Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by NYSE Amex LLC Amending Its Rules To Incorporate the Receipt and Execution of Odd-Lot Interest Into the Round Lot Market and Decommission the Use of the “Odd-Lot System”, 35865-35871 [2010-15133]
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Federal Register / Vol. 75, No. 120 / Wednesday, June 23, 2010 / Notices
am and 3 pm. Copies of such filing also
will be available for inspection and
copying at the principal office of the
CBOE. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–CBOE–2010–053 and
should be submitted on or before July
14, 2010.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
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–CBOE–2010–053 on the
subject line.
mstockstill on DSKH9S0YB1PROD with NOTICES
interest. The Exchange has requested
that the Commission waive the 30-day
operative date, to enable the Exchange
to utilize the proposed appointment cost
for VXX options before the
commencement of trading in that option
class. The Commission believes that it is
consistent with the protection of
investors and the public interest to
waive the 30-day operative delay. For
these reasons, the Commission
designates the proposal to be operative
upon filing.9
SECURITIES AND EXCHANGE
COMMISSION
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–CBOE–2010–053. 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 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
9 For purposes only of waiving the 30-day
operative delay of this proposal, the Commission
has considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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[FR Doc. 2010–15127 Filed 6–22–10; 8:45 am]
BILLING CODE 8010–01–P
[Release No. 34–62303; File No. SR–
NYSEAmex–2010–53]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
NYSE Amex LLC Amending Its Rules
To Incorporate the Receipt and
Execution of Odd-Lot Interest Into the
Round Lot Market and Decommission
the Use of the ‘‘Odd-Lot System’’
June 16, 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 June 10,
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, II, and
III 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 amend its
rules to incorporate the receipt and
execution of odd-lot interest into the
round lot market and decommission the
use of the ‘‘Odd-lot System’’. The text of
the proposed rule change is available at
the Exchange, on the Commission’s Web
site at https://www.sec.gov, the
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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35865
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. The Exchange proposes to
amend its rules to incorporate the
receipt and execution of odd-lot interest
into the round lot market and
decommission the use of the ‘‘Odd-lot
system.’’4
Background
Round lot interest on the Exchange is
executed by Display Book® 5 pursuant to
NYSE Amex Equities Rule 72 on a
priority or parity basis.6 Odd-lot
interest, however, is processed in an
Exchange system designated solely for
handling and execution of odd-lot
4 The Exchange notes that parallel changes are
proposed to be made to the rules of the New York
Stock Exchange LLC (‘‘NYSE’’). See SR–NYSE–
2010–43.
5 The Display Book system is an Exchange order
management and execution facility. The Display
Book system receives and displays interest to the
DMM, provides the data feed for NYSE Amex
OpenBook® that is available to market participants,
contains order information and provides a
mechanism to execute and report transactions and
publish results to the Consolidated Tape. The
Display Book system 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. NYSE Amex OpenBook
provides subscribers a real-time view of the
Exchange’s limit-order book for all NYSE–Amex
traded securities.
6 NYSE Amex Equities Rule 72 provides that all
market participants receive an allocation of
executed shares on an equal basis (‘‘parity’’) with
other interest available at that price. In addition,
where there is more than one bidder (offerer)
participating in an execution and one of the bids
(offers) was clearly established as the first made at
a particular price and such bid or offer is the only
interest when such price is or becomes the best bid
or offer published by the Exchange (the ‘‘Setting
Interest’’), that [sic] the displayed portion of such
Setting Interest is entitled to priority. In order to
qualify as Setting Interest, it must have been the
only interest quoted at a price. Only the quoted (i.e.,
displayed) portion of the Setting Interest is entitled
to priority (‘‘Priority Interest’’).
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mstockstill on DSKH9S0YB1PROD with NOTICES
interest (the ‘‘Odd-lot System’’).7 The
Odd-lot System is a separate system
from the Display Book that executes
odd-lot interest and the odd-lot portion
of part of round lot (‘‘PRL’’) interest.8
NYSE Amex Equities Rule 124
governs handling and execution of oddlot interest and the odd-lot portion of
PRL interest in the Odd-lot System.
Pursuant to the provisions of NYSE
Amex Equities Rule 124 all odd-lot
interest and odd-lot portion of PRL
interest is executed against the DMM as
the contra party.9 NYSE Amex Equities
Rule 124 outlines the complex pricing
formula used to determine the price of
odd-lot executions. Generally, the
execution price of odd-lot interest is
determined based on: (i) The price of
executions in the round lot market; (ii)
whether the odd-lot interest was
marketable or non-marketable upon
receipt in the Odd-lot system; and (iii)
in certain instances the Exchange
system that initially received the
interest.10
7 See NYSE Amex Equities Rule 124(a).
In connection with the NYSE Euronext
acquisition of The Amex Membership Corporation
(‘‘AMC’’) pursuant to an Agreement and Plan of
Merger, dated January 17, 2008 (the ‘‘Merger’’), the
Exchange relocated all equities trading conducted
on the Exchange legacy trading systems and
facilities located at 86 Trinity Place, New York,
New York, to trading systems and facilities located
at 11 Wall Street, New York, New York (the
‘‘Equities Relocation’’) on December 1, 2008. The
Exchange’s equity trading systems and facilities at
11 Wall Street (the ‘‘NYSE Amex Trading Systems’’)
are operated by the NYSE on behalf of the
Exchange. See Securities Exchange Act Release No.
58705 (October 1, 2008), 73 FR 58995 (October 8,
2008) (SR–Amex 2008–63) (approving the Equities
Relocation); Securities Exchange Act Release No.
58833 (October 22, 2008), 73 FR 64642 (October 30,
2008) (SR–NYSE–2008–106) and Securities
Exchange Act Release No. 58839 (October 23, 2008),
73 FR 64645 (October 30, 2008) (SR–NYSEALTR–
2008–03) (implementing the Bonds Relocation);
Securities Exchange Act Release No. 59022
(November 26, 2008), 73 FR 73683 (December 3,
2008) (SR–NYSEALTR–2008–10) (adopting
amendments to NYSE Amex Equities Rules to track
changes to corresponding NYSE Rules); Securities
Exchange Act Release No. 59027 (November 28,
2008), 73 FR 73681 (December 3, 2008) (SR–
NYSEALTR–2008–11) (adopting amendments to
Rule 62—NYSE Amex Equities to track changes to
corresponding NYSE Rule 62).
8 PRL orders are for a size within the standard
unit (round-lot) of trading, which is 100 shares for
most stocks, but contains a portion that is smaller
than the standard unit of trading, e.g. 199 shares.
See Supplementary Material .40 of NYSE Amex
Equities Rule 124.
9 See NYSE Amex Equities Rule 124(a).
10 For a fuller discussion of the operation of the
current odd-lot system see, Securities Exchange Act
Release No. 56551 (September 27, 2007), 72 FR
56415 (October 3, 2007) (SR–NYSE–2007–82)
(NYSE modifications to methodology of pricing and
executing orders in the Odd-lot system). See also
Securities Exchange Act Release No. 59614 (March
20, 2009), 74 FR 13501 (March 27, 2009) (NYSE
Alternext–2009–27) (modification to pricing and
execution methodology to execute odd-lot portion
of the PRL orders pursuant to pricing structure in
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Proposed Amendments To Incorporate
Odd-Lots and Odd-Lot Portion of PRL
Interest in the Round Lot Market
The Exchange is proposing to
terminate the Odd-lot System and
incorporate odd-lot interest and the
odd-lot portion of PRL interest into the
round lot market thus enabling such
interest to interact with all other market
interest and be priced in accordance
with overall supply and demand
dynamics. Pursuant to the proposed rule
change, odd-lot interest and odd-lot
portion of PRL interest will be accepted
and executed in the Display Book.
In order to incorporate interest for
fewer than 100 shares into the round lot
market, the Exchange proposes that the
new unit of trading for all securities be
1 share.11 Although the new unit of
trade will be 1 share, the concepts of
round lots and odd-lots remain for the
purposes of quoting as explained in
more detail below.
There will no longer be a separate
execution pricing structure for odd-lot
interest and the odd-lot portion of PRL
interest. Further, because the trading of
odd-lot interest and the odd-lot portion
of PRL interest is being incorporated in
the round lot market the Exchange no
longer needs the DMM to act in the
capacity of odd-lot dealer. The DMM
will no longer be the contra party to all
odd-lot executions except for odd-lot
size quantity that pursuant to Exchange
rules is to be executed in the opening,
re-opening and closing transactions that
remain unpaired.12 The Exchange
therefore seeks to rescind rules that
govern odd-lot dealers and the distinct
pricing for odd-lot interest and the oddNYSE Amex Equities Rule 124(c) and (d).);
Securities Exchange Act Release No. 60139 (June
18, 2009), 74 FR 30342 (June 25, 2009) (SR–
NYSEAmex–2009–18) (Clarification of the pricing
methodology for the odd-lot portion of a PRL order
and the systems capable of accepting PRL and Good
’Til Cancelled Orders during the implementation of
Exchange system enhancements).
11 See Proposed NYSE Amex Equities Rule 55 and
56. In addition, proposed NYSE Amex Equities Rule
55 retains the ability of the Exchange to designate
securities to be quoted in less than 100 shares.
Investors may subscribe to an NYSE market data
product to obtain information on the securities
designated to quote in less than 100 share
increments. Securities so designated pursuant to
NYSE Amex Equities Rule 65 are to ‘‘be dealt in as
provided in NYSE Amex Equities Rules 64.’’
Because the other provisions of NYSE Amex
Equities Rule 65 no longer apply when odd-lots are
incorporated into the round lot market, the
Exchange further proposes to incorporate this
concept into the provisions of proposed NYSE
Amex Equities Rule 55 and delete the provision of
NYSE Amex Equities Rule 65 in its entirety. The
Exchange further proposes to amend
Supplementary Material subparagraph (2)(c) of
NYSE Amex Equities Rule 115A (‘‘Orders at
Opening or in Unusual Situations’’) to change the
term ‘‘unit of trading’’ to one round lot.
12 See Proposed NYSE Amex Equities Rule 104(e).
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Frm 00103
Fmt 4703
Sfmt 4703
lot portion of PRL interest. Specifically,
the Exchange proposes to rescind the
provisions of NYSE Amex Equities
Rules 99 (‘‘Round-Lot Transactions of
Odd-Lot Dealer and Broker’’) 99 Former
(‘‘Round-Lot Transactions of Odd-Lot
Dealer and Broker’’), 100 (Round-Lot
Transactions of Odd-Lot Dealer or
Broker Affecting Odd-Lot Orders’’),
101(‘‘Registration of Odd-lot Dealers and
Brokers’’) and 124 (‘‘Odd-Lot Orders’’)
and retain the rule numbers as reserved.
Similarly, the Exchange proposes to
delete all references to Odd-Lot Dealers
in NYSE Amex Equities Rules 94
(‘‘Designated Market Markers or Odd-Lot
Dealers Interest in Joint Accounts’’) and
108 (‘‘Limitation on Members’ Bids and
Offers’’).
Odd-lot interest and the odd-lot
portion of PRL interest will be generally
subject to all the provisions of Exchange
rules that heretofore applied only to
interest executed in the round lot
market except as described herein. The
Exchange therefore seeks to delete
current subparagraph (e) of NYSE Amex
Equities Rule 13 under the Auto Ex
Order and make conforming changes to
the lettering. The inclusion of odd-lot
interest and the odd-lot portion of PRL
interest in the round lot market will
obviate the need for a specific provision
authorizing automatic execution for the
round lot portion of a PRL order. In
addition, the Exchange proposes to
delete the provisions of current
subparagraph (f) of NYSE Amex Equities
Rule 14, which restricts non-regular way
settlement instructions solely to round
lot and PRL interest. Floor brokers will
now be permitted to accept orders
containing non-regular way settlement
instructions in odd-lot quantities
because they will be able to represent
them in the round lot market. Current
subparagraph (g) of NYSE Amex
Equities Rule 14 will be amended to
become new subparagraph (f) of
proposed NYSE Amex Equities Rule 14.
Order Handling, Execution, Allocation
In order to incorporate odd-lot
interest and the odd-lot portion of PRL
interest into the round lot market, the
Exchange must amend rules governing
order handling, execution and
allocation to reflect that odd-lot
quantities will not be displayed as the
Exchange quotation and odd-lot
executions are not published to the
Consolidated Tape.
The Exchange proposes to amend
NYSE Amex Rule 61 to delete: (i) The
requirement that odd-lot orders be
executed via the Odd-lot System; and
(ii) references to rescinded rule text. The
Exchange further proposes to re-order
the remaining substantive provisions of
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the rule and update the rule text with
currently recognized references, for
example wordy descriptions of PRL will
be replaced with part of round lot or
PRL.
Pursuant to the instant proposal
Display Book will aggregate all interest
at each limit price, including odd-lot
interest and the odd-lot portion of PRL
interest. Interest will be quoted if it is
equal to or greater than a round lot
when the price point becomes the
Exchange best bid and offer (‘‘Exchange
BBO’’). For example, Table 1 below
depicts the Exchange BBO as 200 shares
bid at $20.05 and 200 shares offered at
$20.10. The quoted offer includes two
non-reserve orders for 100 shares each;
however, the quoted bid includes one
non-reserve order to buy for 100 shares
and two odd-lot non-reserve orders for
50 shares each. The 50 shares at the
price point of $20.07 are not quoted
because it is less than a round lot.
TABLE 1
Displayable interest available
Quoted interest
0 .......................................................................
50 .....................................................................
50, 50, 100 .......................................................
Display Book will continue
publishing the Exchange BBO which
may now include aggregated odd-lot
interest and the odd-lot portion of PRL
interest. The Exchange therefore
proposes to amend NYSE Amex Equities
Rule 60 to include a fuller citation to
Regulation National Market System
(‘‘Reg. NMS’’) and clarify that a bid or
offer may also be the aggregation of oddlot interest and the odd-lot portion of
PRL interest, the sum of which is equal
to or greater than a round lot.13 The
Exchange BBO will still be quoted in
round lots.14 The Exchange proposes to
include odd-lot interest and the odd-lot
portion of PRL interest in the Exchange
BBO only when such odd-lot interest
may be aggregated with other interest at
the price point resulting in a sum that
would be equal to or greater than a
round lot.15
Bid price
0
0
200
Offer price
0
$20.07
$20.05
Quoted interest
$20.10
0
0
Because odd-lot interest and the oddlot portion of PRL interest will be
eligible for inclusion in the Exchange
BBO such interest will be considered
‘‘displayable’’ interest for the purposes
of execution and allocation pursuant to
the provisions of NYSE Amex Equities
Rule 72. Consistent with the current
operation of NYSE Amex Equities Rule
72, interest will not be considered
displayable when such interest is
affirmatively designated as excluded
interest (e.g. reserve interest).
In addition, consistent with the
current logic of priority and parity,
incoming single odd-lot interest will
never be eligible to be the Priority
Interest because it can never be the only
interest quoted at the price point.16 For
example, Table 2 and 3 below depict the
Exchange BBO in XYZ security.
Initially, the Exchange BBO is 200
200
0
0
Displayable interest available
100, 100
0
0
shares bid at $20.05 and 100 shares
offered at $20.11. The quoted offer
includes two non-reserve orders for 50
shares each and the quoted bid includes
one non-reserve order to buy for 150
shares and two odd-lot non-reserve
orders for 50 shares each.17 There is no
Priority Interest in the Exchange BBO
because none of the orders were the
only independently displayable interest
quoted at the price point when it
became the Exchange BBO.
Subsequently an order to sell 200 shares
at $20.10 is received. Table 3 shows the
Exchange BBO is updated to reflect 200
shares offered at $20.10 and 200 shares
bid at $20.05. The 200 share order at
$20.10 is Priority Interest because it was
the only independently displayable
interest capable of being quoted at the
price point when the price point became
the Exchange BBO.
TABLE 2
Displayable interest available
Quoted interest
mstockstill on DSKH9S0YB1PROD with NOTICES
0 .......................................................................
0 .......................................................................
0 .......................................................................
0 .......................................................................
10, 20, 30 .........................................................
10, 10, 25, 50 ...................................................
50, 50, 150 .......................................................
13 NYSE Amex Equities Rule 60 currently
provides that the terms ‘‘bid’’ or ‘‘offer’’ shall have
the meaning given to them in § 242.600(b) (‘‘Rule
602’’) of Regulation NMS. Reg. NMS, Rule 600
provides that: Bid or offer means the bid price or
the offer price communicated by a member of a
national securities exchange or member of a
national securities association to any broker or
dealer, or to any customer, at which it is willing to
buy or sell one or more round lots of an NMS
security, as either principal or agent, but shall not
include indications of interest.
The Exchange proposes to amend the citation in
NYSE Amex Equities Rule 60 to: Section 242.602
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Jkt 220001
0
0
0
0
0
0
200
Bid price
Offer price
0
0
$20.09
$20.08
$20.07
$20.06
$20.05
(‘‘Rule 602’’) of Regulation National Market System
(‘‘Reg. NMS’’), 17 CFR part 242.
14 See Consolidated Tape Plan (‘‘CTA Plan’’)
Second Restatement of Plan Submitted to The
Securities and Exchange Commission Pursuant to
Rule 11Aa3–1 Under the Securities Exchange Act
of 1934 at page 26 section VI.(d)(iv). See also
Securities Exchange Act Release Nos. 10787 (May
10, 1974), 39 FR 17799 (order approving CTA Plan).
The most recent restatement of the CTA Plan was
in 1995. The CTA Plan, pursuant to which markets
collect and disseminate last sale price information
for non- NASDAQ listed securities, is a ‘‘transaction
reporting plan’’ under Rule 601 under the Act, 17
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Frm 00104
Fmt 4703
Sfmt 4703
Quoted interest
$20.11
$20.10
$20.09
0
0
0
0
100
0
0
0
0
0
0
Displayable interest available
50, 50
0
0
0
0
0
0
CFR 242.601, and a ‘‘national market system plan’’
under Rule 608 under the Act, 17 CFR 242.608. See
Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
15 See Proposed NYSE Amex Equities Rule 72(a).
16 See supra, note 11.
17 It is also important to note that in this example
although the total number of shares bid on the
Exchange at the Exchange best bid is 250 shares the
quoted bid is 200 shares consistent with the
provisions of proposed NYSE Amex Equities Rule
55. See also supra, note 11.
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TABLE 3
Displayable interest available
Quoted interest
0 .......................................................................
0 .......................................................................
0 .......................................................................
0 .......................................................................
10, 20, 30 .........................................................
10, 10, 25, 50 ...................................................
50, 50, 150 .......................................................
For the same reason, single odd-lot
interest at a price point may not prevent
single displayable round lot or PRL
interest from establishing itself as
Priority Interest. When single round lot
or PRL interest joins odd-lot interest at
a price point and the sum of the oddlot interest is not equal to a round lot,
the single round lot or PRL that is
published as the Exchange BBO is
considered the setting interest and has
established priority at that price point.18
For example, Table 4 and 5 below
Bid price
0
0
0
0
0
0
200
Offer price
0
0
$20.09
$20.08
$20.07
$20.06
$20.05
Quoted interest
$20.11
$20.10
$20.09
0
0
0
0
depict the Exchange BBO in XYZ
security. Initially, the Exchange BBO is
200 shares bid at $20.05 and 100 shares
offered at $20.11. The quoted offer
includes two non-reserve orders for 50
shares each and the quoted bid includes
one non-reserve order to buy for 100
shares and two odd-lot non-reserve
orders for 50 shares each. There is no
Priority Interest in the Exchange BBO
because none of the displayable orders
were the only independently
displayable interest quoted at the price
100
200
0
0
0
0
0
Displayable interest available
50, 50
200
0
0
0
0
0
point when the price point became the
Exchange BBO. Subsequently an order
to sell 150 shares at $20.10 is received.
Table 5 shows the Exchange BBO is
updated to reflect 200 shares offered at
$20.10 and 200 shares bid at $20.05.
The 150 share order at $20.10 is entitled
to be Priority Interest because it was the
only independently displayable interest
capable of being quoted at the price
point when it became the Exchange
BBO.
TABLE 4
Displayable interest available
Quoted interest
0 .......................................................................
0 .......................................................................
0 .......................................................................
0 .......................................................................
10, 20, 30 .........................................................
10, 10, 25, 50 ...................................................
50, 50, 100 .......................................................
0
0
0
0
0
0
200
Bid price
Offer price
............................
............................
$20.09
$20.08
$20.07
$20.06
$20.05
Quoted interest
$20.11
$20.10
$20.09
0
0
0
0
100
0
0
0
0
0
0
Displayable interest available
50, 50
50
0
0
0
0
0
TABLE 5
Displayable interest available
Quoted interest
mstockstill on DSKH9S0YB1PROD with NOTICES
0 .......................................................................
0 .......................................................................
0 .......................................................................
0 .......................................................................
10, 20, 30 .........................................................
10, 10, 25, 50 ...................................................
50, 50, 100 .......................................................
0
0
0
0
0
0
200
Bid price
Offer price
0
0
$20.09
$20.08
$20.07
$20.06
$20.05
Quoted interest
$20.11
$20.10
$20.09
0
0
0
0
100
200
0
0
0
0
0
Displayable interest available
50, 50
50, 150
0
0
0
0
0
PRL interest that is established as
Priority Interest, establishes priority for
the full quantity of the PRL interest. For
example, a 199 share buy limit order
with no designated reserve quantity that
is the only interest available at the price
point when it is quoted will constitute
199 shares of Priority Interest although
the Exchange Bid will only quote 100
shares. Moreover, and consistent with
the handling of Priority Interest of
round lot interest, PRL interest will
retain its Priority Interest status even if
subsequent executions of the original
interest decrement the quantity of the
shares remaining in the interest to less
than a round lot. Priority Interest will
only lose its priority status if it is
cancelled, executed in full or routed
away for execution and returned
unexecuted.19
Display Book as the matching engine
for the Exchange will be responsible for
the execution of all incoming interest
regardless of the share size consistent
with all applicable Exchange rules and
Federal securities laws. All incoming
interest will be eligible to be executed
against eligible contra side interest.
18 See Proposed NYSE Amex Equities Rule 72
(a)(iv).
19 See Proposed NYSE Amex Equities Rule
72(b)(iv). Priority of the setting interest is not
retained on any portion of Priority Interest that
routes to an away market and is returned
unexecuted unless, such returned Priority Interest
is greater than a round lot and there is no other
interest available at the price point or any other
interest available at the price point is less than a
round lot.
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DMM CCS interest will be accessed to
fill or partially fill 20 incoming interest
except, that Display Book will not
access DMM CCS interest to provide an
execution for an incoming odd-lot order.
The Exchange proposes to amend NYSE
Amex Equities Rule 1000 (d)(i) to clarify
that DMM CCS interest will be accessed
in reaction to incoming contra side
interest that is equal to or greater than
one round lot. As is the case today,
DMM CCS interest must be for a
minimum of a round lot however, a
DMM will be allowed to provide
interest in PRL quantities.21 For
example, today a DMM unit may be
willing to provide 150 shares of
additional liquidity at the price point.
Pursuant to current NYSE Amex
Equities Rule 1000 the DMM unit is
only allowed to provide 100 shares or
must go past its risk tolerance to provide
200 shares. Pursuant to the proposal
DMM CCS interest may be designated at
the price point in any amount equal to
or greater than a round lot, (i.e. 150
shares in the previous example).
Executions will be printed to the
Consolidated Tape in round lots or PRL
quantities. Transactions that result in
executions of less than a round lot will
not: (i) Print to the Consolidated Tape; 22
(ii) be considered the last sale; and (iii)
elect buy minus, sell plus or stop
interest for execution.23 The Exchange
therefore proposes to amend NYSE
Amex Equities Rule 1004 to clarify that
buy minus, sell plus and stop interest
are elected by executions that are
reported to the Consolidated Tape.24
Moreover, because liquidity
replenishment points (‘‘LRP’’) values are
calculated based on the last sale on the
Exchange, NYSE Amex Equities Rule
1000 will be amended to clarify that for
automatic executions, Exchange systems
will recalculate LRP values after
executions that are reported to the
Consolidated Tape.
Display Book will continue to allocate
executed shares in round lots; however,
if the quantity of shares to be allocated
to a specific participant is for a quantity
20 CCS interest shall be accessed by Exchange
systems to partially fill incoming Regulation NMScompliant Immediate or Cancel Order, Exchange
Immediate or Cancel Order and any order whose
partial execution will result in a remaining unfilled
quantity of less than one round lot even if such CCS
interest is not designated for partial execution. See
proposed NYSE Amex Equities Rule
1000(e)(iii)(A)(4).
21 See Proposed NYSE Amex Equities Rule
1000(d)(ii).
22 See supra, note 11.
23 See Proposed NYSE Amex Equities Rules 13
and 61.
24 The Exchange further proposes to amend NYSE
Amex Equities Rule 1004 to remove legacy
references to Percentage Orders, which are no
longer order types accepted on the Exchange.
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less than a round lot, the Display Book
will allocate to the participant the
specific number of shares bid or offered.
The Exchange proposes to amend NYSE
Amex Equities Rule 72(c)(viii) to state
that shares are allocated in round lots or
the size of the order if less than one
round lot.
Below see specific trading examples
demonstrating the execution logic
employing priority parity rules: 25
(A) On each trading day, the allocation
wheel for each security is set to begin with
the participant whose interest is entered or
retained first on a time basis. Thereafter,
participants are added to the wheel as their
interest joins existing interest at a particular
price point. If a participant cancels his, her
or its interest and then rejoins, that
participant joins as the last position on the
wheel at that time.
Parity Example 1
Assume there is interest of the Book
Participant (representing orders entered by
two different public customers), three Floor
brokers and the DMM are bidding at the same
price, with no participant established as
Priority Interest. An order to sell is received
by the Exchange. Exchange systems will
divide the allocations among the
participants, listed in time order, as follows:
Public Order #1 100 shares and Public Order
#2 100 shares Book Participant
Floor Broker 1 Participant A
DMM Participant B
Floor Broker 2 Participant C
Floor Broker 3 Participant D
A market order for 300 shares to sell
entered in Exchange systems will allocate
100 shares to the Book Participant (Public
Order #1), Participant A and Participant B
above. Subsequently, another order to sell
300 shares at the same price is received by
Exchange systems. Those shares will be
allocated to Participant C, Participant D, and
Book Participant (Public Order #2).
(B) The allocation wheel will move to the
next participant when an odd-lot allocation
completely fills the interest of such
participant.
Parity Example 2
Assume there is interest of the Book
Participant (representing orders entered by
two different public customers), three Floor
brokers and the DMM are bidding at the same
price, with no participant having priority. An
order to sell is received by the Exchange.
Exchange systems will divide the allocations
among the participants as follows:
Public Order #1 100 shares and Public Order
#2 100 shares Book Participant
Floor Broker 1 Participant A 50 shares
DMM Participant B 50 shares
Floor Broker 2 Participant C 300 shares
Floor Broker 3 Participant D 300 shares
A market order for 200 shares to sell
entered in Exchange systems will allocate
100 shares to the Book Participant (Public
Order #1), Participant A will receive 50
shares, Participant B above will receive 50
25 See
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35869
shares. Subsequently, another order to sell
300 shares at the same price is received by
Exchange systems. Those shares will be
allocated to Participant C, Participant D, and
Book Participant (Public Order #2).
Parity Example 3
Assume there is interest of the Book
Participant (representing orders entered by
two different public customers), three Floor
brokers and the DMM are bidding at the same
price, with no participant having priority. An
order to sell is received by the Exchange.
Exchange systems will divide the allocations
among the participants as follows:
Public Order #1 100 shares and Public Order
#2 100 shares Book Participant
Floor Broker 1 Participant A 50 shares
DMM Participant B 75 shares
Floor Broker 2 Participant C 300 shares
Floor Broker 3 Participant D 300 shares
A market order for 200 shares to sell
entered in Exchange systems will allocate
100 shares to the Book Participant (Public
Order #1), Participant A will receive 50
shares, Participant B above will receive 50
shares. Subsequently, another order to sell
300 shares at the same price is received by
Exchange systems. The allocation wheel will
start with Participant B. Participant B is
allocated 25 shares, Participant C is allocated
100 shares, Participant D is allocated 100
shares, and Book Participant (Public Order
#2) is allocated 75 shares. Exchange systems
will retain Book Participant (Public Order #2)
as the participant eligible to receive the next
allocation at that price point.
(C) The allocation wheel will also move to
the next participant where Exchange systems
execute remaining displayable odd-lot
interest prior to replenishing the displayable
quantity of a participant.
Parity Example 4
Assume the available bid interest on the
Exchange consists of a single Book
Participant and two Floor brokers listed
below in order of their position on the
allocation wheel None of the participants
have priority.
Floor Broker 1 Participant A—200 shares
displayed and 4800 shares reserve
Book Participant Public Order #1 Participant
B—500 shares displayed
Floor Broker 2 Participant C—500 shares
displayed
An order to sell 350 shares is received by
the Exchange. Exchange systems will divide
the allocations among the participants as
follows:
Participant A—150 shares
Book Participant—100 shares
Participant C—100 shares
Each participant receives a round lot
allocation. The Allocation wheel returns to
Participant A as the first participant on the
wheel and allocates the remaining 50 shares.
The allocation wheel remains on Participant
A. The remaining interest of the three
participants is as follows:
Floor Broker 1 Participant A—50 shares
displayed and 4800 shares reserve
Book Participant Public Order #1 Participant
B 400 shares displayed
Floor Broker 2 Participant C 400 shares
displayed
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Federal Register / Vol. 75, No. 120 / Wednesday, June 23, 2010 / Notices
Prior to the system replenishing the
displayed quantity of Participant A, an order
to sell 100 shares is received by Exchange
systems. The system will allocate 50 shares
to Participants A and B. The next allocation
at the price point will begin with Participant
B.
mstockstill on DSKH9S0YB1PROD with NOTICES
Miscellaneous Amendments
The Exchange proposes to amend the
section title for the grouped NYSE Amex
Equities Rules 99–114 to delete: (i)
Legacy references to specialists and
registered traders; and (ii) the reference
to Odd-lot Dealers. The amended title
will read, ‘‘Designated Market Makers’
(‘‘DMMs’’) and Member Organizations’
Dealings on the Floor’’. The Exchange
also proposes to make conforming
amendments to other Exchange rules
that refer to odd-lot systems and dealers,
including NYSE Amex Equities Rules
92, 94, and 104.
In addition, the Exchange proposes to
amend Rule 411 to delete the
requirement that when a person gives,
either for his own account, for various
accounts in which he has an actual
monetary interest, or for accounts over
which such person is exercising
investment discretion, buy or sell oddlot orders that aggregate 100 shares or
more, such odd-lot orders must be
consolidated into round lots. The
Exchange proposes to delete this
requirement as moot now that Exchange
systems will receive odd-lot orders in
the same system that handles round lot
orders.
Additional New Systemic Capabilities
The system changes required to
decommission the Odd-lot System will
also enable the Exchange to expand its
price fields. Previous constraints on the
number of characters that could be
included in a price field required a ten
cent ($.10) minimum price variation for
quoting and order entry in securities
priced at or greater than $100,000. As a
result of the new systemic capability to
include additional characters in the
price fields, the Exchange proposes to
amend NYSE Amex Equities Rules 62
(‘‘Variations’’) to remove the requirement
that $.10 be the minimum variation for
securities priced at or greater than
$100,000. Specifically, the Exchange
proposes to amend Supplementary
Material .10 of NYSE Amex Equities
Rule 62 to state that the minimum price
variation for quoting and entry of
interest in securities priced at or greater
than a $1.00 will be a penny (‘‘$.01’’).
In addition, the incorporation of oddlot interest and the odd-lot portion of
PRL interest into Display Book will
provide Exchange market data systems
access to odd-lot volumes. Market
participants will therefore benefit from
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16:17 Jun 22, 2010
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additional transparency because the
depth of book information published by
the Exchange via its market data
systems will now include those
quantities. NYSE Amex OpenBook® will
publish in shares the total volume of
interest available at each price point.26
Implementation of Proposed
Amendments 27
Subject to Commission approval, the
Exchange intends to progressively
implement these systemic changes on a
security by security basis as it gains
experience with the new technology
until it is operative in all securities
traded on the Floor. During the
implementation, the Exchange will
identify on its Web site which securities
have been transitioned to the new
system. In addition, the Exchange will
provide information to its constituents
about any modifications to the start or
end date related to the implementation
of such proposal via its Trader Update
Notices that are sent via e-mail to
subscribers and posted on the Exchange
Web site.
2. Statutory basis. The basis under the
Act for this proposed rule change is the
requirement under section 6(b)(5) 28 that
an Exchange have rules that are
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest. The instant proposal is
in keeping with these principles in that
it removes timing restrictions on the
execution of odd-lot interest and the
odd-lot portion of PRL interest by
allowing such interest, if marketable to
be immediately and automatically
executed. It further promotes the
interaction of such interest with all
other market interest and enables it to
be priced in accordance with supply
and demand dynamics.
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
26 NYSE Amex OpenBook provides subscribers a
real-time view of the Exchange’s limit-order book
for all NYSE-traded securities. NYSE OpenBook
shows the aggregate limit-order volume at every bid
and offer price, thus responding to customer
demand for more depth-of-market data and raising
the NYSE Amex market to an even greater level of
transparency.
27 See e-mail from Clare F. Saperstein, Managing
Director, NYSE Regulation, Inc., to Nathan
Saunders, Special Counsel, and Gary Rubin,
Attorney, Commission, dated June 14, 2010.
28 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00107
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necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve the proposed
rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Exchange
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–2010–53 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–2010–53. 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
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Federal Register / Vol. 75, No. 120 / Wednesday, June 23, 2010 / Notices
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
am and 3 pm. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEAmex–2010–53 and should be
submitted on or before July 14, 2010.
Dated: June 16, 2010.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–15133 Filed 6–22–10; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62294; File No. SR–Phlx–
2010–81]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NASDAQ
OMX PHLX, Inc. To List Options on
Trust Issued Receipts in $1 Strike
Intervals
mstockstill on DSKH9S0YB1PROD with NOTICES
June 15, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 10,
2010, NASDAQ OMX PHLX, Inc.
(‘‘PHLX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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16:17 Jun 22, 2010
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II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8010–01–P
29 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Exchange Rule 1012 to allow the
Exchange to list options on Trust Issued
Receipts in $1 strike price intervals.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nasdaqtrader.com/
micro.aspx?id=PHLXRulefilings, at the
principal office of the Exchange, on the
Commission’s Web site at https://
www.sec.gov, and at the Commission’s
Public Reference Room.
1. Purpose
The purpose of the proposed rule
change is to amend Exchange Rule 1012,
Series of Option Contracts Open for
Trading, by adding additional text to
Commentary .05(a)(vi) to allow the
Exchange to list options on the Trust
Issued Receipts (‘‘TIRs’’), including
HOLding Company Depository ReceiptS
(‘‘HOLDRS’’), as defined under
Commentary .05(a)(iv) to Rule 1012, in
$1 or greater strike price intervals,
where the strike price is $200 or less
and $5 or greater where the strike price
is greater than $200.3
Currently, the strike price intervals for
options on TIRs are as follows: (1) $2.50
or greater where the strike price is
$25.00 or less; (2) $5.00 or greater where
the strike price is greater than $25.00;
and (3) $10.00 or greater where the
strike price is greater than $200.4
The Exchange is seeking to permit $1
strikes for options on TIRs (where the
3 HOLDRS are a type of Trust Issued Receipt and
the current proposal would permit $1 strikes for
options on HOLDRS (where the strike price is less
than $200).
4 See Exchange Rule 1012, Commentary .05(a)(iii).
See also Securities Exchange Act Release No. 44709
(August 16, 2001), 66 FR 44194 (August 22, 2001)
(SR–Phlx–2001–71).
PO 00000
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35871
strike price is less than $200) because
TIRs have characteristics similar to
exchange-traded funds (‘‘ETFs’’).
Specifically, TIRs are exchange-listed
securities representing beneficial
ownership of the specific deposited
securities represented by the receipts.
They are negotiable receipts issued by a
trust representing securities of issuers
that have been deposited and held on
behalf of the holders of the TIRs. TIRs,
which trade in round-lots of 100, and
multiples thereof, may be issued after
their initial offering through a deposit
with the trustee of the required number
of shares of common stock of the
underlying issuers. This characteristic
of TIRs is similar to that of ETFs which
also may be created on any business day
upon receipt of the requisite securities
or other investment assets comprising a
creation unit. The trust only issues
receipts upon the deposit of the shares
of the underlying securities that are
represented by a round-lot of 100
receipts. Likewise, the trust will cancel,
and an investor may obtain, hold, trade
or surrender TIRs in a round-lot and
round-lot multiples of 100 receipts.
Strike prices for ETF options are
permitted in $1 or greater intervals
where the strike price is $200 or less
and $5 or greater where the strike is
greater than $200.5 Accordingly, the
Exchange believes that the rationale for
permitting $1 strikes for ETF options
equally applies to permitting $1 strikes
for options on TIRs.
The Exchange has analyzed its
capacity and represents that it believes
the Exchange and the Options Price
Reporting Authority have the necessary
system capacity to handle the additional
traffic associated with the listing and
trading of $1 strikes, where the strike
price is less than $200, for options on
TIRs.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 6 in general, and furthers the
objectives of Section 6(b)(5) of the Act 7
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
allowing the Exchange to list options on
TIRs at $1 strike price intervals. The
Exchange believes that the marketplace
5 See Exchange Rule 1012, Commentary .05
(permitting $1 strikes for options on Units covered
under Commentary .05, also known as ETF
options).
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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]]>Agencies
[Federal Register Volume 75, Number 120 (Wednesday, June 23, 2010)]
[Notices]
[Pages 35865-35871]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15133]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62303; File No. SR-NYSEAmex-2010-53]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by NYSE Amex LLC Amending Its Rules To Incorporate the Receipt
and Execution of Odd-Lot Interest Into the Round Lot Market and
Decommission the Use of the ``Odd-Lot System''
June 16, 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 June 10, 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, II,
and III 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 amend its rules to incorporate the receipt
and execution of odd-lot interest into the round lot market and
decommission the use of the ``Odd-lot System''. The text of the
proposed rule change is available at the Exchange, on the Commission's
Web site at https://www.sec.gov, 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. The Exchange proposes to amend its rules to incorporate
the receipt and execution of odd-lot interest into the round lot market
and decommission the use of the ``Odd-lot system.''\4\
---------------------------------------------------------------------------
\4\ The Exchange notes that parallel changes are proposed to be
made to the rules of the New York Stock Exchange LLC (``NYSE''). See
SR-NYSE-2010-43.
---------------------------------------------------------------------------
Background
Round lot interest on the Exchange is executed by Display
Book[supreg] \5\ pursuant to NYSE Amex Equities Rule 72 on a priority
or parity basis.\6\ Odd-lot interest, however, is processed in an
Exchange system designated solely for handling and execution of odd-lot
[[Page 35866]]
interest (the ``Odd-lot System'').\7\ The Odd-lot System is a separate
system from the Display Book that executes odd-lot interest and the
odd-lot portion of part of round lot (``PRL'') interest.\8\
---------------------------------------------------------------------------
\5\ The Display Book system is an Exchange order management and
execution facility. The Display Book system receives and displays
interest to the DMM, provides the data feed for NYSE Amex
OpenBook[supreg] that is available to market participants, contains
order information and provides a mechanism to execute and report
transactions and publish results to the Consolidated Tape. The
Display Book system 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. NYSE Amex OpenBook provides subscribers a real-time view of
the Exchange's limit-order book for all NYSE-Amex traded securities.
\6\ NYSE Amex Equities Rule 72 provides that all market
participants receive an allocation of executed shares on an equal
basis (``parity'') with other interest available at that price. In
addition, where there is more than one bidder (offerer)
participating in an execution and one of the bids (offers) was
clearly established as the first made at a particular price and such
bid or offer is the only interest when such price is or becomes the
best bid or offer published by the Exchange (the ``Setting
Interest''), that [sic] the displayed portion of such Setting
Interest is entitled to priority. In order to qualify as Setting
Interest, it must have been the only interest quoted at a price.
Only the quoted (i.e., displayed) portion of the Setting Interest is
entitled to priority (``Priority Interest'').
\7\ See NYSE Amex Equities Rule 124(a).
In connection with the NYSE Euronext acquisition of The Amex
Membership Corporation (``AMC'') pursuant to an Agreement and Plan
of Merger, dated January 17, 2008 (the ``Merger''), the Exchange
relocated all equities trading conducted on the Exchange legacy
trading systems and facilities located at 86 Trinity Place, New
York, New York, to trading systems and facilities located at 11 Wall
Street, New York, New York (the ``Equities Relocation'') on December
1, 2008. The Exchange's equity trading systems and facilities at 11
Wall Street (the ``NYSE Amex Trading Systems'') are operated by the
NYSE on behalf of the Exchange. See Securities Exchange Act Release
No. 58705 (October 1, 2008), 73 FR 58995 (October 8, 2008) (SR-Amex
2008-63) (approving the Equities Relocation); Securities Exchange
Act Release No. 58833 (October 22, 2008), 73 FR 64642 (October 30,
2008) (SR-NYSE-2008-106) and Securities Exchange Act Release No.
58839 (October 23, 2008), 73 FR 64645 (October 30, 2008) (SR-
NYSEALTR-2008-03) (implementing the Bonds Relocation); Securities
Exchange Act Release No. 59022 (November 26, 2008), 73 FR 73683
(December 3, 2008) (SR-NYSEALTR-2008-10) (adopting amendments to
NYSE Amex Equities Rules to track changes to corresponding NYSE
Rules); Securities Exchange Act Release No. 59027 (November 28,
2008), 73 FR 73681 (December 3, 2008) (SR-NYSEALTR-2008-11)
(adopting amendments to Rule 62--NYSE Amex Equities to track changes
to corresponding NYSE Rule 62).
\8\ PRL orders are for a size within the standard unit (round-
lot) of trading, which is 100 shares for most stocks, but contains a
portion that is smaller than the standard unit of trading, e.g. 199
shares. See Supplementary Material .40 of NYSE Amex Equities Rule
124.
---------------------------------------------------------------------------
NYSE Amex Equities Rule 124 governs handling and execution of odd-
lot interest and the odd-lot portion of PRL interest in the Odd-lot
System. Pursuant to the provisions of NYSE Amex Equities Rule 124 all
odd-lot interest and odd-lot portion of PRL interest is executed
against the DMM as the contra party.\9\ NYSE Amex Equities Rule 124
outlines the complex pricing formula used to determine the price of
odd-lot executions. Generally, the execution price of odd-lot interest
is determined based on: (i) The price of executions in the round lot
market; (ii) whether the odd-lot interest was marketable or non-
marketable upon receipt in the Odd-lot system; and (iii) in certain
instances the Exchange system that initially received the interest.\10\
---------------------------------------------------------------------------
\9\ See NYSE Amex Equities Rule 124(a).
\10\ For a fuller discussion of the operation of the current
odd-lot system see, Securities Exchange Act Release No. 56551
(September 27, 2007), 72 FR 56415 (October 3, 2007) (SR-NYSE-2007-
82) (NYSE modifications to methodology of pricing and executing
orders in the Odd-lot system). See also Securities Exchange Act
Release No. 59614 (March 20, 2009), 74 FR 13501 (March 27, 2009)
(NYSE Alternext-2009-27) (modification to pricing and execution
methodology to execute odd-lot portion of the PRL orders pursuant to
pricing structure in NYSE Amex Equities Rule 124(c) and (d).);
Securities Exchange Act Release No. 60139 (June 18, 2009), 74 FR
30342 (June 25, 2009) (SR-NYSEAmex-2009-18) (Clarification of the
pricing methodology for the odd-lot portion of a PRL order and the
systems capable of accepting PRL and Good 'Til Cancelled Orders
during the implementation of Exchange system enhancements).
---------------------------------------------------------------------------
Proposed Amendments To Incorporate Odd-Lots and Odd-Lot Portion of PRL
Interest in the Round Lot Market
The Exchange is proposing to terminate the Odd-lot System and
incorporate odd-lot interest and the odd-lot portion of PRL interest
into the round lot market thus enabling such interest to interact with
all other market interest and be priced in accordance with overall
supply and demand dynamics. Pursuant to the proposed rule change, odd-
lot interest and odd-lot portion of PRL interest will be accepted and
executed in the Display Book.
In order to incorporate interest for fewer than 100 shares into the
round lot market, the Exchange proposes that the new unit of trading
for all securities be 1 share.\11\ Although the new unit of trade will
be 1 share, the concepts of round lots and odd-lots remain for the
purposes of quoting as explained in more detail below.
---------------------------------------------------------------------------
\11\ See Proposed NYSE Amex Equities Rule 55 and 56. In
addition, proposed NYSE Amex Equities Rule 55 retains the ability of
the Exchange to designate securities to be quoted in less than 100
shares. Investors may subscribe to an NYSE market data product to
obtain information on the securities designated to quote in less
than 100 share increments. Securities so designated pursuant to NYSE
Amex Equities Rule 65 are to ``be dealt in as provided in NYSE Amex
Equities Rules 64.'' Because the other provisions of NYSE Amex
Equities Rule 65 no longer apply when odd-lots are incorporated into
the round lot market, the Exchange further proposes to incorporate
this concept into the provisions of proposed NYSE Amex Equities Rule
55 and delete the provision of NYSE Amex Equities Rule 65 in its
entirety. The Exchange further proposes to amend Supplementary
Material subparagraph (2)(c) of NYSE Amex Equities Rule 115A
(``Orders at Opening or in Unusual Situations'') to change the term
``unit of trading'' to one round lot.
---------------------------------------------------------------------------
There will no longer be a separate execution pricing structure for
odd-lot interest and the odd-lot portion of PRL interest. Further,
because the trading of odd-lot interest and the odd-lot portion of PRL
interest is being incorporated in the round lot market the Exchange no
longer needs the DMM to act in the capacity of odd-lot dealer. The DMM
will no longer be the contra party to all odd-lot executions except for
odd-lot size quantity that pursuant to Exchange rules is to be executed
in the opening, re-opening and closing transactions that remain
unpaired.\12\ The Exchange therefore seeks to rescind rules that govern
odd-lot dealers and the distinct pricing for odd-lot interest and the
odd-lot portion of PRL interest. Specifically, the Exchange proposes to
rescind the provisions of NYSE Amex Equities Rules 99 (``Round-Lot
Transactions of Odd-Lot Dealer and Broker'') 99 Former (``Round-Lot
Transactions of Odd-Lot Dealer and Broker''), 100 (Round-Lot
Transactions of Odd-Lot Dealer or Broker Affecting Odd-Lot Orders''),
101(``Registration of Odd-lot Dealers and Brokers'') and 124 (``Odd-Lot
Orders'') and retain the rule numbers as reserved. Similarly, the
Exchange proposes to delete all references to Odd-Lot Dealers in NYSE
Amex Equities Rules 94 (``Designated Market Markers or Odd-Lot Dealers
Interest in Joint Accounts'') and 108 (``Limitation on Members' Bids
and Offers'').
---------------------------------------------------------------------------
\12\ See Proposed NYSE Amex Equities Rule 104(e).
---------------------------------------------------------------------------
Odd-lot interest and the odd-lot portion of PRL interest will be
generally subject to all the provisions of Exchange rules that
heretofore applied only to interest executed in the round lot market
except as described herein. The Exchange therefore seeks to delete
current subparagraph (e) of NYSE Amex Equities Rule 13 under the Auto
Ex Order and make conforming changes to the lettering. The inclusion of
odd-lot interest and the odd-lot portion of PRL interest in the round
lot market will obviate the need for a specific provision authorizing
automatic execution for the round lot portion of a PRL order. In
addition, the Exchange proposes to delete the provisions of current
subparagraph (f) of NYSE Amex Equities Rule 14, which restricts non-
regular way settlement instructions solely to round lot and PRL
interest. Floor brokers will now be permitted to accept orders
containing non-regular way settlement instructions in odd-lot
quantities because they will be able to represent them in the round lot
market. Current subparagraph (g) of NYSE Amex Equities Rule 14 will be
amended to become new subparagraph (f) of proposed NYSE Amex Equities
Rule 14.
Order Handling, Execution, Allocation
In order to incorporate odd-lot interest and the odd-lot portion of
PRL interest into the round lot market, the Exchange must amend rules
governing order handling, execution and allocation to reflect that odd-
lot quantities will not be displayed as the Exchange quotation and odd-
lot executions are not published to the Consolidated Tape.
The Exchange proposes to amend NYSE Amex Rule 61 to delete: (i) The
requirement that odd-lot orders be executed via the Odd-lot System; and
(ii) references to rescinded rule text. The Exchange further proposes
to re-order the remaining substantive provisions of
[[Page 35867]]
the rule and update the rule text with currently recognized references,
for example wordy descriptions of PRL will be replaced with part of
round lot or PRL.
Pursuant to the instant proposal Display Book will aggregate all
interest at each limit price, including odd-lot interest and the odd-
lot portion of PRL interest. Interest will be quoted if it is equal to
or greater than a round lot when the price point becomes the Exchange
best bid and offer (``Exchange BBO''). For example, Table 1 below
depicts the Exchange BBO as 200 shares bid at $20.05 and 200 shares
offered at $20.10. The quoted offer includes two non-reserve orders for
100 shares each; however, the quoted bid includes one non-reserve order
to buy for 100 shares and two odd-lot non-reserve orders for 50 shares
each. The 50 shares at the price point of $20.07 are not quoted because
it is less than a round lot.
Table 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Displayable
Displayable interest available Quoted interest Bid price Offer price Quoted interest interest
available
--------------------------------------------------------------------------------------------------------------------------------------------------------
0............................................................. 0 0 $20.10 200 100, 100
50............................................................ 0 $20.07 0 0 0
50, 50, 100................................................... 200 $20.05 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Display Book will continue publishing the Exchange BBO which may
now include aggregated odd-lot interest and the odd-lot portion of PRL
interest. The Exchange therefore proposes to amend NYSE Amex Equities
Rule 60 to include a fuller citation to Regulation National Market
System (``Reg. NMS'') and clarify that a bid or offer may also be the
aggregation of odd-lot interest and the odd-lot portion of PRL
interest, the sum of which is equal to or greater than a round lot.\13\
The Exchange BBO will still be quoted in round lots.\14\ The Exchange
proposes to include odd-lot interest and the odd-lot portion of PRL
interest in the Exchange BBO only when such odd-lot interest may be
aggregated with other interest at the price point resulting in a sum
that would be equal to or greater than a round lot.\15\
---------------------------------------------------------------------------
\13\ NYSE Amex Equities Rule 60 currently provides that the
terms ``bid'' or ``offer'' shall have the meaning given to them in
Sec. 242.600(b) (``Rule 602'') of Regulation NMS. Reg. NMS, Rule
600 provides that: Bid or offer means the bid price or the offer
price communicated by a member of a national securities exchange or
member of a national securities association to any broker or dealer,
or to any customer, at which it is willing to buy or sell one or
more round lots of an NMS security, as either principal or agent,
but shall not include indications of interest.
The Exchange proposes to amend the citation in NYSE Amex
Equities Rule 60 to: Section 242.602 (``Rule 602'') of Regulation
National Market System (``Reg. NMS''), 17 CFR part 242.
\14\ See Consolidated Tape Plan (``CTA Plan'') Second
Restatement of Plan Submitted to The Securities and Exchange
Commission Pursuant to Rule 11Aa3-1 Under the Securities Exchange
Act of 1934 at page 26 section VI.(d)(iv). See also Securities
Exchange Act Release Nos. 10787 (May 10, 1974), 39 FR 17799 (order
approving CTA Plan). The most recent restatement of the CTA Plan was
in 1995. The CTA Plan, pursuant to which markets collect and
disseminate last sale price information for non- NASDAQ listed
securities, is a ``transaction reporting plan'' under Rule 601 under
the Act, 17 CFR 242.601, and a ``national market system plan'' under
Rule 608 under the Act, 17 CFR 242.608. See Securities Exchange Act
Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).
\15\ See Proposed NYSE Amex Equities Rule 72(a).
---------------------------------------------------------------------------
Because odd-lot interest and the odd-lot portion of PRL interest
will be eligible for inclusion in the Exchange BBO such interest will
be considered ``displayable'' interest for the purposes of execution
and allocation pursuant to the provisions of NYSE Amex Equities Rule
72. Consistent with the current operation of NYSE Amex Equities Rule
72, interest will not be considered displayable when such interest is
affirmatively designated as excluded interest (e.g. reserve interest).
In addition, consistent with the current logic of priority and
parity, incoming single odd-lot interest will never be eligible to be
the Priority Interest because it can never be the only interest quoted
at the price point.\16\ For example, Table 2 and 3 below depict the
Exchange BBO in XYZ security. Initially, the Exchange BBO is 200 shares
bid at $20.05 and 100 shares offered at $20.11. The quoted offer
includes two non-reserve orders for 50 shares each and the quoted bid
includes one non-reserve order to buy for 150 shares and two odd-lot
non-reserve orders for 50 shares each.\17\ There is no Priority
Interest in the Exchange BBO because none of the orders were the only
independently displayable interest quoted at the price point when it
became the Exchange BBO. Subsequently an order to sell 200 shares at
$20.10 is received. Table 3 shows the Exchange BBO is updated to
reflect 200 shares offered at $20.10 and 200 shares bid at $20.05. The
200 share order at $20.10 is Priority Interest because it was the only
independently displayable interest capable of being quoted at the price
point when the price point became the Exchange BBO.
---------------------------------------------------------------------------
\16\ See supra, note 11.
\17\ It is also important to note that in this example although
the total number of shares bid on the Exchange at the Exchange best
bid is 250 shares the quoted bid is 200 shares consistent with the
provisions of proposed NYSE Amex Equities Rule 55. See also supra,
note 11.
Table 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Displayable
Displayable interest available Quoted interest Bid price Offer price Quoted interest interest
available
--------------------------------------------------------------------------------------------------------------------------------------------------------
0............................................................. 0 0 $20.11 100 50, 50
0............................................................. 0 0 $20.10 0 0
0............................................................. 0 $20.09 $20.09 0 0
0............................................................. 0 $20.08 0 0 0
10, 20, 30.................................................... 0 $20.07 0 0 0
10, 10, 25, 50................................................ 0 $20.06 0 0 0
50, 50, 150................................................... 200 $20.05 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 35868]]
Table 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Displayable
Displayable interest available Quoted interest Bid price Offer price Quoted interest interest
available
--------------------------------------------------------------------------------------------------------------------------------------------------------
0............................................................. 0 0 $20.11 100 50, 50
0............................................................. 0 0 $20.10 200 200
0............................................................. 0 $20.09 $20.09 0 0
0............................................................. 0 $20.08 0 0 0
10, 20, 30.................................................... 0 $20.07 0 0 0
10, 10, 25, 50................................................ 0 $20.06 0 0 0
50, 50, 150................................................... 200 $20.05 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
For the same reason, single odd-lot interest at a price point may
not prevent single displayable round lot or PRL interest from
establishing itself as Priority Interest. When single round lot or PRL
interest joins odd-lot interest at a price point and the sum of the
odd-lot interest is not equal to a round lot, the single round lot or
PRL that is published as the Exchange BBO is considered the setting
interest and has established priority at that price point.\18\ For
example, Table 4 and 5 below depict the Exchange BBO in XYZ security.
Initially, the Exchange BBO is 200 shares bid at $20.05 and 100 shares
offered at $20.11. The quoted offer includes two non-reserve orders for
50 shares each and the quoted bid includes one non-reserve order to buy
for 100 shares and two odd-lot non-reserve orders for 50 shares each.
There is no Priority Interest in the Exchange BBO because none of the
displayable orders were the only independently displayable interest
quoted at the price point when the price point became the Exchange BBO.
Subsequently an order to sell 150 shares at $20.10 is received. Table 5
shows the Exchange BBO is updated to reflect 200 shares offered at
$20.10 and 200 shares bid at $20.05. The 150 share order at $20.10 is
entitled to be Priority Interest because it was the only independently
displayable interest capable of being quoted at the price point when it
became the Exchange BBO.
---------------------------------------------------------------------------
\18\ See Proposed NYSE Amex Equities Rule 72 (a)(iv).
Table 4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Displayable
Displayable interest available Quoted interest Bid price Offer price Quoted interest interest
available
--------------------------------------------------------------------------------------------------------------------------------------------------------
0............................................................. 0 ................ $20.11 100 50, 50
0............................................................. 0 ................ $20.10 0 50
0............................................................. 0 $20.09 $20.09 0 0
0............................................................. 0 $20.08 0 0 0
10, 20, 30.................................................... 0 $20.07 0 0 0
10, 10, 25, 50................................................ 0 $20.06 0 0 0
50, 50, 100................................................... 200 $20.05 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Displayable
Displayable interest available Quoted interest Bid price Offer price Quoted interest interest
available
--------------------------------------------------------------------------------------------------------------------------------------------------------
0............................................................. 0 0 $20.11 100 50, 50
0............................................................. 0 0 $20.10 200 50, 150
0............................................................. 0 $20.09 $20.09 0 0
0............................................................. 0 $20.08 0 0 0
10, 20, 30.................................................... 0 $20.07 0 0 0
10, 10, 25, 50................................................ 0 $20.06 0 0 0
50, 50, 100................................................... 200 $20.05 0 0 0
--------------------------------------------------------------------------------------------------------------------------------------------------------
PRL interest that is established as Priority Interest, establishes
priority for the full quantity of the PRL interest. For example, a 199
share buy limit order with no designated reserve quantity that is the
only interest available at the price point when it is quoted will
constitute 199 shares of Priority Interest although the Exchange Bid
will only quote 100 shares. Moreover, and consistent with the handling
of Priority Interest of round lot interest, PRL interest will retain
its Priority Interest status even if subsequent executions of the
original interest decrement the quantity of the shares remaining in the
interest to less than a round lot. Priority Interest will only lose its
priority status if it is cancelled, executed in full or routed away for
execution and returned unexecuted.\19\
---------------------------------------------------------------------------
\19\ See Proposed NYSE Amex Equities Rule 72(b)(iv). Priority of
the setting interest is not retained on any portion of Priority
Interest that routes to an away market and is returned unexecuted
unless, such returned Priority Interest is greater than a round lot
and there is no other interest available at the price point or any
other interest available at the price point is less than a round
lot.
---------------------------------------------------------------------------
Display Book as the matching engine for the Exchange will be
responsible for the execution of all incoming interest regardless of
the share size consistent with all applicable Exchange rules and
Federal securities laws. All incoming interest will be eligible to be
executed against eligible contra side interest.
[[Page 35869]]
DMM CCS interest will be accessed to fill or partially fill \20\
incoming interest except, that Display Book will not access DMM CCS
interest to provide an execution for an incoming odd-lot order. The
Exchange proposes to amend NYSE Amex Equities Rule 1000 (d)(i) to
clarify that DMM CCS interest will be accessed in reaction to incoming
contra side interest that is equal to or greater than one round lot. As
is the case today, DMM CCS interest must be for a minimum of a round
lot however, a DMM will be allowed to provide interest in PRL
quantities.\21\ For example, today a DMM unit may be willing to provide
150 shares of additional liquidity at the price point. Pursuant to
current NYSE Amex Equities Rule 1000 the DMM unit is only allowed to
provide 100 shares or must go past its risk tolerance to provide 200
shares. Pursuant to the proposal DMM CCS interest may be designated at
the price point in any amount equal to or greater than a round lot,
(i.e. 150 shares in the previous example).
---------------------------------------------------------------------------
\20\ CCS interest shall be accessed by Exchange systems to
partially fill incoming Regulation NMS-compliant Immediate or Cancel
Order, Exchange Immediate or Cancel Order and any order whose
partial execution will result in a remaining unfilled quantity of
less than one round lot even if such CCS interest is not designated
for partial execution. See proposed NYSE Amex Equities Rule
1000(e)(iii)(A)(4).
\21\ See Proposed NYSE Amex Equities Rule 1000(d)(ii).
---------------------------------------------------------------------------
Executions will be printed to the Consolidated Tape in round lots
or PRL quantities. Transactions that result in executions of less than
a round lot will not: (i) Print to the Consolidated Tape; \22\ (ii) be
considered the last sale; and (iii) elect buy minus, sell plus or stop
interest for execution.\23\ The Exchange therefore proposes to amend
NYSE Amex Equities Rule 1004 to clarify that buy minus, sell plus and
stop interest are elected by executions that are reported to the
Consolidated Tape.\24\ Moreover, because liquidity replenishment points
(``LRP'') values are calculated based on the last sale on the Exchange,
NYSE Amex Equities Rule 1000 will be amended to clarify that for
automatic executions, Exchange systems will recalculate LRP values
after executions that are reported to the Consolidated Tape.
---------------------------------------------------------------------------
\22\ See supra, note 11.
\23\ See Proposed NYSE Amex Equities Rules 13 and 61.
\24\ The Exchange further proposes to amend NYSE Amex Equities
Rule 1004 to remove legacy references to Percentage Orders, which
are no longer order types accepted on the Exchange.
---------------------------------------------------------------------------
Display Book will continue to allocate executed shares in round
lots; however, if the quantity of shares to be allocated to a specific
participant is for a quantity less than a round lot, the Display Book
will allocate to the participant the specific number of shares bid or
offered. The Exchange proposes to amend NYSE Amex Equities Rule
72(c)(viii) to state that shares are allocated in round lots or the
size of the order if less than one round lot.
Below see specific trading examples demonstrating the execution
logic employing priority parity rules: \25\
---------------------------------------------------------------------------
\25\ See Proposed NYSE Amex Equities Rules 72(c).
(A) On each trading day, the allocation wheel for each security
is set to begin with the participant whose interest is entered or
retained first on a time basis. Thereafter, participants are added
to the wheel as their interest joins existing interest at a
particular price point. If a participant cancels his, her or its
interest and then rejoins, that participant joins as the last
position on the wheel at that time.
Parity Example 1
Assume there is interest of the Book Participant (representing
orders entered by two different public customers), three Floor
brokers and the DMM are bidding at the same price, with no
participant established as Priority Interest. An order to sell is
received by the Exchange. Exchange systems will divide the
allocations among the participants, listed in time order, as
follows:
Public Order 1 100 shares and Public Order 2 100
shares Book Participant
Floor Broker 1 Participant A
DMM Participant B
Floor Broker 2 Participant C
Floor Broker 3 Participant D
A market order for 300 shares to sell entered in Exchange
systems will allocate 100 shares to the Book Participant (Public
Order 1), Participant A and Participant B above.
Subsequently, another order to sell 300 shares at the same price is
received by Exchange systems. Those shares will be allocated to
Participant C, Participant D, and Book Participant (Public Order
2).
(B) The allocation wheel will move to the next participant when
an odd-lot allocation completely fills the interest of such
participant.
Parity Example 2
Assume there is interest of the Book Participant (representing
orders entered by two different public customers), three Floor
brokers and the DMM are bidding at the same price, with no
participant having priority. An order to sell is received by the
Exchange. Exchange systems will divide the allocations among the
participants as follows:
Public Order 1 100 shares and Public Order 2 100
shares Book Participant
Floor Broker 1 Participant A 50 shares
DMM Participant B 50 shares
Floor Broker 2 Participant C 300 shares
Floor Broker 3 Participant D 300 shares
A market order for 200 shares to sell entered in Exchange
systems will allocate 100 shares to the Book Participant (Public
Order 1), Participant A will receive 50 shares, Participant
B above will receive 50 shares. Subsequently, another order to sell
300 shares at the same price is received by Exchange systems. Those
shares will be allocated to Participant C, Participant D, and Book
Participant (Public Order 2).
Parity Example 3
Assume there is interest of the Book Participant (representing
orders entered by two different public customers), three Floor
brokers and the DMM are bidding at the same price, with no
participant having priority. An order to sell is received by the
Exchange. Exchange systems will divide the allocations among the
participants as follows:
Public Order 1 100 shares and Public Order 2 100
shares Book Participant
Floor Broker 1 Participant A 50 shares
DMM Participant B 75 shares
Floor Broker 2 Participant C 300 shares
Floor Broker 3 Participant D 300 shares
A market order for 200 shares to sell entered in Exchange
systems will allocate 100 shares to the Book Participant (Public
Order 1), Participant A will receive 50 shares, Participant
B above will receive 50 shares. Subsequently, another order to sell
300 shares at the same price is received by Exchange systems. The
allocation wheel will start with Participant B. Participant B is
allocated 25 shares, Participant C is allocated 100 shares,
Participant D is allocated 100 shares, and Book Participant (Public
Order 2) is allocated 75 shares. Exchange systems will
retain Book Participant (Public Order 2) as the participant
eligible to receive the next allocation at that price point.
(C) The allocation wheel will also move to the next participant
where Exchange systems execute remaining displayable odd-lot
interest prior to replenishing the displayable quantity of a
participant.
Parity Example 4
Assume the available bid interest on the Exchange consists of a
single Book Participant and two Floor brokers listed below in order
of their position on the allocation wheel None of the participants
have priority.
Floor Broker 1 Participant A--200 shares displayed and 4800 shares
reserve
Book Participant Public Order 1 Participant B--500 shares
displayed
Floor Broker 2 Participant C--500 shares displayed
An order to sell 350 shares is received by the Exchange.
Exchange systems will divide the allocations among the participants
as follows:
Participant A--150 shares
Book Participant--100 shares
Participant C--100 shares
Each participant receives a round lot allocation. The Allocation
wheel returns to Participant A as the first participant on the wheel
and allocates the remaining 50 shares. The allocation wheel remains
on Participant A. The remaining interest of the three participants
is as follows:
Floor Broker 1 Participant A--50 shares displayed and 4800 shares
reserve
Book Participant Public Order 1 Participant B 400 shares
displayed
Floor Broker 2 Participant C 400 shares displayed
[[Page 35870]]
Prior to the system replenishing the displayed quantity of
Participant A, an order to sell 100 shares is received by Exchange
systems. The system will allocate 50 shares to Participants A and B.
The next allocation at the price point will begin with Participant
B.
Miscellaneous Amendments
The Exchange proposes to amend the section title for the grouped
NYSE Amex Equities Rules 99-114 to delete: (i) Legacy references to
specialists and registered traders; and (ii) the reference to Odd-lot
Dealers. The amended title will read, ``Designated Market Makers'
(``DMMs'') and Member Organizations' Dealings on the Floor''. The
Exchange also proposes to make conforming amendments to other Exchange
rules that refer to odd-lot systems and dealers, including NYSE Amex
Equities Rules 92, 94, and 104.
In addition, the Exchange proposes to amend Rule 411 to delete the
requirement that when a person gives, either for his own account, for
various accounts in which he has an actual monetary interest, or for
accounts over which such person is exercising investment discretion,
buy or sell odd-lot orders that aggregate 100 shares or more, such odd-
lot orders must be consolidated into round lots. The Exchange proposes
to delete this requirement as moot now that Exchange systems will
receive odd-lot orders in the same system that handles round lot
orders.
Additional New Systemic Capabilities
The system changes required to decommission the Odd-lot System will
also enable the Exchange to expand its price fields. Previous
constraints on the number of characters that could be included in a
price field required a ten cent ($.10) minimum price variation for
quoting and order entry in securities priced at or greater than
$100,000. As a result of the new systemic capability to include
additional characters in the price fields, the Exchange proposes to
amend NYSE Amex Equities Rules 62 (``Variations'') to remove the
requirement that $.10 be the minimum variation for securities priced at
or greater than $100,000. Specifically, the Exchange proposes to amend
Supplementary Material .10 of NYSE Amex Equities Rule 62 to state that
the minimum price variation for quoting and entry of interest in
securities priced at or greater than a $1.00 will be a penny
(``$.01'').
In addition, the incorporation of odd-lot interest and the odd-lot
portion of PRL interest into Display Book will provide Exchange market
data systems access to odd-lot volumes. Market participants will
therefore benefit from additional transparency because the depth of
book information published by the Exchange via its market data systems
will now include those quantities. NYSE Amex OpenBook[supreg] will
publish in shares the total volume of interest available at each price
point.\26\
---------------------------------------------------------------------------
\26\ NYSE Amex OpenBook provides subscribers a real-time view of
the Exchange's limit-order book for all NYSE-traded securities. NYSE
OpenBook shows the aggregate limit-order volume at every bid and
offer price, thus responding to customer demand for more depth-of-
market data and raising the NYSE Amex market to an even greater
level of transparency.
---------------------------------------------------------------------------
Implementation of Proposed Amendments \27\
---------------------------------------------------------------------------
\27\ See e-mail from Clare F. Saperstein, Managing Director,
NYSE Regulation, Inc., to Nathan Saunders, Special Counsel, and Gary
Rubin, Attorney, Commission, dated June 14, 2010.
---------------------------------------------------------------------------
Subject to Commission approval, the Exchange intends to
progressively implement these systemic changes on a security by
security basis as it gains experience with the new technology until it
is operative in all securities traded on the Floor. During the
implementation, the Exchange will identify on its Web site which
securities have been transitioned to the new system. In addition, the
Exchange will provide information to its constituents about any
modifications to the start or end date related to the implementation of
such proposal via its Trader Update Notices that are sent via e-mail to
subscribers and posted on the Exchange Web site.
2. Statutory basis. The basis under the Act for this proposed rule
change is the requirement under section 6(b)(5) \28\ that an Exchange
have rules that are designed to promote just and equitable principles
of trade, to remove impediments to and perfect the mechanism of a free
and open market and a national market system and, in general, to
protect investors and the public interest. The instant proposal is in
keeping with these principles in that it removes timing restrictions on
the execution of odd-lot interest and the odd-lot portion of PRL
interest by allowing such interest, if marketable to be immediately and
automatically executed. It further promotes the interaction of such
interest with all other market interest and enables it to be priced in
accordance with supply and demand dynamics.
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\28\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Exchange 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-2010-53 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-2010-53. 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
[[Page 35871]]
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 am and 3 pm. Copies of the filing
also will be available for inspection and copying at the principal
office of the Exchange. All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-NYSEAmex-2010-53 and should be submitted on or before July 14, 2010.
Dated: June 16, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15133 Filed 6-22-10; 8:45 am]
BILLING CODE 8010-01-P
