Self-Regulatory Organizations; New York Stock Exchange LLC and NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Technical Procedures With Respect to Comparison of Executed Transactions, 41560-41561 [2010-17355]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 75, Number 136 (Friday, July 16, 2010)]
[Notices]
[Pages 41560-41561]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-17355]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64277; File Nos. SR-NYSE-2010-48 and SR-NYSEAMEX-2010-
61]


Self-Regulatory Organizations; New York Stock Exchange LLC and 
NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to Technical Procedures With Respect to Comparison 
of Executed Transactions

July 9, 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 17, 2010, New York Stock Exchange LLC (``NYSE'') and NYSE Amex 
LLC (``NYSE Amex'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes and on June 29, 2010, NYSE 
and NYSEAMEX amended the proposed rule changes as described in Items I, 
II, and III below, which Items have been prepared primarily by NYSE and 
NYSE Amex (collectively, ``Exchanges''). The Exchanges filed the 
proposed rule changes pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder \4\ so that the proposals were 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule changes from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organizations' Statements of the Terms of Substance 
of the Proposed Rule Changes

    The Exchanges will amend NYSE Rule 134 (Differences and Omissions-
Cleared Transactions) and NYSE Amex Equities Rule 134 (NYSE Amex 
Equities. Differences and Omissions-Cleared Transactions) to provide 
for certain technical procedures with respect to comparison of executed 
transactions.

II. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In its filing with the Commission, the Exchanges 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 Exchanges have prepared summaries, set 
forth in sections A, B, and C below, of the most significant parts of 
such statements.

A. Self-Regulatory Organizations' Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Background
    The Exchanges operate the On-Line Comparison System (``OCS'') to 
assist in trade settlement. OCS conducts comparison processing, which 
includes matching initial trade submissions, correction processing, 
omnibus processing, and questioned trade (``QT'') resolution for trades 
that take place on the Exchanges. The OCS system is used by the 
Exchanges' members in their roles as clearing firms, brokers, and 
Designated Market Making Units (``DMM Units'') for trade executions. 
OCS is linked internally to NYSE's trading systems and externally to 
the National Securities Clearing Corporation.\5\
---------------------------------------------------------------------------

    \5\ National Securities Clearing Corporation (``NSCC'') is a 
clearing agency registered with the Commission under Section 17A of 
the Act. NSCC provides centralized clearance and settlement services 
for equity security trades in the U.S.
---------------------------------------------------------------------------

    To facilitate the comparison process, the Exchanges utilize omnibus 
account designations to record trade data.\6\ Using omnibus account 
designations allows for universal contras for one trade side, thereby 
reducing the number of different data elements that have to be 
independently recorded into a broker's hand-held device or written on a 
Floor report for a trade.
---------------------------------------------------------------------------

    \6\ An ``omnibus account'' is an account in which the 
transactions of multiple individual participants are combined.
---------------------------------------------------------------------------

    In May 2009, each of the Exchanges amended its Rule 134 to enable 
them to assign on the second business day after the trade date 
(``T+2'') any open balance in any of the omnibus accounts they use to 
compare trades to either a DMM Unit or to the member organization that 
had been identified as the clearing firm for one side of an unresolved 
trade.\7\ Specifically, each of the Exchanges added new subsection 
(e)(iii) to its Rule 134 to enable the Exchanges to assign a Floor 
broker's clearing firm or DMM Unit at the close of business on T+2 as 
the contra side to an imbalance in any omnibus account that is used by 
OCS.
---------------------------------------------------------------------------

    \7\ Securities Exchange Release Act No. 59997 (May 28, 2009), 74 
FR 28086 (June 12, 2009).
---------------------------------------------------------------------------

2. Proposed Amendment of NYSE Rule 134 and NYSE Amex Rule 134
    Each of the Exchanges will now amend its Rule 134(e)(iii). Rule 
134(e)(iii) will now specify that DMM units are assigned as the contra 
party to any unresolved omnibus account imbalances remaining in OCS. 
New subsection (iv) to Rule 134(e) will provide that a Floor broker's 
clearing firm will be assigned as the contra party to any uncompared e-
Quote transactions remaining in OCS. Each of the Exchanges will also 
add to both subsections that the contra party shall be assigned 
pursuant to the processes set forth in subsection (e)(i) and (e)(ii) of 
their Rule 134 but no earlier than 7 p.m.
    By creating a new subsection (iv) pertaining only to Floor brokers' 
clearing firms and removing all such references to Floor brokers' 
clearing firms from subsection (e)(iii), the Exchanges are making clear 
that the DMM unit is assigned as the contra party to an omnibus account 
imbalance and that clearing firms are the assigned contra party to an 
uncompared trade. Specifically, a Floor broker's clearing firm is 
assigned as the default contra side in a trade resulting from an 
execution involving e-Quotes (i.e., trades involving Floor broker 
agency interest files).\8\ The DMM Unit is assigned in instances where 
there is an open imbalance in an omnibus account whether the DMM was 
involved in the transaction or not.
---------------------------------------------------------------------------

    \8\ NYSE Rule 70(a)(i).
---------------------------------------------------------------------------

    For new subsection 134(e)(iv), the Exchanges will shorten the time 
frame for assignment of uncompared e-Quote transactions from T+2 to the 
first business day after the trade date (``T+1''). The Exchanges 
believe that the shortened time frame for resolving uncompared e-Quote 
transactions will provide Floor brokers and clearing firms with more 
information and certainty on settlement date, which is the third 
business day after trade date (T+3). In particular, the Exchanges 
believe that the changes for resolving uncompared e-Quote transactions 
are necessary for situations where there are system outages. Under 
normal trading conditions, the number of e-Quote QTs that remain 
unresolved by the end of T+1 is relatively low. In the event of a 
Broker System outage, however, the number of e-Quote QTs could increase 
dramatically. Therefore, to mitigate risk and exposure to the Floor 
broker community and to facilitate comparison and settlement, the 
Exchanges believe that reducing the time period from close

[[Page 41561]]

of business on T+2 to the close of business on T+1 is appropriate. The 
Exchanges further understand that the change from T+2 to T+1 will not 
impact clearing member organization's systems. Rather, clearing member 
organizations have requested the change to provide them with more time 
before settlement on T+3 to resolve uncompared transactions.
3. Statutory Basis
    The Exchanges state that the basis under the Act for these proposed 
rule changes is the requirement under Section 6(b)(5) \9\ that a 
national securities 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 Exchanges believe that these rule changes accomplish these goals by 
enhancing the comparison process at the Exchanges thereby supporting 
the timely settlement of securities transactions.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organizations' Statement on Burden on Competition

    The Exchanges do not believe that the proposed rule changes 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 Changes Received From Members, Participants, or Others

    The Exchanges have not solicited or received written comments with 
respect to the proposed rule changes. The Exchanges will notify the 
Commission of any written comments it receives.

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

    The Exchanges have filed the proposed rule changes pursuant to 
Section 19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\ Because the proposed rule changes do not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative prior to 30 days from the date on which they were 
filed, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, 
the proposed rule changes have become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6)(iii) \13\ thereunder.
---------------------------------------------------------------------------

    \10\ Above note 3.
    \11\ Above note 2.
    \12\ Above note 3.
    \13\ 17 CFR 240.19b(f)(6)(iii).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchanges have 
asked the Commission to waive the 30-day operative delay so that the 
proposals may become operative immediately upon filing.
---------------------------------------------------------------------------

    \14\ Above note 4.
    \15\ Above note 13.
---------------------------------------------------------------------------

    The Commission is granting this request because doing so will 
enable the Exchanges to further clarify and strengthen their processes 
to resolve uncompared e-Quote transactions or unresolved account 
imbalances without undue delay while still affording interested parties 
the opportunity to submit comments or concerns to the Commission 
regarding these proposals. The new processes should instill greater 
confidence among the Exchanges' members and investors that such 
situations will be handled in a timely and orderly manner.
    For these reasons, the Commission is waiving the 30-day delay in 
operability so that the proposed rule changes have become operative 
immediately upon filing.
    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSE-2010-48 or SR-NYSEAMEX-2010-61 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 No. SR-NYSE-2010-48 or SR-
NYSEAMEX-2010-61. At least one of these file numbers 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 20549-1090 on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of the filing will also be available for inspection and copying at the 
Exchanges principal offices and on NYSE's Internet Web site at https://www.nyse.com. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File No. SR-NYSE-
2010-48 or SR-NYSEAMEX-2010-61 and should be submitted on or before 
August 6, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-17355 Filed 7-15-10; 8:45 am]
BILLING CODE 8010-01-P