Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex Equities Rule 127 To Remove the Restrictions on the Execution of Block Cross Transactions Outside the Prevailing NYSE Amex Quotation, 15472-15475 [2010-6836]

Download as PDF 15472 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices report will include: the Exchange’s internal file number for the case, the name of the individual and/or organization, the nature of the violation, the specific rule provision violated, the sanction imposed, the number of times the rule violation has occurred, and the date of disposition.6 I. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning EDGA Exchange’s proposed Minor Rule Violation Plan, including whether the proposed plan 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/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. 4–595 on the subject line. cprice-sewell on DSK89S0YB1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. All submissions should refer to File No. 4–595. 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/other.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed Minor Rule Violation Plan change that are filed with the Commission, and all written communications relating to the proposed Minor Rule Violation Plan 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549. 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 No. 4–595 and should be submitted on or before April 28, 2010. solicit comments on the proposed rule change from interested persons. II. Date of Effectiveness of the Proposed Minor Rule Violation Plan and Timing for Commission Action I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Amex Equities Rule 127 (‘‘Block Crosses Outside the Prevailing Exchange Quotation’’) to remove the restrictions on the execution of block cross transactions outside the prevailing NYSE Amex quotation to make such execution more consistent with prevailing industry standard and to delete all references to ‘‘percentage orders’’ in the rule text. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https:// www.nyse.com. Pursuant to Section 19(d)(1) of the Act and Rule 19d–1(c)(2) thereunder,7 after April 28, 2010, the Commission may, by order, declare EDGA Exchange’s proposed Minor Rule Violation Plan effective if the plan is consistent with the public interest, the protection of investors, or otherwise in furtherance of the purposes of the Act. The Commission in its order may restrict the categories of violations to be designated as minor rule violations and may impose any other terms or conditions to the proposed Minor Rule Violation Plan, File No. 4–595, and to the period of its effectiveness which the Commission deems necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of this Act. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–6775 Filed 3–26–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61755; File No. SR– NYSEAmex–2010–27] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex Equities Rule 127 To Remove the Restrictions on the Execution of Block Cross Transactions Outside the Prevailing NYSE Amex Quotation March 22, 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 March 11, 2010, 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 7 15 U.S.C. 78s(d)(1) and 17 CFR 240.19d–1(c)(2). CFR 200.30–3(a)(44). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 8 17 6 EDGA Exchange attached a sample form of the quarterly report with its submission to the Commission. VerDate Nov<24>2008 09:18 Apr 05, 2010 Jkt 220001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NYSE Amex LLC (‘‘NYSE Amex’’ or the ‘‘Exchange’’) proposes to amend NYSE Amex Equities Rule 127 (‘‘Block Crosses Outside the Prevailing Exchange Quotation’’) to remove restrictions on the execution of block cross transactions outside the prevailing NYSE Amex quotation to make such execution more consistent with prevailing industry standard and to delete all references to ‘‘percentage orders’’ in the rule text. The Exchange notes that parallel changes are proposed to be made to the rules of the New York Stock Exchange LLC.4 Background: NYSE Amex Equities Rule 127 governs the execution of block cross transactions outside the Exchange quotation. NYSE Amex Equities Rule 127 prescribes the method of block cross executions for member organizations when the member organization intends to represent both sides of the proposed 4 See E:\FR\FM\29MRN1.SGM SR–NYSE–2010–24. 29MRN1 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices cprice-sewell on DSK89S0YB1PROD with NOTICES cross as agent or will trade with one side of the cross in part or in whole as principal. The member organization handling the block orders must first trade with the displayed bid or offer (whichever is relevant to the proposed cross, i.e., whether the cross is to be executed at a price lower than the bid or higher than the offer) including any reserve interest 5 at that bid or offer price when the member organization is trading as principal on one side of the transaction and is establishing or increasing a proprietary position as a result. The member organization then executes, in a single transaction, at the agreed upon block price, all limit orders on the Display Book (‘‘Display Book’’) 6 priced at or better than the block cleanup price. The result is two separate tape prints. If, however, the cross represents agency interest only or the liquidation of a member organization’s position, the member organization must execute all orders on the Display Book priced better than the block clean-up price at a price one cent better than the clean-up price and then execute the block at the cleanup price. This results in three separate tape prints. The block cross will have execution priority at the clean-up price. None of these executions are subject to the procedural requirements of NYSE Amex Equities Rule 76 governing ‘‘crossing’’ orders with respect to offering the security at a minimum variation higher than the bid. Two Print Execution Example: The NYSE Amex quote in XYZ is $20.05 bid for 10,000 shares with 5,000 shares offered at $20.10. There is no reserve interest at the best bid or offer or at the other bid prices. There are bids at $20.04, $20.03 and $20.02, each for 5,000 shares. A member organization intends to facilitate a block transaction of 50,000 shares at $20.02. The following executions occur: The member organization sells to the 10,000 shares bid at $20.05. Next, the member organization sells 15,000 shares at a price of $20.02 to satisfy the 5,000 shares bids at $20.04, $20.03 and $20.02. The remaining 25,000 shares of the 50,000 share block order are crossed at $20.02 with the member organization 5 Reserve interest is that portion of a bid or offer that is designated as not to be displayed, i.e., is in ‘‘reserve.’’ 6 The Display Book system is an order management and execution facility. The Display Book receives and displays orders to the DMMs, contains order information and provides a mechanism to execute and report transactions and publish the results to the Consolidated Tape. The Display Book is connected to a number of other Exchange systems for the purposes of comparison, surveillance and reporting information to customers and other market data and national market systems. VerDate Nov<24>2008 09:18 Apr 05, 2010 Jkt 220001 buying 25,000 shares as principal from its customer. Three Print Execution Example: The NYSE Amex quote in XYZ is $20.05 bid for 10,000 shares with 5,000 shares offered at $20.10. There is no reserve interest at the best bid or offer or at the other bid prices. There are bids for $20.04, $20.03 and $20.02, each for 5,000 shares. A member organization intends to facilitate a block transaction of 50,000 shares at $20.02 either representing customer (agency) buy side interest at $20.02 or liquidating a current position. The following executions occur: The member organization sells 10,000 shares at $20.05 to satisfy the exposed bid price. Next, the member organization sells an additional 10,000 shares one cent better than the clean-up price at $20.03 to satisfy the bids at $20.04 and $20.03. The remaining 30,000 shares of the 50,000 share block cross order is crossed at $20.02 at the block clean-up price. Proposed Amendment to NYSE Amex Equities Rule 127: Historically, NYSE Amex Equities Rule 127 provided a member organization with the ability to execute block transactions at a negotiated price outside the prevailing quote while providing price improvement to resting orders on the Display Book. Block transactions effected pursuant to the Rule must be executed manually. The DMM assigned to the security must manually enter the information in the Display Book to effect each of the required transactions. Given the speed of execution and updating of quotations in the Exchange’s current more electronic market, the DMM, in most securities, is physically unable to print the transaction at the bid and clean-up price, or bid, one cent better and the clean-up price prior to any quote changes or cancellations/replacements of orders. In the time it takes the DMM to manually print the block cross transaction pursuant to the steps set forth in NYSE Amex Equities Rule 127, quotes and prices in the market have been updated. As such, the member organization is unable to determine how many shares it must satisfy on the Display Book in order to effect the block transaction at the negotiated price. Without the provisions of NYSE Amex Equities Rule 127, a member organization could electronically transmit an order to execute against the liquidity (displayed and non-displayed) available at each limit price until the bid/offer reached the price the member PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 15473 sought to cross his or her order.7 However, because Rule 127 mandates that a member organization with a block of stock it intends to cross on the Floor at a specific clean-up price outside the current NYSE Amex quotation must follow the provisions of paragraph (b) of the Rule, member organizations are impeded in the execution of block cross transactions because of the physical inability of the DMM to print the block cross transactions consistent with the provisions of NYSE Amex Equities Rule 127. This physical impediment to the DMM’s ability to print these transactions makes compliance with NYSE Amex Equities Rule 127 virtually impossible in the liquid securities traded on the Exchange. The Exchange acknowledges that in order to provide for the efficient execution of block cross transactions outside the prevailing quote that affords a member organization the ability to cross stock at a negotiated price and provide price improvement to resting orders on the Display Book, system modifications are required. Such system modifications would allow for these trades to be executed consistent with the requirements of the proposed amendments to NYSE Amex Equities Rule 127, pursuant to the customer’s instructions. Given the inability of the DMM to manually print the required transaction pursuant to NYSE Amex Equities Rule 127 and the need for system modification, NYSE Amex proposes to amend NYSE Amex Equities Rule 127. The amendments would remove the current requirement in Rule 127 that a member organization with a block of stock that it intends to cross on the Floor at a specific clean-up price outside the current NYSE Amex quotation must comply with the provisions of Rule 127.8 Specifically, the Exchange seeks to amend the rule text in NYSE Amex Equities Rule 127(b) by replacing the word ‘‘should’’ with ‘‘may’’ in order to remove the restrictive language that would require member organizations to execute block cross transactions outside the prevailing NYSE Amex quotation pursuant to the specific provisions of the rule. Pursuant to proposed NYSE Amex Equities Rule 127(b), the member organization may execute block crosses 7 This is similar to the method employed by offFloor participants wherein orders are sent to market centers for execution against protected quotes and the balance of the cross order is then printed on a trade reporting facility. 8 E-mail from Jennifer D. Kim, Counsel, NYSE Regulation, to Theodore Venuti, Special Counsel, Division of Trading and Markets, Commission, dated March 17, 2010. E:\FR\FM\29MRN1.SGM 29MRN1 15474 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices outside the prevailing quote prescribed in NYSE Amex Equities Rule 127 or in the same manner as large non-block trades are currently executed. The member organization may electronically route an order to the Display Book that will satisfy protected quotes in other markets and sweep orders on the Display Book to the cross price and manually cross the remainder of the initiating order if market conditions permit, i.e., if the remainder of the initiating order will be executed at the National Best Bid or Offer (‘‘NBBO’’) or consistent with the intermarket sweep order exception under Reg NMS or any other applicable trade-through exception or exemption that may apply. This cross transaction shall be consistent with all NYSE Amex Equities Rules, including those rules related to priority and parity.9 Member organizations will continue to be required to comply with all Reg NMS obligations.10 Finally, the Exchange seeks to delete all references in the rule text to ‘‘percentage orders.’’ Percentage orders were eliminated as a valid order type on the Exchange in a previously approved NYSE filing.11 The references in NYSE Amex Equities Rule 127 were inadvertently left in and should be deleted. cprice-sewell on DSK89S0YB1PROD with NOTICES 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 12 that an Exchange have rules that are designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes the proposed rule change supports these provisions because the proposed amendment removes the current impediment to NYSE Amex members organizations’ ability to execute block cross orders and offers an alternate method while the Exchange develops a better mechanism for the execution of 9 See e.g. NYSE Amex Equities Rule 72. CFR 242.600 et seq.; See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 11 See Securities Exchange Act Release No.58845 (October 24, 2008), 73 FR 64379 (October 29, 2008) (SR–NYSE–2008–46). 12 15 U.S.C. 78f(b)(5). 10 17 VerDate Nov<24>2008 09:18 Apr 05, 2010 Jkt 220001 block cross orders outside the prevailing quotation. 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 13 and Rule 19b–4(f)(6) thereunder.14 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 15 and Rule 19b–4(f)(6)(iii) thereunder.16 A proposed rule change filed under Rule 19b–4(f)(6) 17 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),18 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission notes that the proposed rule change would allow member organizations to execute block 13 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 15 15 U.S.C. 78s(b)(3)(A). 16 17 CFR 240.19b–4(f)(6). 17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires that a self-regulatory organization submit to 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 filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission notes that the Exchange has satisfied this requirement. 18 17 CFR 240.19b–4(f)(6)(iii). 14 17 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 cross transactions outside the prevailing NYSE Amex quotation consistent with the manner that large, non-block size orders may currently be executed on the Exchange and on other market centers. The proposed rule change is consistent with Regulation NMS and the Commission does not believe that it raises any new substantive issues. For these reasons, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposed rule change as operative upon filing.19 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 rulecomments@sec.gov. Please include File Number SR–NYSEAmex–2010–27 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–2010–27. 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,20 all subsequent amendments, all written statements 19 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 20 The text of the proposed rule change is available on the Commission’s Web site at https:// sec.gov/rules/sro/shtml. E:\FR\FM\29MRN1.SGM 29MRN1 Federal Register / Vol. 75, No. 59 / Monday, March 29, 2010 / Notices 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 Web site viewing and printing 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 available publicly. All submissions should refer to File No. SR– NYSEAmex–2010–27 and should be submitted on or before April 19, 2010. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–6836 Filed 3–26–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61752; File No. 4–594] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing of Proposed Minor Rule Violation Plan cprice-sewell on DSK89S0YB1PROD with NOTICES March 22, 2010. Pursuant to Section 19(d)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19d–1(c)(2) thereunder,2 notice is hereby given that on March 19, 2010, EDGX Exchange, Inc. (‘‘EDGX Exchange’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) copies of proposed minor rule violations with sanctions not exceeding $2,500 which would not be subject to the provisions of Rule 19d– 1(c)(1) of the Act 3 requiring that a selfregulatory organization promptly file notice with the Commission of any final disciplinary action taken with respect to any person or organization.4 In 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(d)(1). 2 17 CFR 240.19d–1(c)(2). 3 17 CFR 240.19d–1(c)(1). 4 The Commission adopted amendments to paragraph (c) of Rule 19d–1 to allow self-regulatory 1 15 VerDate Nov<24>2008 09:18 Apr 05, 2010 Jkt 220001 accordance with paragraph (c)(2) of Rule 19d–1 of the Act, the Exchange proposed to designate certain specified rule violations as minor rule violations, and requests that it be relieved of the reporting requirements regarding such violations, provided it gives notice of such violations to the Commission on a quarterly basis. EDGX Exchange proposes to include in its proposed MRVP the policies and procedures currently included in EDGX Exchange Rule 8.15 (‘‘Imposition of Fines for Minor Violation(s) of Rules’’).5 According to the Exchange’s proposed MRVP, under Rule 8.15, the Exchange may impose a fine (not to exceed $2,500) on a member or an associated person with respect to any rule listed in Rule 8.15.01. The Exchange shall serve the person against whom a fine is imposed with a written statement setting forth the rule or rules violated, the act or omission constituting each such violation, the fine imposed, and the date by which such determination becomes final or by which such determination must be contested. If the person against whom the fine is imposed pays the fine, such payment shall be deemed to be a waiver of such person’s right to a disciplinary proceeding and any review of the matter under EDGX Exchange rules. Any person against whom a fine is imposed may contest the Exchange’s determination by filing with the Exchange a written response, at which point the matter shall become a disciplinary proceeding. Under Rule 8.15.01, violations of the following rules would be appropriate for disposition under the minor rule violations plan: Rule 2.5. Interpretation .04, Firm Element Continuing Education Requirement; Rule 3.5 Advertising organizations (‘‘SROs’’) to submit for Commission approval plans for the abbreviated reporting of minor disciplinary infractions. See Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR 23828 (June 8, 1984). Any disciplinary action taken by an SRO against any person for violation of a rule of the SRO which has been designated as a minor rule violation pursuant to such a plan filed with the Commission shall not be considered ‘‘final’’ for purposes of Section 19(d)(1) of the Act if the sanction imposed consists of a fine not exceeding $2,500 and the sanctioned person has not sought an adjudication, including a hearing, or otherwise exhausted his administrative remedies. 5 On March 12, 2010, the Commission approved EDGX Exchange’s application for registration as a national securities exchange, including the rules governing EDGX Exchange. See Securities Exchange Act Release No. 61698, 75 FR 13151 (March 18, 2010). In the approval order, the Commission noted that EDGX Exchange Rule 8.15 provides for the imposition of fines for minor rule violations pursuant to a minor rule violation plan. Accordingly, the Commission noted that as a condition to the operation of EDGX Exchange, the Exchange must file a minor rule violation plan with the Commission. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 15475 Practices; Rule 4.2 and Interpretations thereunder, requiring the submission of responses to Exchange requests for trading data within specified time period; Rule 4.2 and Interpretations thereunder, related to the requirement to furnish Exchange-related order, market and transaction data, as well as financial or regulatory records and information; Rule 11.15, requirement to identify short sale orders as such; Rule 11.16, requirement to comply with locked and crossed market rules; and Rule 12.11, Interpretation .01 and Exchange Act Rule 604—Failure to properly display limit orders. EDGX Exchange proposed to include the rule violations listed in Rule 8.15.01 in its minor rule violation plan. Upon approval of the plan, the Exchange will provide the Commission a quarterly report of actions taken on minor rule violations under the plan. The quarterly report will include: The Exchange’s internal file number for the case, the name of the individual and/or organization, the nature of the violation, the specific rule provision violated, the sanction imposed, the number of times the rule violation has occurred, and the date of disposition.6 I. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning EDGX Exchange’s proposed Minor Rule Violation Plan, including whether the proposed plan 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/other.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. 4–594 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. All submissions should refer to File No. 4–594. 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/other.shtml). 6 EDGX Exchange attached a sample form of the quarterly report with its submission to the Commisision. E:\FR\FM\29MRN1.SGM 29MRN1

Agencies

[Federal Register Volume 75, Number 59 (Monday, March 29, 2010)]
[Notices]
[Pages 15472-15475]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-6836]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61755; File No. SR-NYSEAmex-2010-27]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending NYSE Amex 
Equities Rule 127 To Remove the Restrictions on the Execution of Block 
Cross Transactions Outside the Prevailing NYSE Amex Quotation

March 22, 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 March 11, 2010, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Amex Equities Rule 127 (``Block 
Crosses Outside the Prevailing Exchange Quotation'') to remove the 
restrictions on the execution of block cross transactions outside the 
prevailing NYSE Amex quotation to make such execution more consistent 
with prevailing industry standard and to delete all references to 
``percentage orders'' in the rule text. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Amex LLC (``NYSE Amex'' or the ``Exchange'') proposes to amend 
NYSE Amex Equities Rule 127 (``Block Crosses Outside the Prevailing 
Exchange Quotation'') to remove restrictions on the execution of block 
cross transactions outside the prevailing NYSE Amex quotation to make 
such execution more consistent with prevailing industry standard and to 
delete all references to ``percentage orders'' in the rule text.
    The Exchange notes that parallel changes are proposed to be made to 
the rules of the New York Stock Exchange LLC.\4\
---------------------------------------------------------------------------

    \4\ See SR-NYSE-2010-24.
---------------------------------------------------------------------------

    Background: NYSE Amex Equities Rule 127 governs the execution of 
block cross transactions outside the Exchange quotation. NYSE Amex 
Equities Rule 127 prescribes the method of block cross executions for 
member organizations when the member organization intends to represent 
both sides of the proposed

[[Page 15473]]

cross as agent or will trade with one side of the cross in part or in 
whole as principal. The member organization handling the block orders 
must first trade with the displayed bid or offer (whichever is relevant 
to the proposed cross, i.e., whether the cross is to be executed at a 
price lower than the bid or higher than the offer) including any 
reserve interest \5\ at that bid or offer price when the member 
organization is trading as principal on one side of the transaction and 
is establishing or increasing a proprietary position as a result. The 
member organization then executes, in a single transaction, at the 
agreed upon block price, all limit orders on the Display Book[supreg] 
(``Display Book'') \6\ priced at or better than the block clean-up 
price. The result is two separate tape prints. If, however, the cross 
represents agency interest only or the liquidation of a member 
organization's position, the member organization must execute all 
orders on the Display Book priced better than the block clean-up price 
at a price one cent better than the clean-up price and then execute the 
block at the clean-up price. This results in three separate tape 
prints. The block cross will have execution priority at the clean-up 
price. None of these executions are subject to the procedural 
requirements of NYSE Amex Equities Rule 76 governing ``crossing'' 
orders with respect to offering the security at a minimum variation 
higher than the bid.
---------------------------------------------------------------------------

    \5\ Reserve interest is that portion of a bid or offer that is 
designated as not to be displayed, i.e., is in ``reserve.''
    \6\ The Display Book[supreg] system is an order management and 
execution facility. The Display Book receives and displays orders to 
the DMMs, contains order information and provides a mechanism to 
execute and report transactions and publish the results to the 
Consolidated Tape. The Display Book is connected to a number of 
other Exchange systems for the purposes of comparison, surveillance 
and reporting information to customers and other market data and 
national market systems.
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    Two Print Execution Example: The NYSE Amex quote in XYZ is $20.05 
bid for 10,000 shares with 5,000 shares offered at $20.10. There is no 
reserve interest at the best bid or offer or at the other bid prices. 
There are bids at $20.04, $20.03 and $20.02, each for 5,000 shares. A 
member organization intends to facilitate a block transaction of 50,000 
shares at $20.02. The following executions occur:
    The member organization sells to the 10,000 shares bid at $20.05. 
Next, the member organization sells 15,000 shares at a price of $20.02 
to satisfy the 5,000 shares bids at $20.04, $20.03 and $20.02. The 
remaining 25,000 shares of the 50,000 share block order are crossed at 
$20.02 with the member organization buying 25,000 shares as principal 
from its customer.
    Three Print Execution Example: The NYSE Amex quote in XYZ is $20.05 
bid for 10,000 shares with 5,000 shares offered at $20.10. There is no 
reserve interest at the best bid or offer or at the other bid prices. 
There are bids for $20.04, $20.03 and $20.02, each for 5,000 shares. A 
member organization intends to facilitate a block transaction of 50,000 
shares at $20.02 either representing customer (agency) buy side 
interest at $20.02 or liquidating a current position. The following 
executions occur:
    The member organization sells 10,000 shares at $20.05 to satisfy 
the exposed bid price. Next, the member organization sells an 
additional 10,000 shares one cent better than the clean-up price at 
$20.03 to satisfy the bids at $20.04 and $20.03. The remaining 30,000 
shares of the 50,000 share block cross order is crossed at $20.02 at 
the block clean-up price.
    Proposed Amendment to NYSE Amex Equities Rule 127: Historically, 
NYSE Amex Equities Rule 127 provided a member organization with the 
ability to execute block transactions at a negotiated price outside the 
prevailing quote while providing price improvement to resting orders on 
the Display Book.
    Block transactions effected pursuant to the Rule must be executed 
manually. The DMM assigned to the security must manually enter the 
information in the Display Book to effect each of the required 
transactions. Given the speed of execution and updating of quotations 
in the Exchange's current more electronic market, the DMM, in most 
securities, is physically unable to print the transaction at the bid 
and clean-up price, or bid, one cent better and the clean-up price 
prior to any quote changes or cancellations/replacements of orders. In 
the time it takes the DMM to manually print the block cross transaction 
pursuant to the steps set forth in NYSE Amex Equities Rule 127, quotes 
and prices in the market have been updated. As such, the member 
organization is unable to determine how many shares it must satisfy on 
the Display Book in order to effect the block transaction at the 
negotiated price.
    Without the provisions of NYSE Amex Equities Rule 127, a member 
organization could electronically transmit an order to execute against 
the liquidity (displayed and non-displayed) available at each limit 
price until the bid/offer reached the price the member sought to cross 
his or her order.\7\ However, because Rule 127 mandates that a member 
organization with a block of stock it intends to cross on the Floor at 
a specific clean-up price outside the current NYSE Amex quotation must 
follow the provisions of paragraph (b) of the Rule, member 
organizations are impeded in the execution of block cross transactions 
because of the physical inability of the DMM to print the block cross 
transactions consistent with the provisions of NYSE Amex Equities Rule 
127. This physical impediment to the DMM's ability to print these 
transactions makes compliance with NYSE Amex Equities Rule 127 
virtually impossible in the liquid securities traded on the Exchange.
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    \7\ This is similar to the method employed by off-Floor 
participants wherein orders are sent to market centers for execution 
against protected quotes and the balance of the cross order is then 
printed on a trade reporting facility.
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    The Exchange acknowledges that in order to provide for the 
efficient execution of block cross transactions outside the prevailing 
quote that affords a member organization the ability to cross stock at 
a negotiated price and provide price improvement to resting orders on 
the Display Book, system modifications are required. Such system 
modifications would allow for these trades to be executed consistent 
with the requirements of the proposed amendments to NYSE Amex Equities 
Rule 127, pursuant to the customer's instructions.
    Given the inability of the DMM to manually print the required 
transaction pursuant to NYSE Amex Equities Rule 127 and the need for 
system modification, NYSE Amex proposes to amend NYSE Amex Equities 
Rule 127. The amendments would remove the current requirement in Rule 
127 that a member organization with a block of stock that it intends to 
cross on the Floor at a specific clean-up price outside the current 
NYSE Amex quotation must comply with the provisions of Rule 127.\8\ 
Specifically, the Exchange seeks to amend the rule text in NYSE Amex 
Equities Rule 127(b) by replacing the word ``should'' with ``may'' in 
order to remove the restrictive language that would require member 
organizations to execute block cross transactions outside the 
prevailing NYSE Amex quotation pursuant to the specific provisions of 
the rule.
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    \8\ E-mail from Jennifer D. Kim, Counsel, NYSE Regulation, to 
Theodore Venuti, Special Counsel, Division of Trading and Markets, 
Commission, dated March 17, 2010.
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    Pursuant to proposed NYSE Amex Equities Rule 127(b), the member 
organization may execute block crosses

[[Page 15474]]

outside the prevailing quote prescribed in NYSE Amex Equities Rule 127 
or in the same manner as large non-block trades are currently executed. 
The member organization may electronically route an order to the 
Display Book that will satisfy protected quotes in other markets and 
sweep orders on the Display Book to the cross price and manually cross 
the remainder of the initiating order if market conditions permit, 
i.e., if the remainder of the initiating order will be executed at the 
National Best Bid or Offer (``NBBO'') or consistent with the 
intermarket sweep order exception under Reg NMS or any other applicable 
trade-through exception or exemption that may apply. This cross 
transaction shall be consistent with all NYSE Amex Equities Rules, 
including those rules related to priority and parity.\9\ Member 
organizations will continue to be required to comply with all Reg NMS 
obligations.\10\
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    \9\ See e.g. NYSE Amex Equities Rule 72.
    \10\ 17 CFR 242.600 et seq.; See Securities Exchange Act Release 
No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).
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    Finally, the Exchange seeks to delete all references in the rule 
text to ``percentage orders.'' Percentage orders were eliminated as a 
valid order type on the Exchange in a previously approved NYSE 
filing.\11\ The references in NYSE Amex Equities Rule 127 were 
inadvertently left in and should be deleted.
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    \11\ See Securities Exchange Act Release No.58845 (October 24, 
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46).
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \12\ that an Exchange have rules that 
are designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
The Exchange believes the proposed rule change supports these 
provisions because the proposed amendment removes the current 
impediment to NYSE Amex members organizations' ability to execute block 
cross orders and offers an alternate method while the Exchange develops 
a better mechanism for the execution of block cross orders outside the 
prevailing quotation.
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    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has filed the proposed rule change pursuant to section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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 \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission notes that 
the proposed rule change would allow member organizations to execute 
block cross transactions outside the prevailing NYSE Amex quotation 
consistent with the manner that large, non-block size orders may 
currently be executed on the Exchange and on other market centers. The 
proposed rule change is consistent with Regulation NMS and the 
Commission does not believe that it raises any new substantive issues. 
For these reasons, the Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission designates the proposed rule 
change as operative upon filing.\19\
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    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to 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 filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Commission notes that the Exchange has satisfied 
this requirement.
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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-2010-27 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-2010-27. 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,\20\ all subsequent 
amendments, all written statements

[[Page 15475]]

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 Web site viewing and printing 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 available publicly. All submissions 
should refer to File No. SR-NYSEAmex-2010-27 and should be submitted on 
or before April 19, 2010.
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    \20\ The text of the proposed rule change is available on the 
Commission's Web site at https://sec.gov/rules/sro/shtml.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Florence E. Harmon,
Deputy Secretary.
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    \21\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-6836 Filed 3-26-10; 8:45 am]
BILLING CODE 8011-01-P
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