Performance: Upon applying for SLP status, a member
organization's ability to meet the 5% quoting requirement may be
demonstrated by past and/or current trading activity. If an applicant
has not demonstrated an ability to meet the 5% quoting requirement to
the satisfaction of the SLP Liaison Committee, the applicant may not
qualify as an SLP.
[[Page 2575]]
Disciplinary History: Upon applying for SLP status, a member
organization's disciplinary history must reflect conduct that is
consistent with just and equitable business practices.
Information Barriers: The business unit of the SLP that submits
orders on behalf of the member organization must have in place adequate
information barriers between the SLP unit and the member organization's
customer, research and investment banking business.
SLP Application Process
To become an SLP, a member organization must submit an SLP
application form with all supporting documentation to the SLP Liaison
Committee. The SLP Liaison Committee will determine whether an
applicant is qualified to become an SLP based on the qualifications
described in Section (c) of the proposed Rule (``Qualifications of a
Supplemental Liquidity Provider''). The qualifications focus on the
adequacy of the applicant's trading and reporting technology and
trading infrastructure. The applicant's disciplinary history will be
considered as well.
After submission of the SLP application form and supporting
documentation, the SLP Liaison Committee will notify the applicant
member organization of its decision. If an applicant is approved by the
SLP Liaison Committee to receive SLP status, the applicant must
establish connectivity with relevant Exchange systems and facilities.
The processing of all applications may be suspended when the SLP
Liaison Committee has determined that there is a sufficient number of
SLPs assigned to each eligible security in the SLP program (see Section
(g)(2) of the proposed Rule).
If an applicant is disapproved or ``disqualified,'' pursuant to
Section (i)(2) of the proposed Rule, by the SLP Liaison Committee, such
applicant may request an appeal of such disapproval or disqualification
by the SLP Panel as provided in Section (j) (``Appeal of Non-Regulatory
Penalties'') of this Rule, and/or reapply for SLP status three (3)
months after the month in which the applicant received disapproval or
disqualification notice from the Exchange (see Section (d)(6) of the
proposed Rule).
Voluntary Withdrawal of SLP Status
An SLP may withdraw from the status of an SLP at any time by giving
notice to the SLP Liaison Committee, the Market Surveillance Division
of NYSE Regulation, Inc. and NYSE Euronext employees of the Operations
Division (see Section (e) (``Voluntary Withdrawal of Supplemental
Liquidity Provider Status'' of the proposed Rule). However, withdrawal
of SLP status will not become effective until the withdrawing SLP's
assigned securities are reassigned to other SLPs. After the notice of
withdrawal is received by the SLP Liaison Committee, the Market
Surveillance Division and the Operations Division, the SLP Liaison
Committee will reassign said securities as soon as practicable but no
later than 30 days of the date said notice is received by the SLP
Liaison Committee, the Market Surveillance Division and the Operations
Division. In the event the reassignment of securities takes longer than
the 30-day period, the withdrawing SLP will have no obligations under
this Rule 107B-NYSE Amex Equities and will not be held responsible for
any matters concerning its previously assigned SLP securities upon
termination of this 30-day period.
Quoting Requirements of the Supplemental Liquidity Provider
In order to maintain SLP status, an SLP is required to maintain a
bid or an offer at the NBB or NBO on the Exchange averaging at least 5%
of the trading day in round lots for each assigned security.\6\ While
the SLP may provide displayed and non-displayed liquidity (e.g.,
reserve and dark orders), the 5% average quoting requirement can only
be satisfied when an SLP posts displayed liquidity in its assigned
securities in round lots at the NBB or the NBO. Thus, non-displayed
liquidity will not be counted as credit towards the 5% quoting
requirement. Additionally, tick sensitive orders (i.e., ``Sell Plus,''
``Buy Minus'' (see Rule 13) and ``Buy Minus Zero Plus'') will not be
counted as credit towards the 5% quoting requirement.
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\6\ See Exhibit 5, Section (a) of the proposed Rule.
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In order for an SLP to be entitled to a rebate, an SLP must post
liquidity on the Exchange that executes against incoming orders and
meet the monthly minimum quoting requirement averaging at least 3% at
the NBB or the NBO in round lots in its assigned securities (see
Section (b) (``Financial Rebates for Executed Transactions'') in the
proposed Rule). If the SLP does not meet a minimum monthly quoting
requirement averaging at least 3%, an SLP will not be entitled to a
rebate on executed volume in that given month in that particular
affected security (see Section (i) (``non-Regulatory Penalties'') of
the proposed Rule).
The SLP is not subject to any minimum or maximum quoting size
requirement apart from the requirement that an order be for at least
one round lot (see Section (f)(2) of the proposed Rule).
An SLP must use its SLP mnemonic when trading as an SLP in its
assigned securities in order to obtain credit for their SLP trading
activity (see Section (f)(2) of the proposed Rule). Quoting and rebate
credit will be measured only by using the SLP's unique mnemonics
specifically designated for SLP trading activity.
Calculation of the Quoting Requirements
The SLP's quoting requirements will not be in effect in the first
month the SLP operates as an SLP. The Exchange will provide the SLP
with a one-month grace period to allow preparation time for the SLP.
Therefore, this quoting requirement will not take effect until the
second month of an SLP's operation as an SLP.
Beginning with the second month an SLP is operating as an SLP, an
SLP must satisfy the 5% quoting requirement for each assigned
security.\7\ The SLP Liaison Committee will determine whether an SLP
has met its quoting requirement for the trading days \8\ in a calendar
month by calculating the following:
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\7\ NYSE Euronext's Strategic Analysis Department will be
responsible for generating SLP performance data and providing such
data to the SLP Liaison Committee in order to determine which SLPs
are meeting their quoting requirements and are eligible for
financial rebates.
\8\ For purposes of Section (f)(1) of the proposed rule text
(Exhibit 5), ``trading day'' shall mean any day on which the
Exchange is scheduled to be open for business. Days on which the
Exchange closes prior to 4 p.m. (Eastern Time) for any reason, which
may include any regulatory halt or trading halt, shall be considered
a trading day.
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(1) The ``Daily NBB Quoting Percentage'' by determining the
percentage of time an SLP has at least one round lot of displayed
interest in an Exchange bid at the NBB during each trading day for a
calendar month;
(2) The ``Daily NBO Quoting Percentage'' by determining the
percentage of time an SLP has at least one round lot of displayed
interest in an Exchange offer at the NBO during each trading day for a
calendar month;
(3) The ``Average Daily NBBO Quoting Percentage'' for each trading
day by summing the ``Daily NBB Quoting Percentage'' and the ``Daily NBO
Quoting Percentage'' in each assigned security then dividing such sum
by two; and
(4) The ``Monthly Average NBBO Quoting Percentage'' for each
assigned security by summing the security's ``Average Daily NBBO
Quoting
[[Page 2576]]
Percentages'' for each trading day in a calendar month then dividing
the resulting sum by the total number of trading days in such calendar
month.
Example of Quoting Requirement Calculation
Below is an example of a quoting requirement calculation. For
purposes of this example, it is assumed that SLP No. 1 has two assigned
securities, A and B, and that there were 5 trading days in the selected
calendar month.
The ``Average Daily NBBO Quoting Percentage'' for SLP No. 1 is
calculated for each security by summing the daily NBB and NBO of each
security for that day and dividing that number by two:
----------------------------------------------------------------------------------------------------------------
``Average
Calculation of ``Average Daily Daily NBBO
Trading days NBB NBO NBBO Quoting Percentage'' for Quoting
SLP No. 1 Percentage''
----------------------------------------------------------------------------------------------------------------
Security A
----------------------------------------------------------------------------------------------------------------
T1.............................. 4% 6% 4% + 6% = 10% divided by 2 = 5%
5%.
T2.............................. 3% 5% 3% + 5% = 8% divided by 2 = 4% 4%
T3.............................. 4% 4% 4% + 4% = 8% divided by 2 = 4% 4%
T4.............................. 6% 8% 6% + 8% = 14% divided by 2 = 7%
7%.
T5.............................. 5% 5% 5% + 5% = 10% divided by 2 = 5%
5%.
----------------------------------------------------------------------------------------------------------------
Security B
----------------------------------------------------------------------------------------------------------------
T1.............................. 5% 7% 5% + 7% = 12% divided by 2 = 6%
6%.
T2.............................. 4% 6% 4% + 6% = 10% divided by 2 = 5%
5%.
T3.............................. 6% 8% 6% + 8% = 14% divided by 2 = 7%
7%.
T4.............................. 7% 9% 7% + 9% = 16% divided by 2 = 8%
8%.
T5.............................. 9% 9% 9% + 9% = 18% divided by 2 = 9%
9%.
----------------------------------------------------------------------------------------------------------------
The ``Monthly Average NBBO Quoting Percentage'' for each security
is then calculated by summing the security's ``Average Daily NBBO
Quoting Percentages'' for all five trading days of the calendar month
and then dividing the resulting total by the number of trading days in
the calendar month (in this instance 5).
----------------------------------------------------------------------------------------------------------------
``Average Daily NBBO Quoting Percentage'' ``Monthly
------------------------------------------------- Calculation of ``Monthly Average NBBO Quoting Average NBBO
Percentage'' for SLP No. 1 Quoting
T1 T2 T3 T4 T5 Percentage''
----------------------------------------------------------------------------------------------------------------
Security A
----------------------------------------------------------------------------------------------------------------
5% 4% 4% 7% 5% 5% + 4% + 4% + 7% + 5% = 25% divided by 5 = 5% 5%
----------------------------------------------------------------------------------------------------------------
Security B
----------------------------------------------------------------------------------------------------------------
6% 5% 7% 8% 9% 6% + 5% + 7% + 8% + 9% = 35% divided by 5 = 7% 7%
----------------------------------------------------------------------------------------------------------------
Financial Rebates for Executed Transactions
When an SLP posts liquidity, displayed or non-displayed, on the
Exchange in its SLP assigned securities and such liquidity is executed
against an incoming order, the SLP will receive a financial rebate for
that executed transaction provided the SLP has met it rebate quoting
requirement averaging at least 3% at the NBB or the NBO in each
assigned security pursuant to Section (i)(1)(A) and (B) (``Non-
Regulatory Penalties''). An SLP will only receive a rebate when it has
met the monthly 3% or better quoting requirement in its assigned
securities and the SLP's posted displayed or non-displayed liquidity
results in an execution.
SLP Rebate Calculation
The SLP rebate will be $0.0020 per share priced at or above $1.00,
and $0.0005 per share priced below $1.00, for executions when the SLP
provides liquidity.\9\ The rebate will be paid for displayed and non-
displayed orders provided that the SLP meets the quoting requirement
averaging 3% or more at the NBB or NBO in its assigned securities for a
given month. If an SLP does not meet the average quoting requirement
described above, such SLP will not be entitled to a rebate. As
discussed previously, if an SLP does not meet its quoting requirement
averaging 5% at the NBB or the NBO for each assigned security for 3
consecutive months, such SLP may be disqualified from SLP status. The
Exchange will track the volume and quoting requirement of SLPs by their
designated SLP mnemonics.
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\9\ The Exchange will file a separate fee filing with the SEC
pursuant to the provisions of Section 19b-4 that will outline the
SLP rebate program described above. The calculation and amount of
the SLP rebate will be published in the NYSE Amex Equities Price
List, available on the Exchange's Web site.
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Except for the rebate, all other SLP fees are the same as existing
customer fees on the Exchange (see the NYSE Amex Equities Price List on
the Exchange Web site).
SLP Parity With Other Market Participants Pursuant to Rule 72--NYSE
Amex Equities
Exchange systems are responsible for share allocation and create
interest files for each market participant. Individual Floor brokers
and the DMM registered in a security each constitute single
participants. All off-Floor orders entered in Exchange systems at the
Exchange BBO together constitute a single participant (``Book
Participant'') for the purpose of share allocation. SLP orders will be
in the ``Book Participant''
[[Page 2577]]
category pursuant to Rule 72--NYSE Amex Equities.
Market Data and Trading Information Available to the SLP
The universe of trading information and market data available to
the SLP will include market data published by the Exchange and all
other automated trading centers (as defined in Rule 600 of Regulation
NMS), trading information published on the Consolidated Tape and on the
NYSE Amex OpenBook[supreg].\10\ Thus, the SLP will have the same
published trading information and market data that all other Exchange
customers have available to them.
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\10\ The NYSE Amex OpenBook[supreg] is provided by the Exchange
to vendors and customers in two modes. The first displays the depth
of the market refreshed every five seconds. The second displays the
depth of the market in real time. NYSE Amex OpenBook[supreg]
discloses limit order interest at the price at the best bid and
offer and at prices below the best bid and above the best offer.
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Non-Regulatory Penalties
If an SLP fails to meet the 5% quoting requirement for any assigned
security, the SLP may be subject to non-regulatory penalties imposed by
the SLP Liaison Committee (see Section (i) of the proposed Rule). Such
non-regulatory penalties include: (1) Denial of the financial rebate;
(2) removal of one or more assigned securities from the SLP; and (3)
disqualification. These non-regulatory penalties and the conditions
under which such penalties are imposed may be appealed by an SLP as
provided in Section (j) (``Appeal of a Non-Regulatory Penalty'') of the
proposed Rule and described in more detail below.
Penalties for Quoting Less Than 5% in a Given Calendar Month
In a given calendar month, if an SLP maintains a quote at the NBB
or NBO averaging 3% of the trading day, but less than the average of 5%
of the trading day in any assigned security, the SLP will receive a
financial rebate for that calendar month for executed transactions in
that particular security as described in Section (b) (``Rebates for
Executed Transactions'') of the proposed Rule. Failure to meet the 5%
quoting requirement for each assigned security in that month will be
counted towards the three-month disqualification period provided in
paragraph (i)(C) of the proposed Rule.
In a given calendar month, if an SLP maintains a quote at the NBB
or the NBO averaging less than 3% of the regular trading day in an
assigned security, the SLP will not receive the financial rebate for
that month for transactions executed in that particular assigned
security. The failure to meet the 5% quoting requirement for any
assigned security in that month will also be counted towards the three-
month disqualification period.
If an SLP fails to meet the 5% quoting requirement for three
consecutive calendar months in any assigned security, the SLP Liaison
Committee may, in its discretion, take the following non-regulatory
action:
(1) Revoke the assignment of the affected security(ies);
(2) Revoke the assignment of an additional, unaffected security
from an SLP; or
(3) Disqualify a member organization's status as an SLP.
Disqualification Determinations
In the second calendar month that an SLP fails to meet the 5%
quoting requirement, the SLP Liaison Committee will notify the SLP in
writing that the SLP may be disqualified if it fails to meet the
quoting requirement the third consecutive month.\11\ If the SLP fails
to meet the 5% quoting requirement for a third consecutive month, the
SLP may be disqualified from SLP status.
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\11\ The SLP Liaison Committee will be responsible for issuing
the letter to an SLP that fails to meet its quoting requirement for
three consecutive months. It will also be responsible for advising
an SLP of its eligibility or ineligibility to become an SLP.
---------------------------------------------------------------------------
When disqualification determinations are made, the SLP Liaison
Committee will provide a disqualification notice to the member
organization informing the member organization of its disqualification
as an SLP.
If a member organization is disqualified from its status as an SLP
pursuant to Section (i)(1)(C)(iii) of the proposed Rule, the member
organization may appeal the disqualification pursuant to Section (j)
(``Appeal of a Non-Regulatory Penalties'') of the proposed Rule, or re-
apply for SLP status in accordance with Section (d)(6) (``Re-
application for SLP Status'') of the proposed Rule. However, the re-
application process may not begin until three calendar months after the
month in which the member organization received its disqualification
notice.
Appeal of Non-Regulatory Penalties
An SLP may request an appeal of the decision to impose a non-
regulatory penalty as provided in Section (j) of the proposed Rule.
Upon receiving a request for an appeal, a panel of NYSE Euronext
employees referred to as the ``SLP Panel'' will review the decision to
impose non-regulatory penalties. The SLP Panel shall consist of the
Exchange's Chief Regulatory Officer (``CRO''), or a designee of the
CRO, and two (2) officers of the Exchange designated by the NYSE
Euronext Head of the U.S. Markets Division.
The SLP Panel will review the facts of the subject non-regulatory
penalty and render a decision as to the correctness of the decision to
impose the penalty. The SLP Panel may overturn or modify an action
taken by the SLP Liaison Committee, and all determinations by the SLP
Panel will constitute final action by the Exchange on the disputed
matter.
Regulatory Oversight of SLPs
Member organizations that act as SLPs will be subject to regulatory
oversight by the Exchange and FINRA.
Proposed amendments to Rule 2A--NYSE Amex Equities
In conjunction with the adoption of Rule 107B--NYSE Amex Equities,
the Exchange also proposes to amend Rule 2A(c)--NYSE Amex Equities to
accommodate the Exchange's authority to approve or disapprove the
designation of a member or member organization as an SLP.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with, and furthers the objectives of, Section 6(b)(5) of the Act,\12\
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 proposed rule change also supports the principles
of Section 11A(a)(1) \13\ of the Act in that it seeks to ensure the
economically efficient execution of securities transactions and fair
competition among brokers and dealers and among exchange markets.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------
The Exchange believes that the proposed Rule is consistent with
these principles in that it seeks to establish a new class of market
participant that will provide additional liquidity to the market and
add competition to the existing group of liquidity providers. The
Exchange believes that by requiring an SLP to quote at the NBB or the
NBO a percentage of the regular trading day in their assigned
securities, and by paying an SLP a rebate when its posted interest
results in an execution, the Exchange is rewarding aggressive liquidity
providers in the market, and
[[Page 2578]]
by doing so, the Exchange will encourage the additional utilization of,
and interaction with, the NYSE Amex Equities market and provide
customers with the premier venue for price discovery, liquidity,
competitive quotes and price improvement.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
\16\ In addition, Rule 19b-4(f)(6) requires a self-regulatory
organization to give the Commission 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.
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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-NYSEAmex-2009-98 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-NYSEAmex-2009-98. 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,\17\ all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Room, 100 F Street, NE, Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of such
filing also will be available for inspection and copying at the
principal 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 publicly available. All submissions should refer to
File Number SR-NYSEAmex-2009-98 and should be submitted on or before
February 5, 2010.
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\17\ The text of the proposed rule change is available on the
Commission's Web site at https://www.sec.gov.
\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-637 Filed 1-14-10; 8:45 am]
BILLING CODE 8011-01-P
