
[Federal Register: August 27, 2009 (Volume 74, Number 165)]
[Notices]               
[Page 43737-43739]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27au09-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60554; File No. SR-NYSEAmex-2009-42]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of 
Amendment No. 1 and Order Granting Accelerated Approval of a Proposed 
Rule Change, as Modified by Amendment No. 1, Relating to the Electronic 
Trading of Complex Orders

August 21, 2009.

I. Introduction

    On July 9, 2009, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposal to adopt rules 
relating to the electronic trading of complex orders. The proposed rule 
change was published for comment in the Federal Register on July

[[Page 43738]]

20, 2009.\3\ NYSE Amex filed Amendment No. 1 to the proposal on August 
19, 2009.\4\ The Commission received no comments regarding the proposed 
rule change. This order provides notice of filing of Amendment No. 1 to 
the proposed rule change and grants accelerated approval to the 
proposed rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 60297 (July 13, 
2009), 74 FR 35223.
    \4\ Amendment No. 1 modifies the text of the proposed rule to 
add to NYSE Amex Rule 980NY(c)(i) a reference to ``quotes'' that was 
omitted erroneously, and to replace an incorrect cross-reference in 
NYSE Amex Rule 980NY(c)(ii) with a reference to executions ``against 
such new order(s) or quote(s)'' to describe the execution of resting 
Electronic Complex Orders. The revision to NYSE Amex Rule 
980NY(c)(ii) harmonizes the rule text with the description provided 
in the purpose section of the proposal.
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II. Description of the Proposal

    NYSE Amex proposes to adopt NYSE Amex Rule 980NY, ``Electronic 
Complex Order Trading,'' to describe the trading of Electronic Complex 
Orders on NYSE Amex. Electronic Complex Orders include any Complex 
Order, as defined in NYSE Amex Rule 900.3NY(e), and any Stock/option 
Order, as defined in NYSE Amex Rule 9003.NY(h), that is entered into 
the NYSE Amex system.\5\ The definition of Complex Order is consistent 
with the definition of complex trade used for purposes of the Plan For 
the Purpose of Creating and Operating an Intermarket Option Linkage 
(``Linkage Plan'') in connection with the Linkage Plan's exemption from 
trade-through liability for complex trades. Accordingly, the individual 
legs of an Electronic Complex Order may be executed at prices outside 
the National Best Bid or Offer, although no leg of an Electronic 
Complex Order will be executed at a price outside of the NYSE Amex best 
bid or offer for that leg.\6\
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    \5\ See NYSE Amex Rule 980NY. NYSE Amex Rule 900.3NY(e) defines 
a Complex Order as ``any order involving the simultaneous purchase 
and/or sale of two or more different option series in the same 
underlying security, for the same account, in a ratio that is equal 
to or greater than one-to-three (.333) and less than or equal to 
three-to-one (3.00) and for the purpose of executing a particular 
investment strategy.'' NYSE Rule 900.3NY(h) defines a Stock/option 
Order as ``an order to buy or sell a stated number of units of an 
underlying stock or a security convertible into the underlying stock 
(``convertible security'') coupled with the purchase or sale of 
option contract(s) on the opposite side of the market representing 
either (A) the same number of units of the underlying stock or 
convertible security, or (B) the number of units of the underlying 
stock necessary to create a delta neutral position, but in no case 
in a ratio greater than 8 option contracts per unit of trading of 
the underlying stock or convertible security established for that 
series by the Clearing Corporation.''
    \6\ See NYSE Amex Rule 980NY(c).
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    An Electronic Complex Order entered into the NYSE Amex system is 
routed to the Complex Matching Engine (``CME'') for possible execution 
against other Electronic Complex Orders or against individual quotes 
and orders in the Consolidated Book.\7\ Electronic Complex Orders that 
are not executed immediately by the CME are routed to the Consolidated 
Book.\8\ Electronic Complex Orders in the Consolidated Book are ranked 
in price/time priority based on the total net debit or credit price for 
the order and the time of order entry, provided that customer 
Electronic Complex Orders are ranked ahead of non-customer Complex 
Orders at the same price.\9\
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    \7\ See NYSE Amex Rule 980NY(a).
    \8\ Id.
    \9\ See NYSE Amex Rule 980NY(b).
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    The CME will automatically execute an incoming marketable 
Electronic Complex Order against an Electronic Complex Order in the 
Consolidated Book or, if the incoming order is not marketable against 
another Electronic Complex Order, against individual orders or quotes 
in the Consolidated Book that can fill the incoming order in full or in 
a permissible ratio.\10\ Notwithstanding the foregoing, individual 
Customer orders in the Consolidated Book that could fill an incoming 
Electronic Complex Order in full, or in a permissible ratio, would have 
priority over an Electronic Complex Order in the Consolidated Book at 
the same price.\11\
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    \10\ See NYSE Amex Rule 980NY(c)(i).
    \11\ Id.
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    Non-marketable Electronic Complex Orders will rest in the 
Consolidated Book. The CME will monitor interest in the leg markets, 
and will execute a resting Electronic Complex Order against new 
order(s) or quote(s) entered into the Consolidated Book if the new 
order(s) or quote(s) can execute the resting Electronic Complex Order 
in full or in a permissible ratio.\12\
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    \12\ See NYSE Amex Rule 980NY(c)(ii).
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    NYSE Amex market participants will be able to view Electronic 
Complex Orders in the Consolidated Book via an electronic interface and 
may submit Electronic Complex Orders to the CME to trade against orders 
in the Consolidated Book.\13\ A Specialist will not have a guaranteed 
allocation when an Electronic Complex Order executes against either the 
Specialist's Electronic Complex Order or its interest in the leg 
market.\14\
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    \13\ See NYSE Amex Rule 980NY(c)(iii).
    \14\ See NYSE Amex Rules 980NY(c)(i) and (iii).
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    Electronic Complex Orders may be executed in one-cent increments 
regardless of the minimum price variation otherwise applicable to the 
individual legs of the order.\15\ In addition, the price of at least 
one leg of an Electronic Complex Order must trade at a price that is 
better than the corresponding price of all customer bids or offers in 
the Consolidated Book for the same series by at least one standard 
trading increment, as defined in NYSE Amex Rule 960NY.\16\
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    \15\ See NYSE Amex Rule 980NY, Commentary .01.
    \16\ See NYSE Amex Rule 980NY, Commentary .02.
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    Stock/option Orders with one options leg that are submitted to the 
CME will trade in the following sequence: (1) Against other Stock/
option Orders in the Consolidated Book, using public customer priority 
and then time priority; (2) against individual orders or quotes, 
provided that the Stock/option Order can be executed in full or in a 
permissible ratio; and (3) against orders or quotes submitted by market 
participants.\17\ Notwithstanding these priority provisions, the option 
leg of a Stock/option Order will not be executed at NYSE Amex's best 
bid or offer in that series if one or more public customer orders are 
resting at that price unless the options leg trades with such public 
customer order(s).\18\ A Stock/option Order with more than one options 
leg will be handled in the same manner as a Stock/option Order with a 
single option leg, except that the requirement to trade with existing 
public customer interest at NYSE Amex's best bid or offer will apply 
only if there are public customer orders at NYSE Amex's best bid or 
offer for each of the legs of the order.\19\
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    \17\ See NYSE Amex Rule 980NY, Commentary .03(c).
    \18\ See NYSE Amex Rule 980NY, Commentary .03(b).
    \19\ See NYSE Amex Rule 980NY, Commentary .03(d).
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III. Discussion

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\20\ In particular, the Commission finds that the 
proposal, as amended, is consistent with Section 6(b)(5) of the 
Act,\21\ which requires, in part, that the rules of a national 
securities exchange be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and

[[Page 43739]]

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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    \20\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
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    As discussed above, all NYSE Amex market participants will be able 
to view Electronic Complex Orders in the Consolidated Book and submit 
Electronic Complex Orders to the CME to trade against orders in the 
Consolidated Book. Accordingly, the Commission believes that the 
proposal could increase the transparency of Electronic Complex Orders 
and facilitate their execution.
    The proposal provides customer Electronic Complex Orders with 
priority over non-customer Electronic Complex Orders at the same 
price,\22\ and also preserves the priority of customer orders in the 
individual leg markets. In this regard, if individual customer orders 
in the Consolidated Book can execute an incoming Electronic Complex 
Order in full, or in a permissible ratio, at the same total net debit 
or credit as an Electronic Complex Order in the Consolidated Book, the 
individual customer orders will have priority.\23\ Further, when an 
Electronic Complex Order is executed, the price of at least one leg of 
the order must trade at a price that is better than the corresponding 
price of all customer bids or offers in the Consolidated Book for that 
series by at least one standard trading increment.\24\
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    \22\ See NYSE Amex Rule 980NY(b).
    \23\ See NYSE Amex Rule 980NY(c)(i).
    \24\ See NYSE Amex Rule 980NY, Commentary .02.
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    The Commission believes that it is reasonable and consistent with 
the Act for NYSE Amex not to provide a guaranteed allocation to 
Specialists, as described above, because Specialists do not have 
quoting obligations for complex strategies.
    Finally, the Commission believes that the proposal could facilitate 
the execution of stock-option orders on the Amex by providing for the 
electronic handling and execution of these orders, which currently must 
be handled manually. The Commission notes that proposal provides for 
the execution of stock-option orders submitted to the CME in a manner 
that is consistent with the Amex's existing priority rules for stock-
option orders, which provide the options leg of a stock-option order 
with priority over bids (offers) in the trading crowd at the same 
price, but not over public customer orders in the Consolidated 
Book.\25\ Accordingly, the Commission finds that the NYSE Amex rules 
concerning the execution of Stock/option Orders submitted to the CME 
are consistent with the Act.
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    \25\ See NYSE Amex Rule 963NY(d). The Commission notes that the 
proposed rules governing the handling of Stock/option Orders are 
substantially similar to rules adopted by the Chicago Board Options 
Exchange, Incorporated, which the Commission reviewed previously. 
See CBOE Rule 6.53C, Commentary .06. See also Securities Exchange 
Act Release Nos. 56903 (December 5, 2007), 72 FR 70356 (December 11, 
2007) (File No. SR-CBOE-2007-68) (order approving rules relating to 
the electronic handling and execution of stock-option orders); and 
59585 (March 17, 2009), 74 FR 12416 (March 24, 2009) (File No. SR-
CBOE-2009-017) (notice of filing and immediate effectiveness of 
rules allowing conversions and reversals to be routed to the 
electronic complex order book).
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IV. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after publication for comment in the Federal Register. Amendment No. 1, 
which inserts a reference to ``quotes'' that was omitted erroneously 
and replaces an incorrect cross-reference in the proposed rule text, 
help to clarify the proposed rule change and do not differ materially 
from the proposal as published in the Federal Register on July 19, 
2009. Accordingly, the Commission finds good cause, consistent with 
Section 19(b)(2) of the Act,\26\ to approve the proposed rule change, 
as modified by Amendment No. 1, on an accelerated basis.
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    \26\ 15 U.S.C. 78s(b)(2).
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V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether Amendment No. 1 
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-2009-42 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-2009-42. 
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 inspection 
and copying 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-NYSEAmex-2009-42 and 
should be submitted on or before September 17, 2009.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NYSEAmex-2009-42), as 
modified by Amendment No. 1, is approved on an accelerated basis.
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    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20654 Filed 8-26-09; 8:45 am]

BILLING CODE 8010-01-P
