Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE MKT Rules 103B(IX)-Equities and 504-Equities To Provide That a Designated Market Maker Unit May Trade at the Same Panel Securities Traded on the Exchange and/or Securities Listed on the New York Stock Exchange LLC, 53952-53955 [2012-21678]

Download as PDF 53952 Federal Register / Vol. 77, No. 171 / Tuesday, September 4, 2012 / Notices 2. Statutory Basis The Exchange believes that the proposed rule changes are consistent with the objectives of Section 6 of the Act,6 in general, and furthers the objectives of Section 6(b)(4),7 in particular, as the proposed rule changes are designed to provide for the equitable allocation of reasonable dues, fees and other charges among Members and other persons using the Exchange’s facilities. The Exchange believes its proposal to amend its fee schedule to reduce the quantity of free DIRECT Logical Ports from ten sessions to five sessions represents an equitable allocation of reasonable dues, fees and other charges because the Exchange has implemented several infrastructure enhancements that increased the message throughput (efficiency) per port, thereby requiring fewer ports to communicate the same information. The Exchange also believes that reducing the quantity of free DIRECT Logical Ports to five sessions will promote efficient use of the ports by market participants, helping the Exchange to continue to maintain and improve its infrastructure, while also encouraging Members and nonMembers to request and enable only the ports that are necessary for their operations related to the Exchange. In addition, the Exchange will use the revenue generated from its proposal to supplement its administrative and infrastructure costs associated with allowing Members and non-Members to establish logical ports to connect to the Exchange’s systems and continue to maintain and improve its infrastructure, market technology, and services. The Exchange also notes that assessing charges for logical ports is reasonable because it is consistent with the practices of other exchanges, such as the BATS Exchange and the NASDAQ OMX Group, Inc. that charge customers for logical ports.8 Lastly, the Exchange also believes that the proposed reduction in quantity of free ports is nondiscriminatory because it applies uniformly to Members and nonMembers. B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that tkelley on DSK3SPTVN1PROD with NOTICES 6 15 U.S.C. 78f. U.S.C. 78f(b)(4). 8 See BATS BZX fee schedule at https:// batstrading.com/FeeSchedule/ (where BATS BZX charges its customers a monthly fee per logical port). See also NASDAQ Price List-Trading & Connectivity, https://www.nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2 (where NASDAQ charges its customers a monthly fee per logical port). 7 15 VerDate Mar<15>2010 19:25 Aug 31, 2012 Jkt 226001 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 The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3) of the Act 9 and Rule 19b–4(f)(2) 10 thereunder. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–EDGA–2012–37 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–EDGA–2012–37. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–EDGA– 2012–37 and should be submitted on or before September 25, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–21680 Filed 8–31–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67740; File No. SR– NYSEMKT–2012–37] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending NYSE MKT Rules 103B(IX)—Equities and 504— Equities To Provide That a Designated Market Maker Unit May Trade at the Same Panel Securities Traded on the Exchange and/or Securities Listed on the New York Stock Exchange LLC August 28, 2012. 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 August 22, 2012, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) 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 Commission is publishing this notice to 11 17 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 19b–4(f)(2) [sic]. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\04SEN1.SGM 04SEN1 Federal Register / Vol. 77, No. 171 / Tuesday, September 4, 2012 / Notices 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 MKT Rules 103B(IX)—Equities and 504—Equities to provide that a Designated Market Maker (‘‘DMM’’) unit may trade at the same panel securities traded on the Exchange and/or securities listed on the New York Stock Exchange LLC (‘‘NYSE’’). The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 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. tkelley on DSK3SPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend NYSE MKT Rules 103B– Equities (‘‘Rule 103B’’) and 504—Equities (‘‘Rule 504’’) to provide that a DMM unit may trade at the same panel securities traded at the Exchange and/or securities listed on the NYSE. Background Rule 103B(IX) currently provides that securities listed on the Exchange or admitted to dealings on the Exchange pursuant to a grant of unlisted trading privileges, i.e., Nasdaq Securities,3 (collectively, ‘‘Exchange-traded securities’’) shall be assigned for trading only at panels exclusively designated for trading securities on the Exchange. The rule further provides that ‘‘DMM units may only trade securities listed on the Exchange or admitted to dealings on the Exchange pursuant to a grant of unlisted trading privileges at panels exclusively designated for trading securities on the Exchange.’’ In practice, this means that a DMM panel 3 See Exchange Rule 501(c)—Equities. VerDate Mar<15>2010 19:25 Aug 31, 2012 Jkt 226001 designated for trading in Exchangetraded securities may not also be assigned securities listed on the New York Stock Exchange, LLC (‘‘NYSE’’).4 This rule was adopted in 2008, when the Exchange moved from the 86 Trinity Place location and trading systems to 11 Wall Street and the NYSE trading systems,5 and amended in 2010 when the Exchange began trading Nasdaq Securities.6 At the time, the Exchange proposed that Exchange-traded Securities be traded at separate panels designated for trading in NYSE securities to prevent any potential confusion between Exchange and NYSE rules. Rule 504(b)(6) further provides that DMM units registered on both the Exchange and the NYSE must commit staff, including DMMs and clerks, for the trading of NYSE-listed securities separate from that for the trading of Exchange-listed securities and/or Nasdaq Securities. The rule further provides that ‘‘[i]ndividual DMMs and support staff will not be permitted to trade NYSE-listed securities together with Exchange-listed securities and/or Nasdaq Securities at the same time.’’ Rule 504(d) also provides that, in accordance with Rule 103B(IX), Nasdaq Securities shall be allocated for trading only at panels exclusively designated for trading Nasdaq Securities and/or securities listed on the Exchange. As a result of these rule requirements, DMM units that are registered in both Exchange-traded securities and NYSElisted securities must maintain separate panels and staff for NYSE-listed securities. In addition, Exchange DMM units must maintain separate panels and staff for Nasdaq Securities, separate from Exchange-listed securities. Proposed Amendments The Exchange proposes to eliminate the restrictions on a DMM unit trading Exchange-listed, Nasdaq Securities, and NYSE-listed securities at the same panel. To effect this change, the Exchange proposes to amend Rule 103B(IX) to provide that Exchangetraded securities may be assigned to panels that also trade NYSE-listed securities, delete Rule 504(b)(6), and amend Rule 504(d) to provide that 4 The restriction on trading Exchange-traded securities and NYSE-listed securities at the same panel is only in Exchange rules; NYSE rules do not have a counterpart. 5 See Securities Exchange Act Release No. 58705 (Oct 1, 2008), 73 FR 58995 (Oct. 8. 2008) (SR– Amex–2008–63). 6 See Securities Exchange Act Release No. 62479 (July 9, 2010), 75 FR 41264 (July 15, 2010) (SR– NYSEAmex–2010–31) (Amending Rule 103B to permit trading of Exchange-traded securities on posts throughout the Trading Floor). PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 53953 Nasdaq Securities may be allocated to DMM units for trading at panels that also trade Exchange-listed and/or NYSElisted securities. The Exchange notes that even if Exchange-traded securities and NYSElisted securities are assigned to a single panel, the Exchange will keep them on separate Display Book systems. To the extent the rules applicable to a security differ between the Exchange and NYSE, the separate Display Book systems will operate in accordance with the separate rules. In addition, the individual DMMs and clerks will be able to sign into ID Track simultaneously for both Exchange-traded and NYSE-listed securities so that the Exchange can continue to track which securities a DMM and Floor clerk is operating in for a particular day.7 The Exchange proposes these changes to reflect the changes in the trading environment, as compared to 2010, when Rule 504 was adopted and Rule 103B(IX) was last amended. In particular, the Exchange believes the changes are warranted because they reflect the changing landscape for DMM units. In 2010, when the rules relating to trading Nasdaq Securities were adopted, only one of the DMM units registered to trade on the Exchange was also registered to trade securities listed on the NYSE. Now, all DMM units registered to trade on the Exchange are also registered to trade securities listed on the NYSE. In addition, former NYSEonly DMM units are now all either registered, or in the process of registering, to trade Exchange-traded securities. Accordingly, all but one DMM units that operate on the Trading Floor are now dually-registered for Exchange-traded and NYSE-listed securities. The Exchange notes that the rationale provided in 2010 to maintain separate panels was to reduce confusion between Exchange and NYSE rules. However, the Exchange believes that now that DMM units and Floor broker firms have had two years’ experience managing Exchange-traded and NYSE-listed securities on the Trading Floor, the risk of confusion among trading rules has been obviated through experience. Accordingly, the stated need in 2010 to maintain separate panels is no longer necessary, and is outweighed by the inefficiencies in DMM unit operations that maintaining separate panels entails. The Exchange further notes that the Exchange and NYSE already operate in an integrated manner on a single physical Trading Floor, and the proposed change is minimally 7 See E:\FR\FM\04SEN1.SGM Exchange Rule 103.11—Equities. 04SEN1 53954 Federal Register / Vol. 77, No. 171 / Tuesday, September 4, 2012 / Notices tkelley on DSK3SPTVN1PROD with NOTICES incremental. For example, in 2008, when the Exchange moved to its current location, it adopted a rule that made clear that Exchange-traded equity securities would be traded on the systems and facilities of NYSE Market, Inc., which are located at 11 Wall Street and are the same systems and facilities where NYSE-listed securities trade.8 In recognition of the fact that the Exchange-traded and NYSE-listed securities would be trading on the same physical space, in 2008, the Exchange adopted Exchange Rule 2.10—Equities, which provides that any registered broker dealer that is approved or deemed approved as a member organization of the NYSE shall be approved as an Exchange member organization. Similarly, pursuant to Exchange Rule 2.20—Equities, all natural persons who were approved or deemed approved as a member of the NYSE, i.e., all NYSE DMMs and Floor brokers, were similarly deemed approved as members of the Exchange.9 Accordingly, as part of the move of the Exchange to the NYSE facilities, all Floor brokers and DMMs were approved as member organizations of both the Exchange and the NYSE. As a practical matter, this meant that Floor brokers were approved to operate from their Trading Floor booth premises to trade both Exchange-traded and NYSE-listed securities. With respect to the physical location of DMM units assigned to Exchangelisted securities, the Exchange notes that in 2008, Exchange-listed securities were physically located at DMM posts in the ‘‘Garage’’ room of the Trading Floor. However, in 2010, when the Exchange adopted its pilot program to trade Nasdaq Securities, the Exchange further integrated Exchange-listed securities and Nasdaq Securities at DMM posts throughout the Trading Floor, which had the practical effect of moving Exchange-traded securities from the posts located in the Garage and having them assigned to posts in both the Main Room and the Garage, at panels that were contiguous with panels that traded NYSE-listed securities.10 The Exchange 8 See Exchanges [sic] Rule 0(b) and 0—Equities. In addition, the Exchange’s Equities Trading Floor is defined as the physical locations commonly known as the ‘‘Main Room’’ and the ‘‘Garage’’, which is the same definition of Trading Floor for the NYSE. See Exchange Rule 6A—Equities and NYSE Rule 6A. 9 NYSE adopted similar rules pursuant to which Exchange member organizations and members were deemed approved as NYSE member organizations and members. See NYSE Rules 2.10 and 2.20. 10 See supra footnote 6. In the approval order, the Commission noted that the integration of Exchangetraded and NYSE-listed securities trading at the same post was reasonable and consistent with the Act. VerDate Mar<15>2010 19:25 Aug 31, 2012 Jkt 226001 believes that the current proposal to permit Exchange-traded and NYSElisted securities to trade at a single panel within a post is an incremental change from the existing physical integration between Exchange and NYSE trading that raises no new or novel regulatory issues. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. In particular, the Exchange believes that its proposal is consistent with Section 6(b) of the Act,11 in general, and furthers the objectives of Section 6(b)(5) of the Act,12 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, 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 Exchange believes that the proposal promotes just and equitable principles of trade because it will remove a restriction that is applicable only to DMM units. Off-Floor market makers, and Exchange supplemental liquidity provides [sic], do not have similar restrictions, and may assign personnel to trade in equity securities regardless of the listing venue. The Exchange therefore believes that the proposed rule change would eliminate a restriction that places DMMs at a competitive disadvantage as compared to off-Floor market participants. The Exchange further believes that the proposed rule change removes impediments to and perfects the mechanism of a free and open market because it would eliminate rule-based requirements that impose unnecessary restrictions on DMM units that in today’s market environment, serve only to force DMM units to operate in an inefficient manner, and at a competitive disadvantage to off-Floor market participants. Rather, the proposed rule change will perfect the mechanism of a free and open market by assuring that DMM units staff the securities registered with that DMM unit based on the needs of the market, rather than on artificial constraints imposed by rule. Finally, the Exchange believes that the proposal to further integrate trading of Exchange-traded and NYSE-listed securities at a single panel of a DMM 11 15 12 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00116 Fmt 4703 Sfmt 4703 post is consistent with the Act because the Commission has already approved the existing integration to permit Exchange-traded and NYSE-listed securities to trade at the same DMM post. The Exchange believes that permitting the securities to trade at a single panel is an incremental change because currently, Exchange-traded and NYSE-listed securities can trade at contiguous panels at the same post. Therefore, the proposed change does not raise any new or novel regulatory issues. 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 Because the foregoing proposed rule change does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and, by its terms, does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and Rule 19b– 4(f)(6) thereunder.14 At any time within 60 days of the filing of the 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 13 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 14 17 E:\FR\FM\04SEN1.SGM 04SEN1 Federal Register / Vol. 77, No. 171 / Tuesday, September 4, 2012 / Notices 53955 change is consistent with the Act. Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION of the most significant parts of such statements. Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEMKT–2012–37 on the subject line. [Release No. 34–67737; File No. SR– NYSEArca–2012–93] A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, Proposed Rule Change tkelley on DSK3SPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEMKT–2012–37. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEMKT–2012–37 and should be submitted on or before September 25, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Deleting NYSE Arca Equities Rule 4.3(c) and Adopting New Rules 2262 and 2269 To Harmonize With the Rules of New York Stock Exchange LLC, NYSE MKT LLC, and Financial Industry Regulatory Authority, Inc. August 28, 2012. 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 August 16, 2012, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the 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 delete NYSE Arca Equities Rule 4.3(c) and adopt new Rules 2262 and 2269 to harmonize with the rules of New York Stock Exchange LLC (‘‘NYSE’’), NYSE MKT LLC (‘‘NYSE MKT’’), and Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’). The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 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, [FR Doc. 2012–21678 Filed 8–31–12; 8:45 am] BILLING CODE 8011–01–P 1 15 U.S.C.78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 15 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 19:25 Aug 31, 2012 Jkt 226001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 1. Purpose The Exchange proposes to delete NYSE Arca Equities Rule 4.3(c) and to adopt new Rules 2262 and 2269 to harmonize with the rules of New York Stock Exchange LLC (‘‘NYSE’’), NYSE MKT LLC (‘‘NYSE MKT’’), and Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’).4 To harmonize the Exchange Rules with the rules of NYSE, NYSE MKT, and FINRA, the Exchange correspondingly proposes to delete NYSE Arca Equities Rule 4.3(c) and replace it with proposed NYSE Arca Equities Rules 2262 and 2269. As proposed, NYSE Arca Equities Rules 2262 and 2269 adopt the same language as FINRA Rules 2262 and 2269, except for substituting for or adding to, as needed, the term ‘‘ETP Holder’’ for the term ‘‘member’’, and making corresponding technical changes.5 Current NYSE Arca Equities Rule 4.3(c) states that an ETP Holder shall not trade in (except on an unsolicited basis) or make recommendations with respect to its own securities or those of its parents or affiliates (other than registered investment companies) and any parents or affiliates of an ETP Holder shall not trade in (except on an unsolicited basis) or make recommendations with respect to its own securities or those of its affiliates, or those of the ETP Holder (other than registered investment companies). While the current NYSE Arca Equities Rule 4.3(c) restricts the trading and recommendation activities of the ETP Holder with respect to its own securities or those of its parents or affiliates, the rule does not cover transactions beyond those involving securities of parent or affiliate and does not contain a written disclosure requirement that is consistent with Rules 15c1–5 and 15c1–6 of the Act.6 In 2009, FINRA adopted NASD Rules 2240 (Disclosure of Control Relationship 4 See NYSE Rules 2262, 2269; NYSE MKT Rules 2262—Equities, 2269—Equities; and FINRA Rules 2262, 2269. See also Securities Exchange Act Release Nos. 60659 (September 11, 2009), 74 FR 48117 (September 21, 2009) (order approving SR– FINRA–2009–44); 61176 (December 16, 2009), 74 FR 68442 (December 24, 2009) (SR–NYSE–2009– 125); and 61179 (December 16, 2009), 74 FR 68440 (December 24, 2009) (SR–NYSEAmex–2009–89). 5 These changes to FINRA Rules 2262, 2269 are consistent with the changes done by NYSE and NYSE MKT. See supra note 4. 6 See 17 CFR 240.15c1–5 and 17 CFR 240.15c1– 6. E:\FR\FM\04SEN1.SGM 04SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 171 (Tuesday, September 4, 2012)]
[Notices]
[Pages 53952-53955]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21678]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67740; File No. SR-NYSEMKT-2012-37]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending NYSE MKT Rules
103B(IX)--Equities and 504--Equities To Provide That a Designated
Market Maker Unit May Trade at the Same Panel Securities Traded on the
Exchange and/or Securities Listed on the New York Stock Exchange LLC

August 28, 2012.
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 August 22, 2012, NYSE MKT LLC (the ``Exchange'' or ``NYSE
MKT'') 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
Commission is publishing this notice to

[[Page 53953]]

solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 MKT Rules 103B(IX)--Equities
and 504--Equities to provide that a Designated Market Maker (``DMM'')
unit may trade at the same panel securities traded on the Exchange and/
or securities listed on the New York Stock Exchange LLC (``NYSE''). The
text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
The Exchange proposes to amend NYSE MKT Rules 103B- Equities
(``Rule 103B'') and 504--Equities (``Rule 504'') to provide that a DMM
unit may trade at the same panel securities traded at the Exchange and/
or securities listed on the NYSE.
Background
Rule 103B(IX) currently provides that securities listed on the
Exchange or admitted to dealings on the Exchange pursuant to a grant of
unlisted trading privileges, i.e., Nasdaq Securities,\3\ (collectively,
``Exchange-traded securities'') shall be assigned for trading only at
panels exclusively designated for trading securities on the Exchange.
The rule further provides that ``DMM units may only trade securities
listed on the Exchange or admitted to dealings on the Exchange pursuant
to a grant of unlisted trading privileges at panels exclusively
designated for trading securities on the Exchange.'' In practice, this
means that a DMM panel designated for trading in Exchange-traded
securities may not also be assigned securities listed on the New York
Stock Exchange, LLC (``NYSE'').\4\ This rule was adopted in 2008, when
the Exchange moved from the 86 Trinity Place location and trading
systems to 11 Wall Street and the NYSE trading systems,\5\ and amended
in 2010 when the Exchange began trading Nasdaq Securities.\6\ At the
time, the Exchange proposed that Exchange-traded Securities be traded
at separate panels designated for trading in NYSE securities to prevent
any potential confusion between Exchange and NYSE rules.
---------------------------------------------------------------------------

\3\ See Exchange Rule 501(c)--Equities.
\4\ The restriction on trading Exchange-traded securities and
NYSE-listed securities at the same panel is only in Exchange rules;
NYSE rules do not have a counterpart.
\5\ See Securities Exchange Act Release No. 58705 (Oct 1, 2008),
73 FR 58995 (Oct. 8. 2008) (SR-Amex-2008-63).
\6\ See Securities Exchange Act Release No. 62479 (July 9,
2010), 75 FR 41264 (July 15, 2010) (SR-NYSEAmex-2010-31) (Amending
Rule 103B to permit trading of Exchange-traded securities on posts
throughout the Trading Floor).
---------------------------------------------------------------------------

Rule 504(b)(6) further provides that DMM units registered on both
the Exchange and the NYSE must commit staff, including DMMs and clerks,
for the trading of NYSE-listed securities separate from that for the
trading of Exchange-listed securities and/or Nasdaq Securities. The
rule further provides that ``[i]ndividual DMMs and support staff will
not be permitted to trade NYSE-listed securities together with
Exchange-listed securities and/or Nasdaq Securities at the same time.''
Rule 504(d) also provides that, in accordance with Rule 103B(IX),
Nasdaq Securities shall be allocated for trading only at panels
exclusively designated for trading Nasdaq Securities and/or securities
listed on the Exchange.
As a result of these rule requirements, DMM units that are
registered in both Exchange-traded securities and NYSE-listed
securities must maintain separate panels and staff for NYSE-listed
securities. In addition, Exchange DMM units must maintain separate
panels and staff for Nasdaq Securities, separate from Exchange-listed
securities.
Proposed Amendments
The Exchange proposes to eliminate the restrictions on a DMM unit
trading Exchange-listed, Nasdaq Securities, and NYSE-listed securities
at the same panel. To effect this change, the Exchange proposes to
amend Rule 103B(IX) to provide that Exchange-traded securities may be
assigned to panels that also trade NYSE-listed securities, delete Rule
504(b)(6), and amend Rule 504(d) to provide that Nasdaq Securities may
be allocated to DMM units for trading at panels that also trade
Exchange-listed and/or NYSE-listed securities.
The Exchange notes that even if Exchange-traded securities and
NYSE-listed securities are assigned to a single panel, the Exchange
will keep them on separate Display Book systems. To the extent the
rules applicable to a security differ between the Exchange and NYSE,
the separate Display Book systems will operate in accordance with the
separate rules. In addition, the individual DMMs and clerks will be
able to sign into ID Track simultaneously for both Exchange-traded and
NYSE-listed securities so that the Exchange can continue to track which
securities a DMM and Floor clerk is operating in for a particular
day.\7\
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\7\ See Exchange Rule 103.11--Equities.
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The Exchange proposes these changes to reflect the changes in the
trading environment, as compared to 2010, when Rule 504 was adopted and
Rule 103B(IX) was last amended. In particular, the Exchange believes
the changes are warranted because they reflect the changing landscape
for DMM units. In 2010, when the rules relating to trading Nasdaq
Securities were adopted, only one of the DMM units registered to trade
on the Exchange was also registered to trade securities listed on the
NYSE. Now, all DMM units registered to trade on the Exchange are also
registered to trade securities listed on the NYSE. In addition, former
NYSE-only DMM units are now all either registered, or in the process of
registering, to trade Exchange-traded securities. Accordingly, all but
one DMM units that operate on the Trading Floor are now dually-
registered for Exchange-traded and NYSE-listed securities.
The Exchange notes that the rationale provided in 2010 to maintain
separate panels was to reduce confusion between Exchange and NYSE
rules. However, the Exchange believes that now that DMM units and Floor
broker firms have had two years' experience managing Exchange-traded
and NYSE-listed securities on the Trading Floor, the risk of confusion
among trading rules has been obviated through experience. Accordingly,
the stated need in 2010 to maintain separate panels is no longer
necessary, and is outweighed by the inefficiencies in DMM unit
operations that maintaining separate panels entails.
The Exchange further notes that the Exchange and NYSE already
operate in an integrated manner on a single physical Trading Floor, and
the proposed change is minimally

[[Page 53954]]

incremental. For example, in 2008, when the Exchange moved to its
current location, it adopted a rule that made clear that Exchange-
traded equity securities would be traded on the systems and facilities
of NYSE Market, Inc., which are located at 11 Wall Street and are the
same systems and facilities where NYSE-listed securities trade.\8\ In
recognition of the fact that the Exchange-traded and NYSE-listed
securities would be trading on the same physical space, in 2008, the
Exchange adopted Exchange Rule 2.10--Equities, which provides that any
registered broker dealer that is approved or deemed approved as a
member organization of the NYSE shall be approved as an Exchange member
organization. Similarly, pursuant to Exchange Rule 2.20--Equities, all
natural persons who were approved or deemed approved as a member of the
NYSE, i.e., all NYSE DMMs and Floor brokers, were similarly deemed
approved as members of the Exchange.\9\ Accordingly, as part of the
move of the Exchange to the NYSE facilities, all Floor brokers and DMMs
were approved as member organizations of both the Exchange and the
NYSE. As a practical matter, this meant that Floor brokers were
approved to operate from their Trading Floor booth premises to trade
both Exchange-traded and NYSE-listed securities.
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\8\ See Exchanges [sic] Rule 0(b) and 0--Equities. In addition,
the Exchange's Equities Trading Floor is defined as the physical
locations commonly known as the ``Main Room'' and the ``Garage'',
which is the same definition of Trading Floor for the NYSE. See
Exchange Rule 6A--Equities and NYSE Rule 6A.
\9\ NYSE adopted similar rules pursuant to which Exchange member
organizations and members were deemed approved as NYSE member
organizations and members. See NYSE Rules 2.10 and 2.20.
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With respect to the physical location of DMM units assigned to
Exchange-listed securities, the Exchange notes that in 2008, Exchange-
listed securities were physically located at DMM posts in the
``Garage'' room of the Trading Floor. However, in 2010, when the
Exchange adopted its pilot program to trade Nasdaq Securities, the
Exchange further integrated Exchange-listed securities and Nasdaq
Securities at DMM posts throughout the Trading Floor, which had the
practical effect of moving Exchange-traded securities from the posts
located in the Garage and having them assigned to posts in both the
Main Room and the Garage, at panels that were contiguous with panels
that traded NYSE-listed securities.\10\ The Exchange believes that the
current proposal to permit Exchange-traded and NYSE-listed securities
to trade at a single panel within a post is an incremental change from
the existing physical integration between Exchange and NYSE trading
that raises no new or novel regulatory issues.
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\10\ See supra footnote 6. In the approval order, the Commission
noted that the integration of Exchange-traded and NYSE-listed
securities trading at the same post was reasonable and consistent
with the Act.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange. In particular,
the Exchange believes that its proposal is consistent with Section 6(b)
of the Act,\11\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\12\ in particular, because it is designed to
prevent fraudulent and manipulative acts and practices, 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.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposal promotes just and equitable
principles of trade because it will remove a restriction that is
applicable only to DMM units. Off-Floor market makers, and Exchange
supplemental liquidity provides [sic], do not have similar
restrictions, and may assign personnel to trade in equity securities
regardless of the listing venue. The Exchange therefore believes that
the proposed rule change would eliminate a restriction that places DMMs
at a competitive disadvantage as compared to off-Floor market
participants. The Exchange further believes that the proposed rule
change removes impediments to and perfects the mechanism of a free and
open market because it would eliminate rule-based requirements that
impose unnecessary restrictions on DMM units that in today's market
environment, serve only to force DMM units to operate in an inefficient
manner, and at a competitive disadvantage to off-Floor market
participants. Rather, the proposed rule change will perfect the
mechanism of a free and open market by assuring that DMM units staff
the securities registered with that DMM unit based on the needs of the
market, rather than on artificial constraints imposed by rule.
Finally, the Exchange believes that the proposal to further
integrate trading of Exchange-traded and NYSE-listed securities at a
single panel of a DMM post is consistent with the Act because the
Commission has already approved the existing integration to permit
Exchange-traded and NYSE-listed securities to trade at the same DMM
post. The Exchange believes that permitting the securities to trade at
a single panel is an incremental change because currently, Exchange-
traded and NYSE-listed securities can trade at contiguous panels at the
same post. Therefore, the proposed change does not raise any new or
novel regulatory issues.

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

Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
---------------------------------------------------------------------------

At any time within 60 days of the filing of the 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

[[Page 53955]]

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 email to rule-comments@sec.gov. Please
include File Number SR-NYSEMKT-2012-37 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-NYSEMKT-2012-37. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2012-37 and should
be submitted on or before September 25, 2012.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21678 Filed 8-31-12; 8:45 am]
BILLING CODE 8011-01-P

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