
[Federal Register: January 5, 2010 (Volume 75, Number 2)]
[Notices]               
[Page 477-479]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05ja10-148]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61250; File No. SR-NYSEAmex-2009-92]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Extending the 
Operative Date of Rule 92(c)(3) From December 31, 2009 to July 31, 2010

December 29, 2009.
    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 December 23, 2009, NYSE Amex LLC (the ``Exchange'' or 
``NYSE Amex'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend the operative date of Rule 92(c)(3) 
from December 31, 2009 to July 31, 2010. The text of the proposed rule 
change is available at the Exchange, on the Commission's Web site at 
http://www.sec.gov, the Commission's Public Reference Room, and http://
www.nyse.com.

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

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

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

1. Purpose
    The Exchange is proposing to extend the delayed operative date of 
Rule 92(c)(3) from December 31, 2009 to July 31, 2010. The Exchange 
believes that this extension will provide the time necessary for the 
Exchange, the New York Stock Exchange LLC (``NYSE''), and the Financial 
Industry Regulatory Authority, Inc. (``FINRA'') to harmonize their 
respective rules concerning customer order protection to achieve a 
standardized industry practice.\4\
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    \4\ NYSE has filed a companion rule filing to conform its Rules 
to the changes proposed in this filing. See SR-NYSE-2009-129, 
formally submitted December 23, 2009.
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Background

    On July 5, 2007, the Commission approved amendments to NYSE Rule 92 
to permit riskless principal trading at the NYSE.\5\ These amendments 
were filed in part to begin the harmonization process between NYSE Rule 
92 and FINRA's Manning Rule.\6\ In connection with those amendments, 
the NYSE implemented for an operative date of January 16, 2008, NYSE 
Rule 92(c)(3), which permits NYSE member organizations to submit 
riskless principal orders to the NYSE, but requires them to submit to a 
designated NYSE database a report of the execution of the facilitated 
order. That rule also requires members to submit to that same database 
sufficient information to provide an electronic link of the execution 
of the facilitated order to all of the underlying orders.
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    \5\ See Securities Exchange Act Release No. 56017 (Jul. 5, 
2007), 72 FR 38110 (Jul. 12, 2007) (SR-NYSE-2007-21).
    \6\ See NASD Rule 2111 and IM-2110-2.
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    For purposes of NYSE Rule 92(c)(3), the NYSE informed member 
organizations that when executing riskless principal transactions, 
firms must submit order execution reports to the NYSE's Front End 
Systemic Capture (``FESC'') database linking the execution of the 
riskless principal order on the NYSE to the specific underlying orders. 
The information provided must be sufficient for both member firms and 
the NYSE to reconstruct in a time-sequenced manner all orders, 
including allocations to the underlying orders, with respect to which a 
member organization is claiming the riskless principal exception.

[[Page 478]]

    Because the rule change required both the NYSE and member 
organizations to make certain changes to their trading and order 
management systems, the NYSE filed to delay to May 14, 2008 the 
operative date of the NYSE Rule 92(c)(3) requirements, including 
submitting end-of-day allocation reports for riskless principal 
transactions and using the riskless principal account type 
indicator.\7\ The NYSE filed for additional extensions of the operative 
date of Rule 92(c)(3) to December 31, 2009.\8\ Because NYSE Amex 
adopted NYSE Rule 92 in its then current form,\9\ the delayed operative 
date for the NYSE Rule 92(c)(3) reporting requirements also applied for 
NYSE Amex Equities Rule 92(c)(3) reporting requirements and the 
Exchange filed for additional extensions of the operative date, the 
most recent of which was an extension to December 31, 2009.\10\
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    \7\ See Securities Exchange Act Release No. 56968 (Dec. 14, 
2007), 72 FR 72432 (Dec. 20, 2007) (SR-NYSE-2007-114).
    \8\ See Securities Exchange Act Release Nos. 57682 (Apr. 17, 
2008), 73 FR 22193 (Apr. 24, 2008) (SR-NYSE-2008-29); 59621 (Mar. 
23, 2009), 74 FR 14179 (Mar. 30, 2009) (SR-NYSE-2009-30); and 60396 
(July 30, 2009), 74 FR 39128 [sic] (Aug. 5, 2009) (SR-NYSE-2009-73).
    \9\ The NYSE Amex Equities Rules, which became operative on 
December 1, 2008, are substantially identical to the current NYSE 
Rules 1-1004 and the Exchange continues to update the NYSE Amex 
Equities Rules as necessary to conform with rule changes to 
corresponding NYSE Rules filed by the NYSE. See Securities Exchange 
Act Release Nos. 58705 (Oct. 1, 2008), 73 FR 58995 (Oct. 8, 2008) 
(SR-Amex-2008-63); No. 58833 (Oct. 22, 2008), 73 FR 64642 (Oct. 30, 
2008) (SR-NYSE-2008-106); No. 58839 (Oct. 23, 2008), 73 FR 64645 
(October 30, 2008) (SR-NYSEALTR-2008-03); No. 59022 (Nov. 26, 2008), 
73 FR 73683 (Dec. 3, 2008) (SR-NYSEALTR-2008-10); and No. 59027 
(Nov. 28, 2008), 73 FR 73681 (Dec. 3, 2008) (SR-NYSEALTR-2008-11).
    \10\ See Securities Exchange Act Release Nos. 59620 (Mar. 23, 
2009), 74 FR 14176 (Mar. 30, 2009) (SR-NYSEALTR-2009-29) and 60397 
(July 30, 2009), 74 FR 39128 (Aug. 5, 2009) (SR-NYSEAmex-2009-48).
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Request for Extension

    FINRA, NYSE, and the Exchange have been working diligently on fully 
harmonizing their respective rules, including reviewing the 
possibilities for a uniform reporting standard for riskless principal 
transactions. However, because of the complexity of the existing 
customer order protection rules, including the need for input from 
industry participants as well as Commission approval, the Exchange, 
NYSE, and FINRA will not have harmonized their respective customer 
order protection rules by the current December 31, 2009 date for the 
implementation of the FESC riskless principal reporting.
    The Exchange notes that it has agreed with NYSE and FINRA to pursue 
efforts to harmonize customer order protection rules. As authorized by 
their respective Boards, FINRA and NYSE Regulation, Inc. (``NYSE 
Regulation'') have each published a Regulatory Notice/Information Memo 
that solicited comments from their respective member participants on 
the proposed harmonized approach to customer order protection.\11\ 
Because industry participants need to code their trading systems to 
comply with customer order protection rules, the Exchange believes that 
industry input is vital to ensuring that the approach to customer order 
protection both meets regulatory needs of protecting customer orders, 
but is also feasible technologically.
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    \11\ See NYSE Regulation Information Memo 09-13 (March 12, 
2009); FINRA Regulatory Notice 09-15 (March 12, 2009).
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    Both FINRA and NYSE Regulation have received comments from the 
public on the Regulatory Notice and Information Memo, including 
comments from industry forums such as Securities Industry and Financial 
Markets Association (``SIFMA'') and Financial Information Forum 
(``FIF'') that each jointly addressed the FINRA and NYSE Regulation 
proposals. The comments have generally supported efforts to harmonize 
the FINRA and NYSE rules. Among issues raised in the comment letters, 
however, is the concern that FINRA and NYSE have a harmonized approach 
for reporting riskless principal transactions. In addition, commenters 
note the need for an implementation period to develop any technology 
that would be needed to comply with the proposed reporting standard.
    On December 10, 2009, FINRA filed with the Commission its rule 
proposal to adopt a new industry standard for customer order protection 
as proposed FINRA Rule 5320.\12\ That proposed filing is based on the 
draft rule text that FINRA and NYSE Regulation each circulated to their 
respective member participants and includes copies of the comment 
letters that FINRA and NYSE Regulation received on the rule proposal. 
The Exchange intends to adopt a new customer order protection rule that 
is substantially identical to proposed FINRA Rule 5320.
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    \12\ See SR-FINRA-2009-090 (December 10, 2009).
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    The Exchange continues to believe that pending full harmonization 
of the respective customer order protection rules, it would be 
premature to require firms to meet the current Rule 92(c)(3) FESC 
reporting requirements.\13\ Indeed, having differing reporting 
standards for riskless principal orders would be inconsistent with the 
overall goal of the harmonization process.
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    \13\ The Exchange notes that it would also need to make 
technological changes to implement the proposed FESC reporting 
solution for Rule 92(c)(3).
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    Accordingly, to provide the Exchange, NYSE, and FINRA the time 
necessary to obtain Commission approval for and implement a harmonized 
rule set that would apply across their respective marketplaces, 
including a harmonized approach to riskless principal trade reporting, 
the Exchange is proposing to delay the operative date for NYSE Amex 
Equities Rule 92(c)(3) from December 31, 2009 to July 31, 2010.
    Pending the harmonization of the three rules, the Exchange will 
continue to require that, as of the date each member organization 
implements riskless principal routing, the member organization have in 
place systems and controls that allow them to easily match and tie 
riskless principal execution on the Exchange to the underlying orders 
and that they be able to provide this information to the Exchange upon 
request. To make clear that this requirement continues, the Exchange 
proposes to amend supplementary material .95 to Rule 92 to specifically 
provide that the Rule 92(c)(3) reporting requirements are suspended 
until July 31, 2010 and that member organizations are required to have 
in place such systems and controls relating to their riskless principal 
executions on the Exchange. Moreover, the Exchange will coordinate with 
NYSE and FINRA to examine for compliance with the rule requirements for 
those firms that engage in riskless principal trading under Rule 92(c).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\14\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\15\ 
in particular, in that 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 the proposed extension provides the Exchange, NYSE, and FINRA 
the time necessary to develop a harmonized rule concerning customer 
order protection that will enable member organizations to participate 
in the national market system without unnecessary impediments.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).

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[[Page 479]]

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:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 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, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \16\ 
and Rule 19b-4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written notice of its 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.
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    The Exchange has requested the Commission to waive the 30-day 
operative delay so that the Exchange can extend the operative date of 
NYSE Amex Equities Rule 92(c)(3) without interruption. The Exchange 
notes that extending the delayed operative date of Rule 92(c)(3) from 
December 31, 2009 to July 31, 2010 will provide sufficient time for the 
Exchange, NYSE, and FINRA to obtain Commission approval for and 
implement a harmonized approach to customer order protection rules, 
including how riskless principal transactions should be reported. The 
Commission hereby grants the Exchange's request and believes such 
waiver is consistent with the protection of investors and the public 
interest.\18\ Accordingly, the Commission designates the proposed rule 
change operative upon filing with the Commission.
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    \18\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2009-92 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-2009-92. 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 on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of such 
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-2009-92 and should be submitted on or before 
January 26, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-31273 Filed 1-4-10; 8:45 am]

BILLING CODE 8011-01-P
