Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE Rule 440B to Modify the Exchange's Procedures for Handling Short Sale Orders During a Period When the Short Sale Price Test Restrictions of Rule 201 of Regulation SHO are In Effect, 18278-18280 [2011-7654]
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18278
Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Notices
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. Copies of
the filing will also be available for
inspection and copying at the NYSE’s
principal office and on its 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
Number SR–NYSEAmex–2011–19 and
should be submitted on or before April
22, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–7656 Filed 3–31–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64136; File No. SR–NYSE–
2011–11]
mstockstill on DSKH9S0YB1PROD with NOTICES
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Amending
NYSE Rule 440B to Modify the
Exchange’s Procedures for Handling
Short Sale Orders During a Period
When the Short Sale Price Test
Restrictions of Rule 201 of Regulation
SHO are In Effect
March 28, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
17 17
CFR 200.30–3(a)(12).
1 15 U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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20:09 Mar 31, 2011
Jkt 223001
notice is hereby given that on March 25,
2011, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) 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 amend
NYSE Rule 440B (Short Sales) to modify
the Exchange’s procedures for handling
short sale orders during a period when
the short sale price test restrictions of
Rule 201 of Regulation SHO (‘‘Rule
201’’) 4 are in effect (‘‘Short Sale
Period’’). The text of the proposed rule
change is available at the Exchange, the
Commission’s Public Reference Room,
and https://www.nyse.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On February 26, 2010, the
Commission adopted amendments to
Rule 201 of Regulation SHO under the
Act.5 In order to implement the
provisions of revised Rule 201, the
Exchange amended NYSE Rule 440B
(Short Sales) to (1) Establish procedures
for the Exchange, as a listing market, to
determine that the short sale price test
restrictions of Rule 201 have been
4 17
CFR 242.201.
Securities Exchange Act Release No. 61595
(February 26, 2010), 75 FR 11232 (March 10, 2010)
(File No. S7–08–09; Amendments to Regulation
SHO) (‘‘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).
5 See
PO 00000
Frm 00135
Fmt 4703
Sfmt 4703
triggered for a covered security, (2)
establish the protocols for the handling
of short sale orders by the Exchange, as
a trading center, in the event the short
sale price test restrictions of Rule 201
are triggered, including establishing
what types of short sale orders will be
re-priced to achieve a ‘‘Permitted Price’’
(as defined and calculated in Rule
440B(e)), in accordance with Rule 201,
during a Short Sale Period, (3) establish
the Exchange’s procedures regarding the
execution and display of permissible
orders during a Short Sale Period, and
the execution and display of orders
marked ‘‘short exempt’’ during such a
period, (4) establish the Exchange’s
procedures regarding the permissible
execution price of short sale orders in
single-priced opening, re-opening and
closing transactions during a Short Sale
Period, and (5) provide that, during a
Short Sale Period, 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 (except as
otherwise provided by Rule 440B and
consistent with Rule 201).6
Under Rule 440B(e), during a Short
Sale Period, short sale orders that are
limited to the national best bid or lower
and short sale market orders will be repriced by Exchange systems one
minimum price increment above the
current national best bid to permit their
execution at a price that is compliant
with the short sale price test restrictions
of Rule 201. Consistent with Rule 201,7
the Permitted Price for securities for
which the national best bid is $1 or
more is $.01 above the national best bid;
the Permitted Price for securities for
which the national best bid is below $1
is $.0001 above the national best bid.8
Among other things, Rule 440B(f)
implements Rule 201(b)(1)(iii)(A),
which provides that a trading center
must have policies and procedures
reasonably designed to permit the
execution of a displayed short sale order
of a covered security if, at the time of
the initial display of the short sale
order, the order was at a price above the
current national best bid. Rule 440B(f)
specifically provides that the Exchange
will execute and display a short sale
order without regard to price if, at the
time of the initial display of the short
sale order, the order was at a price
above the then current national best bid.
The Exchange proposes to amend
Rule 440B(e) to provide for how
6 See Securities Exchange Act Release No. 63977
(February 25, 2010), 76 FR 12165 (March 4, 2011)
(SR–NYSE–2011–05).
7 See Rule 201 Adopting Release at 11247.
8 17 CFR 242.612.
E:\FR\FM\01APN1.SGM
01APN1
Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Notices
Exchange systems will treat short sale
orders that are not marked ‘‘short
exempt’’ during a Short Sale Period, i.e.,
displayed short sale orders pursuant to
Rule 440B(f) or non-marketable
displayable or non-displayed short sale
orders that Exchange systems have not
yet re-priced pursuant to Rule 440B(e),
and that would be required to be routed
to a protected bid pursuant to
Regulation NMS, which, by definition,
would be the national best bid or lower.
An example of a situation where
Exchange systems would otherwise be
required to route to the national best bid
includes the following: (1) A short sale
order is displayed pursuant to Rule
440B(f), (2) the Exchange enters a ‘‘slow’’
state, for example, if the Exchange
reaches a liquidity replenishment point
pursuant to Exchange Rule 1000, and (3)
when the Exchange resumes ‘‘fast’’
trading, the previously displayed short
sale order crosses the national best bid.9
In such scenario, pursuant to Regulation
NMS, the Exchange would be required
to route such previously displayed short
sale order to be executed against the
national best bid.
The Exchange proposes to address
how Exchange systems will treat short
sale orders that have been displayed
pursuant to Rule 440B(f) or that are not
yet marketable and therefore have not
yet been re-priced, and that would
otherwise be required to be routed to an
away market. For such scenarios, the
Exchange proposes that rather than
route such short sale orders to the
national best bid, the Exchange will
instead re-price such short sale orders to
a Permitted Price, as provided for in
Rule 440B(e). In particular, the
proposed amendment to Rule 440B
would add new subparagraph (e)(2),
which would provide that, during a
Short Sale Period, Exchange systems
will not route to an away market short
sale orders that have been displayed
pursuant to Rule 440B(f) or that have
not yet been re-priced consistent with
Rule 440B(e) and instead will re-price
such orders to a Permitted Price. In
addition, the proposed amendment
would renumber existing subparagraph
(e)(2) as (e)(3). The Exchange further
proposes to amend Rule 440B(e)(3) to
provide that Exchange systems will not
route the DMM interest identified in
mstockstill on DSKH9S0YB1PROD with NOTICES
9 The
Exchange enters a ‘‘slow’’ trading state, or
‘‘Non-Firm Mode’’ when, pursuant to Rule
602(a)(3)(i) of Regulation NMS and Exchange Rule
60(c)(ii)(A) and (B), the Exchange quotation is not
available for automatic execution. The Exchange
resumes a ‘‘fast’’ trading state, or ‘‘Normal Mode’’
when the Exchange is open for trading and collects,
processes, and makes available to quotation vendors
the highest bid and the lowest offer, and the
quotation size, in compliance with Rule 602(a) of
Regulation NMS and Exchange Rule 60(c)(i).
VerDate Mar<15>2010
20:09 Mar 31, 2011
Jkt 223001
that subparagraph and will instead
cancel such interest. Accordingly, if
Exchange systems would otherwise
route such DMM interest to an away
market in compliance with Regulation
NMS, during a Short Sale Period,
Exchange systems will instead cancel
such DMM short sale interest rather
than route it.
The Exchange also proposes a
clarifying amendment to Rule 440B(g) to
specify that if a short sale order has
been marked ‘‘short exempt,’’ Exchange
systems will display, execute, and route
such order without regard to whether
the order is at a Permitted Price.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,10 in general, and furthers the
objectives of Section 6(b)(5) of the Act,11
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 refining the Exchange’s written
policies and procedures reasonably
designed to prevent the execution or
display of a short sale order of a covered
security in violation of the short sale
price test restrictions established in that
rule. To that end, the proposed rule
change will establish the Exchange’s
procedures regarding handling of short
sale orders during a Short Sale Period
that might otherwise be routed to away
markets.
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 12 and Rule
10 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
12 15 U.S.C. 78s(b)(3)(A)(iii).
11 15
PO 00000
Frm 00136
Fmt 4703
Sfmt 4703
18279
19b–4(f)(6) thereunder.13 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
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 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.16 Waiving the 30-day
operative delay will allow the Exchange
to handle short sale orders during a
Short Sale Period that might otherwise
be routed to an away market in a
manner that is consistent with Rule 201.
Therefore, the Commission believes that
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.
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:
13 17
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
16 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).
14 17
E:\FR\FM\01APN1.SGM
01APN1
18280
Federal Register / Vol. 76, No. 63 / Friday, April 1, 2011 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2011–11 on the
subject line.
Paper Comments
mstockstill on DSKH9S0YB1PROD with NOTICES
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64132; File No. SR–BATS–
2011–009]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Proposed
Rule Change, as Modified by
Amendment No. 1, To Create a
Directed Order Program on a 6-Month
Pilot Basis
March 28, 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 March 16,
2011, BATS Exchange, Inc. (‘‘Exchange’’
All submissions should refer to File
or ‘‘BATS’’) filed with the Securities and
Number SR–NYSE–2011–11. This file
Exchange Commission (‘‘Commission’’)
number should be included on the
the proposed rule change as described
subject line if e-mail is used. To help the in Items I and II below, which Items
Commission process and review your
have been prepared by the Exchange.
comments more efficiently, please use
On March 24, 2011, the Exchange filed
only one method. The Commission will Amendment No. 1 to the proposed rule
post all comments on the Commission’s filing.3 The Commission is publishing
Internet Web site (https://www.sec.gov/
this notice to solicit comments on the
rules/sro.shtml). Copies of the
proposed rule change, as modified by
Amendment No. 1, from interested
submission, all subsequent
persons.
amendments, all written statements
with respect to the proposed rule
I. Self-Regulatory Organization’s
change that are filed with the
Statement of the Terms of Substance of
Commission, and all written
the Proposed Rule Change
communications relating to the
The Exchange is filing with the
proposed rule change between the
Commission a proposal for the BATS
Commission and any person, other than Exchange Options Market (‘‘BATS
those that may be withheld from the
Options’’) to create, on a pilot basis, new
public in accordance with the
BATS Rule 21.1(d)(13), entitled ‘‘Market
provisions of 5 U.S.C. 552, will be
Maker Price Improving Orders’’ and new
available for Web site viewing and
BATS Rule 21.1(d)(14), entitled
printing in the Commission’s Public
‘‘Directed Orders.’’ The Exchange also
Reference Room, 100 F Street, NE.,
proposes to amend existing BATS Rule
Washington, DC 20549–1090. Copies of
21.1(d)(2), entitled ‘‘Price Improving
the filing will also be available for
Orders.’’
The text of the proposed rule change
inspection and copying at the NYSE’s
is available at the Exchange’s Web site
principal office and on its Internet Web
at https://www.batstrading.com, at the
site at https://www.nyse.com. All
principal office of the Exchange, and at
comments received will be posted
the Commission’s Public Reference
without change; the Commission does
Room.
not edit personal identifying
information from submissions. You
II. Self-Regulatory Organization’s
should submit only information that
Statement of the Purpose of, and
you wish to make available publicly. All Statutory Basis for, the Proposed Rule
submissions should refer to File
Change
Number SR–NYSE–2011–11 and should
In its filing with the Commission, the
be submitted on or before April 22,
Exchange included statements
2011.
concerning the purpose of and basis for
the proposed rule change and discussed
For the Commission, by the Division of
any comments it received on the
Trading and Markets, pursuant to delegated
proposed rule change. The text of these
authority.17
statements may be examined at the
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011–7654 Filed 3–31–11; 8:45 am]
BILLING CODE 8011–01–P
17 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
20:09 Mar 31, 2011
Jkt 223001
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, the Exchange listed
additional data that the Exchange will include in
monthly reports to be provided to the Commission
during the pilot program.
2 17
PO 00000
Frm 00137
Fmt 4703
Sfmt 4703
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 is proposing certain
modifications and additions to its rules
related to the trading of options. First,
the Exchange is proposing the
establishment of new Rule 21.1(d)(13),
entitled Market Maker Price Improving
Orders. Second the Exchange is
proposing the establishment of new
Rule 21.1(d)(14), entitled Directed
Orders. Third, the Exchange is
proposing to modify the text of Rule
21.1(d)(6), entitled Price Improving
Orders, to make a clarifying change.4
The Exchange is proposing the rule
changes described below to establish a
directed order program through which
members of BATS Options (‘‘Options
Members’’) can direct an order to a
particular BATS Options Market Maker
for potential execution at a price
improved over the existing National
Best Bid (‘‘NBB’’) or National Best Offer
(‘‘NBO’’). As part of this program, BATS
is proposing to define two new order
types. The first would be new Rule
21.1(d)(13), entitled Market Maker Price
Improving Orders, which are orders
from a BATS Options Market Maker to
buy or sell an option that has a
displayed price and size and a nondisplayed price at which the BATS
Options Market Maker is willing to
trade with a Directed Order. As
proposed, a Market Maker Price
Improving Order would be ranked on
the BATS Options Book at its displayed
price. The non-displayed price of the
Market Maker Price Improving Order
would not be entered into the BATS
Options Book, but would be, along with
its displayed size, converted to a buy or
sell order at its non-displayed price in
4 The Exchange previously filed a proposal to
establish a directed order program for BATS
Options. See Securities Exchange Act Release No.
63403 (December 1, 2010), 75 FR 76059 (December
7, 2010) (SR–BATS–2010–034) (notice of filing of
directed order program proposal). The Exchange
withdrew its original filing in its entirety and has
re-filed this proposal to address comments received
on the proposal by eliminating the originally
proposed midpoint order functionality, to provide
additional clarity in a few areas, and to propose
operation of the directed order program on a pilot
basis. In a manner consistent with this filing, the
Exchange also responded to comments received on
the original proposal. See Letter from Eric J.
Swanson, Secretary, BATS Exchange, Inc. to
Elizabeth M. Murphy, Secretary, U.S. Securities and
Exchange Commission dated February 24, 2011.
E:\FR\FM\01APN1.SGM
01APN1
Agencies
[Federal Register Volume 76, Number 63 (Friday, April 1, 2011)]
[Notices]
[Pages 18278-18280]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-7654]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64136; File No. SR-NYSE-2011-11]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 440B to Modify the Exchange's Procedures for
Handling Short Sale Orders During a Period When the Short Sale Price
Test Restrictions of Rule 201 of Regulation SHO are In Effect
March 28, 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 March 25, 2011, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') 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 amend NYSE Rule 440B (Short Sales) to
modify the Exchange's procedures for handling short sale orders during
a period when the short sale price test restrictions of Rule 201 of
Regulation SHO (``Rule 201'') \4\ are in effect (``Short Sale
Period''). The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and https://www.nyse.com.
---------------------------------------------------------------------------
\4\ 17 CFR 242.201.
---------------------------------------------------------------------------
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
of Regulation SHO under the Act.\5\ In order to implement the
provisions of revised Rule 201, the Exchange amended NYSE Rule 440B
(Short Sales) to (1) Establish procedures for the Exchange, as a
listing market, to determine that the short sale price test
restrictions of Rule 201 have been triggered for a covered security,
(2) establish the protocols for the handling of short sale orders by
the Exchange, as a trading center, in the event the short sale price
test restrictions of Rule 201 are triggered, including establishing
what types of short sale orders will be re-priced to achieve a
``Permitted Price'' (as defined and calculated in Rule 440B(e)), in
accordance with Rule 201, during a Short Sale Period, (3) establish the
Exchange's procedures regarding the execution and display of
permissible orders during a Short Sale Period, and the execution and
display of orders marked ``short exempt'' during such a period, (4)
establish the Exchange's procedures regarding the permissible execution
price of short sale orders in single-priced opening, re-opening and
closing transactions during a Short Sale Period, and (5) provide that,
during a Short Sale Period, 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 (except as
otherwise provided by Rule 440B and consistent with Rule 201).\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 61595 (February 26,
2010), 75 FR 11232 (March 10, 2010) (File No. S7-08-09; Amendments
to Regulation SHO) (``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).
\6\ See Securities Exchange Act Release No. 63977 (February 25,
2010), 76 FR 12165 (March 4, 2011) (SR-NYSE-2011-05).
---------------------------------------------------------------------------
Under Rule 440B(e), during a Short Sale Period, short sale orders
that are limited to the national best bid or lower and short sale
market orders will be re-priced by Exchange systems one minimum price
increment above the current national best bid to permit their execution
at a price that is compliant with the short sale price test
restrictions of Rule 201. Consistent with Rule 201,\7\ the Permitted
Price for securities for which the national best bid is $1 or more is
$.01 above the national best bid; the Permitted Price for securities
for which the national best bid is below $1 is $.0001 above the
national best bid.\8\
---------------------------------------------------------------------------
\7\ See Rule 201 Adopting Release at 11247.
\8\ 17 CFR 242.612.
---------------------------------------------------------------------------
Among other things, Rule 440B(f) implements Rule 201(b)(1)(iii)(A),
which provides that a trading center must have policies and procedures
reasonably designed to permit the execution of a displayed short sale
order of a covered security if, at the time of the initial display of
the short sale order, the order was at a price above the current
national best bid. Rule 440B(f) specifically provides that the Exchange
will execute and display a short sale order without regard to price if,
at the time of the initial display of the short sale order, the order
was at a price above the then current national best bid.
The Exchange proposes to amend Rule 440B(e) to provide for how
[[Page 18279]]
Exchange systems will treat short sale orders that are not marked
``short exempt'' during a Short Sale Period, i.e., displayed short sale
orders pursuant to Rule 440B(f) or non-marketable displayable or non-
displayed short sale orders that Exchange systems have not yet re-
priced pursuant to Rule 440B(e), and that would be required to be
routed to a protected bid pursuant to Regulation NMS, which, by
definition, would be the national best bid or lower. An example of a
situation where Exchange systems would otherwise be required to route
to the national best bid includes the following: (1) A short sale order
is displayed pursuant to Rule 440B(f), (2) the Exchange enters a
``slow'' state, for example, if the Exchange reaches a liquidity
replenishment point pursuant to Exchange Rule 1000, and (3) when the
Exchange resumes ``fast'' trading, the previously displayed short sale
order crosses the national best bid.\9\ In such scenario, pursuant to
Regulation NMS, the Exchange would be required to route such previously
displayed short sale order to be executed against the national best
bid.
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\9\ The Exchange enters a ``slow'' trading state, or ``Non-Firm
Mode'' when, pursuant to Rule 602(a)(3)(i) of Regulation NMS and
Exchange Rule 60(c)(ii)(A) and (B), the Exchange quotation is not
available for automatic execution. The Exchange resumes a ``fast''
trading state, or ``Normal Mode'' when the Exchange is open for
trading and collects, processes, and makes available to quotation
vendors the highest bid and the lowest offer, and the quotation
size, in compliance with Rule 602(a) of Regulation NMS and Exchange
Rule 60(c)(i).
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The Exchange proposes to address how Exchange systems will treat
short sale orders that have been displayed pursuant to Rule 440B(f) or
that are not yet marketable and therefore have not yet been re-priced,
and that would otherwise be required to be routed to an away market.
For such scenarios, the Exchange proposes that rather than route such
short sale orders to the national best bid, the Exchange will instead
re-price such short sale orders to a Permitted Price, as provided for
in Rule 440B(e). In particular, the proposed amendment to Rule 440B
would add new subparagraph (e)(2), which would provide that, during a
Short Sale Period, Exchange systems will not route to an away market
short sale orders that have been displayed pursuant to Rule 440B(f) or
that have not yet been re-priced consistent with Rule 440B(e) and
instead will re-price such orders to a Permitted Price. In addition,
the proposed amendment would renumber existing subparagraph (e)(2) as
(e)(3). The Exchange further proposes to amend Rule 440B(e)(3) to
provide that Exchange systems will not route the DMM interest
identified in that subparagraph and will instead cancel such interest.
Accordingly, if Exchange systems would otherwise route such DMM
interest to an away market in compliance with Regulation NMS, during a
Short Sale Period, Exchange systems will instead cancel such DMM short
sale interest rather than route it.
The Exchange also proposes a clarifying amendment to Rule 440B(g)
to specify that if a short sale order has been marked ``short exempt,''
Exchange systems will display, execute, and route such order without
regard to whether the order is at a Permitted Price.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ 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 refining the
Exchange's written policies and procedures reasonably designed to
prevent the execution or display of a short sale order of a covered
security in violation of the short sale price test restrictions
established in that rule. To that end, the proposed rule change will
establish the Exchange's procedures regarding handling of short sale
orders during a Short Sale Period that might otherwise be routed to
away markets.
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\10\ 15 U.S.C. 78f(b).
\11\ 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 \12\ and Rule 19b-4(f)(6) thereunder.\13\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
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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 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.\16\ Waiving the 30-day operative delay will allow
the Exchange to handle short sale orders during a Short Sale Period
that might otherwise be routed to an away market in a manner that is
consistent with Rule 201. Therefore, the Commission believes that 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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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ 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:
[[Page 18280]]
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-NYSE-2011-11 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-NYSE-2011-11. 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 20549-1090. Copies of the filing will also be available
for inspection and copying at the NYSE's principal office and on its
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 Number SR-NYSE-2011-11 and should be submitted on
or before April 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-7654 Filed 3-31-11; 8:45 am]
BILLING CODE 8011-01-P