Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adopting Supplementary Material .20 to NYSE Amex Equities Rule 123C To Provide for the Treatment of Short Sale Orders at the Close, 12202-12204 [2011-4890]
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12202
Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices
Reference Room, 100 F Street, NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the
Exchange’s principal office and on its
Internet Web site at http://
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 Number SR–
NYSEAMEX–2011–08 and should be
submitted on or before March 25, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–4892 Filed 3–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63972; File No. SR–
NYSEAMEX–2011–09]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Adopting Supplementary
Material .20 to NYSE Amex Equities
Rule 123C To Provide for the
Treatment of Short Sale Orders at the
Close
February 25, 2011.
jlentini on DSKJ8SOYB1PROD with NOTICES
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 February
24, 2011, NYSE Amex LLC (the
‘‘Exchange’’ or ‘‘NYSE Amex’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt
Supplementary Material .20 to NYSE
Amex Equities Rule 123C (The Closing
Procedures) to provide for the treatment
of short sale orders at the close, for
46 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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purposes of execution priority, as orders
subject to tick restrictions 4 during a
period when a restriction on the prices
at which covered securities may be sold
short is in effect (‘‘Short Sale Price Test’’)
under NYSE Amex Equities Rule 440B 5
(which implements the provisions of
Rule 201 of Regulation SHO (‘‘Rule
201’’) under the Act). The text of the
proposed rule change is available at the
Exchange, the Commission’s Public
Reference Room, and http://
www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On February 26, 2010, the
Commission adopted amendments to
Rule 201.6 Among other things, the
amendments establish a short salerelated circuit breaker that, if triggered
with respect to a covered security,7
4 Orders subject to tick restrictions are sell ‘‘plus’’
and buy ‘‘minus’’ orders. See NYSE Amex Equities
Rule 13.
5 Amendments to NYSE Amex Equities Rule 440B
to implement the short sale price test restriction
requirements of Rule 201 are the subject of a
separate rule filing. See SR–NYSEAmex–2011–08.
6 Amendments to Regulation SHO, Securities
Exchange Act Release No. 61595 (Feb. 26, 2010), 75
FR 11232 (Mar. 10, 2010) (‘‘Rule 201 Adopting
Release’’). In the Rule 201 Adopting Release, the
Commission also adopted amendments to Rule
200(g) of Regulation SHO to include a ‘‘short
exempt’’ marking requirement. 17 CFR 242.200(g).
See also Division of Trading and Markets:
Responses to Frequently Asked Questions
Concerning Rule 201 of Regulation SHO (‘‘T&M
FAQs’’).
7 The term ‘‘covered security’’ shall have the same
meaning as in Rule 201 of Regulation SHO. Rule
201(a)(1) defines the term ‘‘covered security’’ to
mean any ‘‘NMS stock’’ as defined under Rule
600(b)(47) of Regulation NMS. Rule 600(b)(47) of
Regulation NMS defines an ‘‘NMS stock’’ as ‘‘any
NMS security other than an option.’’ Rule 600(b)(46)
of Regulation NMS defines an ‘‘NMS security’’ as
‘‘any security or class of securities for which
transaction reports are collected, processed, and
made available pursuant to an effective transaction
reporting plan, or an effective national market
system plan for reporting transactions in listed
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imposes a short sale price test.8
Amended Rule 201 became effective on
May 10, 2010 and the compliance date
for the Rule is February 28, 2011.9
Rule 201(b) requires that trading
centers,10 including NYSE Amex,
establish, maintain, and enforce written
policies and procedures reasonably
designed to prevent the execution or
display of a short sale order of a covered
security at a price that is less than or
equal to the current national best bid 11
if the price of that covered security
decreases by 10% or more from the
covered security’s closing price as
determined by the listing market 12 for
the covered security as of the end of
regular trading hours on the prior day.13
In addition, Rule 201(b) requires that
trading centers establish, maintain, and
enforce written policies and procedures
reasonably designed to impose the Short
Sale Price Test for the remainder of the
day and the following day (including
the close on both days) when a national
best bid for the covered security is
calculated and disseminated on a
current and continuing basis by a plan
processor pursuant to an effective
national market system plan.14
options.’’ 17 CFR 242.201(a)(1); 17 CFR
242.600(b)(47); and 17 CFR 242.600(b)(46).
8 17 CFR 242.201(b).
9 Rule 201 Adopting Release, 75 FR 11232. The
Rule 201 compliance date, originally set for
November 10, 2010, was extended to February 28,
2011 in Securities Exchange Act Release No. 63247
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). The
May 10th effective date and February 28th
compliance date also apply to amended Rule 200(g).
10 Rule 201(a)(9) states that the term ‘‘trading
center’’ shall have the same meaning as in Rule
600(b)(78) of Regulation NMS. Rule 600(b)(78)
defines a ‘‘trading center’’ as ‘‘a national securities
exchange or national securities association that
operates an SRO trading facility, an alternative
trading system, an exchange market maker, an OTC
market maker, or any other broker or dealer that
executes orders internally by trading as principal or
crossing orders as agent.’’ 17 CFR 242.600(b)(78).
11 The term ‘‘national best bid’’ shall have the
same meaning as in Rule 201 of Regulation SHO.
Rule 201(a)(4) states that such term shall have the
same meaning as in Rule 600(b)(42) of Regulation
NMS. 17 CFR 242.201(a)(4); 17 CFR 242.600(b)(42).
12 The term ‘‘listing market’’ shall have the same
meaning as in Rule 201 of Regulation SHO. Rule
201(a)(3) defines the term ‘‘listing market’’ to have
the same meaning as the term ‘‘listing market’’ as
defined in the effective transaction reporting plan
for the covered security. 17 CFR 242.201(a)(3). See
also 17 CFR 242.201(a)(2).
13 17 CFR 242.201(b)(1)(i).
14 17 CFR 242.201(b)(1)(ii). In addition, if the
price of a covered security declines intra-day by at
least 10% on a day on which the security is already
subject to the short sale price test restriction of Rule
201, the restriction will be re-triggered and,
therefore, will continue in effect for the remainder
of that day and the following day. See Rule 201
Adopting Release, 75 FR 11232, 11253, n. 290. Rule
201 does not place any limit on the frequency or
number of times the circuit breaker can be retriggered with respect to a particular stock. See
T&M FAQs, at Q&A 2.2.
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Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices
jlentini on DSKJ8SOYB1PROD with NOTICES
In order to implement the provisions
of Rule 201, the Exchange has proposed
amendments to NYSE Amex Equities
Rule 440B to establish the protocols for
determining when a Short Sale Price
Test is to be triggered for a covered
security where the Exchange is the
listing market. The proposed Rule 440B
amendments also provide that, except
for certain permissible and short exempt
orders,15 during the period a Short Sale
Price Test is in effect for a covered
security, Exchange systems will not
execute or display a short sale order
with respect to that security at a price
that is less than or equal to the current
national best bid.
NYSE Amex Equities Rule 123C
prescribes the method for determining
the closing print to be reported to the
Consolidated Tape for each security at
the close of trading. Interest executed in
the closing transaction is allocated
pursuant to NYSE Amex Equities Rule
72 and consistent with the hierarchy of
allocation of trading interest in NYSE
Amex Equities Rule 123C(7). In the
hierarchy of allocation, better priced
interest 16 must receive an execution in
whole or in part (‘‘must execute
interest’’) 17 in order for the security to
close. Included in this category are MOC
orders without tick restrictions, MOC
orders with tick restrictions that are
eligible to be executed at a price better
than the closing price,18 better priced
limit orders, better priced limit on close
(‘‘LOC’’) orders with or without tick
restrictions that are eligible for
execution at a better price than the
closing price and Crowd interest.19
After the ‘‘must execute interest’’ is
satisfied, then any limit orders
represented in the Display Book 20 at the
closing price may be used to offset the
remaining imbalance.21 Next eligible for
execution in the hierarchy of allocation
for the closing transaction are LOC
orders without tick restrictions limited
to the closing price, then MOC orders
that have tick restrictions which limit
the order’s price to the price of the
closing transaction,22 followed by LOC
orders limited to the price of the closing
transaction that have tick restrictions,
‘‘G’’ orders,23 and finally closing offset
orders.
The Exchange proposes to establish
the execution priority for short sale
orders at the close during a period when
the Short Sale Price Test is in effect. As
provided for in proposed NYSE Amex
Equities Rule 440B(h)(3), when the
Short Sale Price Test is in effect,
Exchange systems will, in connection
with the closing transaction, re-price all
short sale market orders and short sale
orders limited to the last published
Exchange bid or lower to one minimum
price increment above the last
published Exchange bid. If the closing
price will be at or below the last
published Exchange bid, such re-priced
short sale orders will not participate in
the close. If the closing price is above
the last published Exchange bid, the repriced short sale orders may participate
in the closing transaction, depending on
whether the proposed closing price is
the same as the re-priced order, or if the
re-priced order is priced better than the
closing price. If the re-priced order is
priced better than the closing price,
such re-priced short sale order will
participate in the closing transaction.24
If the re-priced order is priced at the
same price as the closing price, such repriced short sale order plus all other
short sale orders limited at that price 25
15 See paragraphs (f) and (g) of proposed Rule
440B regarding the treatment of permissible and
short exempt orders. See SR–NYSEAmex–2011–08.
16 Better priced interest means an order that is
priced lower than the closing price (in the case of
an order to sell) or priced higher than the closing
price (in the case of an order to buy).
17 A market on close (‘‘MOC’’) order without tick
restrictions must be executed in its entirety at the
closing price. Marketable limit orders receive an
execution subject to the availability of contra side
volume.
18 References in NYSE Amex Equities Rule
123C(7) to orders with tick restrictions mean sell
‘‘plus’’ or buy ‘‘minus’’ orders, as defined in Rule 13.
19 Crowd interest means verbal floor broker
interest at the market entered by the designated
market maker (‘‘DMM’’) to interact with orders in
the Display Book. See note 20 infra.
20 The Display Book system is an order
management and execution facility. The Display
Book system receives and displays orders to the
DMM, contains order information, and provides a
mechanism to execute and report transactions and
published reports 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.
21 DMM interest, including better priced DMM
interest entered into the Display Book prior to the
closing transaction that is eligible to participate in
the closing transaction is always included in the
hierarchy of execution as if it were interest equal
to the price of the closing transaction.
22 For example, the last sale on the Exchange was
at a price of $46.00 on a minus tick, the closing
price is $46.01, all sell plus MOC orders are limited
to the closing price of $46.01 because the closing
transaction would be the next plus tick.
23 See Section 11(a)(1)(G) of the Act. G orders are
orders for an Exchange member’s own account
where the member meets a business mix test that
requires it to be primarily engaged in the business
of underwriting and distributing securities, selling
securities to customers, and/or acting as a broker
and provided more than 50% of its gross revenues
is derived from such businesses and related
activities. G orders on the Exchange are required to
yield priority, parity and precedence to non-G
orders.
24 See NYSE Amex Equities Rule 123C(7)(a).
25 These would include short sale orders that
were already priced above the last published
Exchange bid.
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12203
may (but are not required to) participate
in the closing transaction consistent
with how NYSE Amex Equities Rule
123C(7)(b) treats market or limit orders
with tick restrictions.
The Exchange therefore proposes to
add new Supplementary Material .20 to
NYSE Amex Equities Rule 123C
providing that short sale orders for a
covered security during a period when
a Short Sale Price Test is in effect will
be treated, for purposes of execution at
the close under NYSE Amex Equities
Rule 123C(7)(b), as orders that have tick
restrictions.26 Thus, short sale orders
that are eligible to participate in the
closing transaction and that are priced
at the same price as the closing
transaction will be treated in the same
manner as sell ‘‘plus’’ and buy ‘‘minus’’
tick restrictive orders priced at the
closing price.27 As a result, re-priced
short sale orders priced at the closing
price will be eligible for participation at
the close following limit orders
represented in the Display Book with a
price equal to the closing price and LOC
orders with a price equal to the closing
price.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,28 in general, and furthers the
objectives of Section 6(b)(5) of the Act,29
in particular, in that it is designed to,
among other things, prevent fraudulent
and manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest. The
proposal is designed to implement the
provisions of Rule 201 of Regulation
SHO by establishing, maintaining and
enforcing written policies and
procedures reasonably designed to
prevent the execution or display of a
short sale order of a covered security at
26 The Exchange will not be making any changes
in its opening and re-opening procedures in
connection with the implementation of the short
sale price test restrictions of Rule 201. The presence
of short sale price test restrictions will have no
impact on the priority of orders eligible to
participate in openings and re-openings.
27 See NYSE Amex Equities Rule 13 (defining Sell
‘‘Plus’’–Buy ‘‘Minus’’ Orders). A sell ‘‘plus’’ order is
an order to sell a specified amount of stock as long
as the price of the trade is not lower than the price
of the last sale if the last sale was a plus or zero
plus tick, and is not lower than the last sale plus
the minimum change in the price if the last sale was
a minus or zero minus tick. A buy ‘‘minus’’ order
is an order to buy a specified amount of stock as
long as the price to be executed is not higher than
the price of the last sale if the last sale was a minus
or zero minus tick, and is not higher than the price
of the last sale less than the minimum change in
the price of the stock if the last sale was a plus tick
or zero plus tick.
28 15 U.S.C. 78f(b).
29 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices
the close in violation of the Short Sale
Price Test established in that rule. To
that end, the proposed rule change will,
among other things, amend the
Exchange’s procedures for determining
the closing price by treating short sale
orders as orders subject to tick
restrictions during a period when a
Short Sale Price Test is in effect.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 30 and Rule
19b–4(f)(6) thereunder.31 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 32 and Rule 19b–4(f)(6)(iii)
thereunder.33
A proposed rule change filed under
Rule 19b–4(f)(6) 34 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),35 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
30 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
32 15 U.S.C. 78s(b)(3)(A)(iii).
33 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change at least five business
days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
34 17 CFR 240.19b–4(f)(6).
35 17 CFR 240.19b–4(f)(6)(iii).
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31 17
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operative delay so that the proposal may
become operative immediately upon
filing. The Commission hereby grants
the request.36 Waiving the 30-day
operative delay will allow the Exchange
to implement the proposed amendments
by February 28, 2011, which, as noted
by the Exchange, is the compliance date
for amendments to Regulation SHO
under the Act. By waiving the operative
delay, the Exchange will be able to
comply with the amendments to
Regulation SHO by February 28, 2011.
Therefore, the Commission believes it is
consistent with the protection of
investors and the public interest to
waive the 30-day operative delay and
designates the proposal as operative
upon filing.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend 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.
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. Copies of
the filing will also be available for
inspection and copying at the
Exchange’s principal office and on its
Internet Web site at http://
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 Number SR–
NYSEAMEX–2011–09 and should be
submitted on or before March 25, 2011.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Cathy H. Ahn,
Deputy Secretary.
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 (http://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEAMEX–2011–09 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–2011–09. 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 (http://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
36 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
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[FR Doc. 2011–4890 Filed 3–3–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63970; File No. SR–BYX–
2011–004]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change by BATS Exchange, Inc.
To Adopt BYX Rule 11.21, entitled
‘‘Input of Accurate Information’’
February 25, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
18, 2011, BATS Y-Exchange, Inc.
(‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
37 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Agencies
[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12202-12204]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4890]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63972; File No. SR-NYSEAMEX-2011-09]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Adopting
Supplementary Material .20 to NYSE Amex Equities Rule 123C To Provide
for the Treatment of Short Sale Orders at the Close
February 25, 2011.
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 February 24, 2011, NYSE Amex LLC (the ``Exchange'' or
``NYSE Amex'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been substantially prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt Supplementary Material .20 to NYSE
Amex Equities Rule 123C (The Closing Procedures) to provide for the
treatment of short sale orders at the close, for purposes of execution
priority, as orders subject to tick restrictions \4\ during a period
when a restriction on the prices at which covered securities may be
sold short is in effect (``Short Sale Price Test'') under NYSE Amex
Equities Rule 440B \5\ (which implements the provisions of Rule 201 of
Regulation SHO (``Rule 201'') under the Act). The text of the proposed
rule change is available at the Exchange, the Commission's Public
Reference Room, and http://www.nyse.com.
---------------------------------------------------------------------------
\4\ Orders subject to tick restrictions are sell ``plus'' and
buy ``minus'' orders. See NYSE Amex Equities Rule 13.
\5\ Amendments to NYSE Amex Equities Rule 440B to implement the
short sale price test restriction requirements of Rule 201 are the
subject of a separate rule filing. See SR-NYSEAmex-2011-08.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
On February 26, 2010, the Commission adopted amendments to Rule
201.\6\ Among other things, the amendments establish a short sale-
related circuit breaker that, if triggered with respect to a covered
security,\7\ imposes a short sale price test.\8\ Amended Rule 201
became effective on May 10, 2010 and the compliance date for the Rule
is February 28, 2011.\9\
---------------------------------------------------------------------------
\6\ Amendments to Regulation SHO, Securities Exchange Act
Release No. 61595 (Feb. 26, 2010), 75 FR 11232 (Mar. 10, 2010)
(``Rule 201 Adopting Release''). In the Rule 201 Adopting Release,
the Commission also adopted amendments to Rule 200(g) of Regulation
SHO to include a ``short exempt'' marking requirement. 17 CFR
242.200(g). See also Division of Trading and Markets: Responses to
Frequently Asked Questions Concerning Rule 201 of Regulation SHO
(``T&M FAQs'').
\7\ The term ``covered security'' shall have the same meaning as
in Rule 201 of Regulation SHO. Rule 201(a)(1) defines the term
``covered security'' to mean any ``NMS stock'' as defined under Rule
600(b)(47) of Regulation NMS. Rule 600(b)(47) of Regulation NMS
defines an ``NMS stock'' as ``any NMS security other than an
option.'' Rule 600(b)(46) of Regulation NMS defines an ``NMS
security'' as ``any security or class of securities for which
transaction reports are collected, processed, and made available
pursuant to an effective transaction reporting plan, or an effective
national market system plan for reporting transactions in listed
options.'' 17 CFR 242.201(a)(1); 17 CFR 242.600(b)(47); and 17 CFR
242.600(b)(46).
\8\ 17 CFR 242.201(b).
\9\ Rule 201 Adopting Release, 75 FR 11232. The Rule 201
compliance date, originally set for November 10, 2010, was extended
to February 28, 2011 in Securities Exchange Act Release No. 63247
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). The May 10th effective
date and February 28th compliance date also apply to amended Rule
200(g).
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Rule 201(b) requires that trading centers,\10\ including NYSE Amex,
establish, maintain, and enforce written policies and procedures
reasonably designed to prevent the execution or display of a short sale
order of a covered security at a price that is less than or equal to
the current national best bid \11\ if the price of that covered
security decreases by 10% or more from the covered security's closing
price as determined by the listing market \12\ for the covered security
as of the end of regular trading hours on the prior day.\13\ In
addition, Rule 201(b) requires that trading centers establish,
maintain, and enforce written policies and procedures reasonably
designed to impose the Short Sale Price Test for the remainder of the
day and the following day (including the close on both days) when a
national best bid for the covered security is calculated and
disseminated on a current and continuing basis by a plan processor
pursuant to an effective national market system plan.\14\
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\10\ Rule 201(a)(9) states that the term ``trading center''
shall have the same meaning as in Rule 600(b)(78) of Regulation NMS.
Rule 600(b)(78) defines a ``trading center'' as ``a national
securities exchange or national securities association that operates
an SRO trading facility, an alternative trading system, an exchange
market maker, an OTC market maker, or any other broker or dealer
that executes orders internally by trading as principal or crossing
orders as agent.'' 17 CFR 242.600(b)(78).
\11\ The term ``national best bid'' shall have the same meaning
as in Rule 201 of Regulation SHO. Rule 201(a)(4) states that such
term shall have the same meaning as in Rule 600(b)(42) of Regulation
NMS. 17 CFR 242.201(a)(4); 17 CFR 242.600(b)(42).
\12\ The term ``listing market'' shall have the same meaning as
in Rule 201 of Regulation SHO. Rule 201(a)(3) defines the term
``listing market'' to have the same meaning as the term ``listing
market'' as defined in the effective transaction reporting plan for
the covered security. 17 CFR 242.201(a)(3). See also 17 CFR
242.201(a)(2).
\13\ 17 CFR 242.201(b)(1)(i).
\14\ 17 CFR 242.201(b)(1)(ii). In addition, if the price of a
covered security declines intra-day by at least 10% on a day on
which the security is already subject to the short sale price test
restriction of Rule 201, the restriction will be re-triggered and,
therefore, will continue in effect for the remainder of that day and
the following day. See Rule 201 Adopting Release, 75 FR 11232,
11253, n. 290. Rule 201 does not place any limit on the frequency or
number of times the circuit breaker can be re-triggered with respect
to a particular stock. See T&M FAQs, at Q&A 2.2.
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[[Page 12203]]
In order to implement the provisions of Rule 201, the Exchange has
proposed amendments to NYSE Amex Equities Rule 440B to establish the
protocols for determining when a Short Sale Price Test is to be
triggered for a covered security where the Exchange is the listing
market. The proposed Rule 440B amendments also provide that, except for
certain permissible and short exempt orders,\15\ during the period a
Short Sale Price Test is in effect for a covered security, Exchange
systems will not execute or display a short sale order with respect to
that security at a price that is less than or equal to the current
national best bid.
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\15\ See paragraphs (f) and (g) of proposed Rule 440B regarding
the treatment of permissible and short exempt orders. See SR-
NYSEAmex-2011-08.
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NYSE Amex Equities Rule 123C prescribes the method for determining
the closing print to be reported to the Consolidated Tape for each
security at the close of trading. Interest executed in the closing
transaction is allocated pursuant to NYSE Amex Equities Rule 72 and
consistent with the hierarchy of allocation of trading interest in NYSE
Amex Equities Rule 123C(7). In the hierarchy of allocation, better
priced interest \16\ must receive an execution in whole or in part
(``must execute interest'') \17\ in order for the security to close.
Included in this category are MOC orders without tick restrictions, MOC
orders with tick restrictions that are eligible to be executed at a
price better than the closing price,\18\ better priced limit orders,
better priced limit on close (``LOC'') orders with or without tick
restrictions that are eligible for execution at a better price than the
closing price and Crowd interest.\19\
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\16\ Better priced interest means an order that is priced lower
than the closing price (in the case of an order to sell) or priced
higher than the closing price (in the case of an order to buy).
\17\ A market on close (``MOC'') order without tick restrictions
must be executed in its entirety at the closing price. Marketable
limit orders receive an execution subject to the availability of
contra side volume.
\18\ References in NYSE Amex Equities Rule 123C(7) to orders
with tick restrictions mean sell ``plus'' or buy ``minus'' orders,
as defined in Rule 13.
\19\ Crowd interest means verbal floor broker interest at the
market entered by the designated market maker (``DMM'') to interact
with orders in the Display Book. See note 20 infra.
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After the ``must execute interest'' is satisfied, then any limit
orders represented in the Display Book \20\ at the closing price may be
used to offset the remaining imbalance.\21\ Next eligible for execution
in the hierarchy of allocation for the closing transaction are LOC
orders without tick restrictions limited to the closing price, then MOC
orders that have tick restrictions which limit the order's price to the
price of the closing transaction,\22\ followed by LOC orders limited to
the price of the closing transaction that have tick restrictions, ``G''
orders,\23\ and finally closing offset orders.
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\20\ The Display Book system is an order management and
execution facility. The Display Book system receives and displays
orders to the DMM, contains order information, and provides a
mechanism to execute and report transactions and published reports
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.
\21\ DMM interest, including better priced DMM interest entered
into the Display Book prior to the closing transaction that is
eligible to participate in the closing transaction is always
included in the hierarchy of execution as if it were interest equal
to the price of the closing transaction.
\22\ For example, the last sale on the Exchange was at a price
of $46.00 on a minus tick, the closing price is $46.01, all sell
plus MOC orders are limited to the closing price of $46.01 because
the closing transaction would be the next plus tick.
\23\ See Section 11(a)(1)(G) of the Act. G orders are orders for
an Exchange member's own account where the member meets a business
mix test that requires it to be primarily engaged in the business of
underwriting and distributing securities, selling securities to
customers, and/or acting as a broker and provided more than 50% of
its gross revenues is derived from such businesses and related
activities. G orders on the Exchange are required to yield priority,
parity and precedence to non-G orders.
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The Exchange proposes to establish the execution priority for short
sale orders at the close during a period when the Short Sale Price Test
is in effect. As provided for in proposed NYSE Amex Equities Rule
440B(h)(3), when the Short Sale Price Test is in effect, Exchange
systems will, in connection with the closing transaction, re-price all
short sale market orders and short sale orders limited to the last
published Exchange bid or lower to one minimum price increment above
the last published Exchange bid. If the closing price will be at or
below the last published Exchange bid, such re-priced short sale orders
will not participate in the close. If the closing price is above the
last published Exchange bid, the re-priced short sale orders may
participate in the closing transaction, depending on whether the
proposed closing price is the same as the re-priced order, or if the
re-priced order is priced better than the closing price. If the re-
priced order is priced better than the closing price, such re-priced
short sale order will participate in the closing transaction.\24\ If
the re-priced order is priced at the same price as the closing price,
such re-priced short sale order plus all other short sale orders
limited at that price \25\ may (but are not required to) participate in
the closing transaction consistent with how NYSE Amex Equities Rule
123C(7)(b) treats market or limit orders with tick restrictions.
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\24\ See NYSE Amex Equities Rule 123C(7)(a).
\25\ These would include short sale orders that were already
priced above the last published Exchange bid.
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The Exchange therefore proposes to add new Supplementary Material
.20 to NYSE Amex Equities Rule 123C providing that short sale orders
for a covered security during a period when a Short Sale Price Test is
in effect will be treated, for purposes of execution at the close under
NYSE Amex Equities Rule 123C(7)(b), as orders that have tick
restrictions.\26\ Thus, short sale orders that are eligible to
participate in the closing transaction and that are priced at the same
price as the closing transaction will be treated in the same manner as
sell ``plus'' and buy ``minus'' tick restrictive orders priced at the
closing price.\27\ As a result, re-priced short sale orders priced at
the closing price will be eligible for participation at the close
following limit orders represented in the Display Book with a price
equal to the closing price and LOC orders with a price equal to the
closing price.
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\26\ The Exchange will not be making any changes in its opening
and re-opening procedures in connection with the implementation of
the short sale price test restrictions of Rule 201. The presence of
short sale price test restrictions will have no impact on the
priority of orders eligible to participate in openings and re-
openings.
\27\ See NYSE Amex Equities Rule 13 (defining Sell ``Plus''-Buy
``Minus'' Orders). A sell ``plus'' order is an order to sell a
specified amount of stock as long as the price of the trade is not
lower than the price of the last sale if the last sale was a plus or
zero plus tick, and is not lower than the last sale plus the minimum
change in the price if the last sale was a minus or zero minus tick.
A buy ``minus'' order is an order to buy a specified amount of stock
as long as the price to be executed is not higher than the price of
the last sale if the last sale was a minus or zero minus tick, and
is not higher than the price of the last sale less than the minimum
change in the price of the stock if the last sale was a plus tick or
zero plus tick.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\28\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\29\ in particular, in that it is designed to, among
other things, prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, and, in general, to
protect investors and the public interest. The proposal is designed to
implement the provisions of Rule 201 of Regulation SHO by establishing,
maintaining and enforcing written policies and procedures reasonably
designed to prevent the execution or display of a short sale order of a
covered security at
[[Page 12204]]
the close in violation of the Short Sale Price Test established in that
rule. To that end, the proposed rule change will, among other things,
amend the Exchange's procedures for determining the closing price by
treating short sale orders as orders subject to tick restrictions
during a period when a Short Sale Price Test is in effect.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \30\ and Rule 19b-4(f)(6) thereunder.\31\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act \32\ and Rule 19b-
4(f)(6)(iii) thereunder.\33\
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\30\ 15 U.S.C. 78s(b)(3)(A)(iii).
\31\ 17 CFR 240.19b-4(f)(6).
\32\ 15 U.S.C. 78s(b)(3)(A)(iii).
\33\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \34\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\35\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission hereby
grants the request.\36\ Waiving the 30-day operative delay will allow
the Exchange to implement the proposed amendments by February 28, 2011,
which, as noted by the Exchange, is the compliance date for amendments
to Regulation SHO under the Act. By waiving the operative delay, the
Exchange will be able to comply with the amendments to Regulation SHO
by February 28, 2011. Therefore, the Commission believes it is
consistent with the protection of investors and the public interest to
waive the 30-day operative delay and designates the proposal as
operative upon filing.
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\34\ 17 CFR 240.19b-4(f)(6).
\35\ 17 CFR 240.19b-4(f)(6)(iii).
\36\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend 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 (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEAMEX-2011-09 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-2011-09. 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 (http://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. Copies of the filing will also
be available for inspection and copying at the Exchange's principal
office and on its Internet Web site at http://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 Number SR-NYSEAMEX-2011-09 and should
be submitted on or before March 25, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4890 Filed 3-3-11; 8:45 am]
BILLING CODE 8011-01-P