
[Federal Register: January 15, 2010 (Volume 75, Number 10)]
[Notices]               
[Page 2573-2578]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15ja10-92]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61308; File No. SR-NYSEAmex-2009-98]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Adopting New 
Rule 107B--NYSE Amex Equities To Establish a New Class of NYSE Amex 
Equities Market Participants Referred to as ``Supplemental Liquidity 
Providers'' or ``SLPs''

January 7, 2010.
    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 30, 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 adopt new Rule 107B--NYSE Amex Equities 
(``Supplemental Liquidity Providers'') to establish, as a pilot 
program, a new class of NYSE Amex Equities market participants referred 
to as ``Supplemental Liquidity Providers'' or ``SLPs''. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.nyse.com.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to adopt new Rule 107B--
NYSE Amex Equities (``Supplemental Liquidity Providers'') to establish, 
as a pilot program, a new class of NYSE Amex Equities market 
participants referred to as ``Supplemental Liquidity Providers'' or 
``SLPs''.
Background
    Proposed Rule 107B--NYSE Amex Equities is based on NYSE Rule 107B. 
The New York Stock Exchange LLC (``NYSE'') adopted NYSE Rule 107B 
governing SLPs as a six-month pilot program commencing in November 
2008, which was subsequently extended to March 30, 2010.\4\
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    \4\ See Securities Exchange Act Release Nos. 58877 (October 29, 
2008), 73 FR 65904 (November 5, 2008) (SR-NYSE-2008-108) (adopting 
SLP pilot program); 59869 (May 6, 2009), 74 FR 22796 (May 14, 2009) 
(SR-NYSE-2009-46) (extending SLP pilot program until October 1, 
2009); 60756 (October 1, 2009), 74 FR 51628 (October 7, 2009) (SR-
NYSE-2009-100) (extending SLP pilot program until November 30, 2009) 
and SR-NYSE-2009-119 (extending SLP pilot program until March 30, 
2010).
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    Proposed Rule 107B--NYSE Amex Equities tracks NYSE Rule 107B in its 
entirety, subject to such changes as are necessary to apply the Rule to 
the Exchange.\5\ In addition, the Exchange proposes to adopt Rule 
107B--NYSE Amex Equities as a pilot program commencing on the date the 
Rule is filed with the Commission and continuing until March 30, 2010, 
the date NYSE's SLP pilot program expires. The Exchange will extend the 
duration of its SLP pilot program as needed to track the NYSE's SLP 
pilot program and will file for permanent approval at the same time as 
the NYSE.
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    \5\ Notably, the Exchange proposes to change the descriptions of 
the ``SLP Liaison Committee'' and the ``SLP Panel'' contained in 
parts (d)(1) and (j)(2) of the Rule, as well as the procedures for 
withdrawal in part (e), to match the proper corporate relationship 
between the various constituents described therein. The Exchange's 
SLP program would also include both listed and ``traded'' 
securities, i.e., securities admitted to trading on the Exchange 
pursuant to a grant of unlisted trading privileges (``UTP'') (see 
part (g)(1) of the Rule).
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Proposed Rule 107B--NYSE Amex Equities
    With this rule filing, the Exchange is proposing a pilot program to 
establish a new class of market participants: Supplemental Liquidity 
Providers (``SLP''). SLPs will supplement the liquidity provided by 
Designated Market

[[Page 2574]]

Makers (``DMMs''). SLPs may only enter orders electronically from off 
the Floor of the Exchange and may only enter such orders directly into 
Exchange systems and facilities designated for this purpose. All SLP 
orders must only be for the proprietary account of the SLP member 
organization. Thus, an SLP will not handle orders from public customers 
or otherwise act on an agency basis. They will have a 5% average 
quoting requirement per assigned security. Additionally, if an SLP 
posts displayed or non-displayed liquidity in its assigned securities 
that results in an execution, the Exchange will pay the SLP a financial 
rebate.
    By establishing this new class of market participant, the Exchange 
is seeking to provide incentives for quoting and to add competition to 
the existing group of liquidity providers. By requiring SLPs to quote 
at the NBB or the NBO a percentage of the regular trading day in their 
assigned securities, and by paying a rebate when the SLP's interest 
results in an execution, the Exchange is rewarding aggressive liquidity 
providers in the market. The Exchange believes that this rebate program 
will encourage the additional utilization of, and interaction with, the 
Exchange's marketplace and provide customers with the premier venue for 
price discovery, liquidity, competitive quotes and price improvement.
Responsibilities of the Supplemental Liquidity Provider
SLP's 5% Average Quoting Requirement
    An SLP is required to maintain a bid or an offer at the NBB or NBO 
(e.g., the ``inside'') averaging at least 5% of the trading day for 
each assigned security in round lots in order to maintain its status as 
an SLP. If an SLP fails to meet the quoting requirement for three 
consecutive months, the Exchange may revoke the SLP status pursuant to 
Section (i)(1)(C)(iii) of the proposed Rule.
SLP's 3% Average or More Quoting Requirement for Rebate Purposes
    If an SLP posts liquidity in its assigned securities that results 
in an execution, the Exchange will pay the SLP a financial rebate of 
$0.0020 per share priced at or above $1.00, and $0.0005 per share 
priced below $1.00, provided the SLP meets its monthly quoting 
requirement for rebates averaging at least 3% at the NBB or the NBO in 
its assigned securities in round lots (see Section (i) (``Non-
Regulatory Penalties'') and Section (f) (``Calculation of Quoting 
Requirements'') of the proposed Rule). Meeting the 3% average quoting 
requirement for rebates does not satisfy the 5% average quoting 
requirement which SLPs must meet in order to remain in the SLP program. 
The rebate calculation is described in more detail below.
    A member organization that acts as an SLP is not permitted to act 
as a DMM on the Floor of the Exchange in the same security. Thus, a 
member organization that acts as a DMM on the Floor may not also act as 
an SLP in those securities registered to the DMM unit.
    Like all other member organizations of the Exchange, an SLP must 
abide by Exchange and SEC rules and regulations and must deal in a 
manner consistent with just and equitable principles of trade. SLPs are 
subject to regulatory oversight by the Exchange and FINRA.
Assigned Securities
    During the proposed SLP pilot program, the SLP Liaison Committee, 
as defined in Section (d)(1) of the proposed Rule, will initially 
assign a cross section of Exchange-listed and/or traded securities to 
each SLP. The SLP Liaison Committee will determine which securities 
will be assigned to an SLP and the number of securities assigned to 
each SLP. The Exchange's SLP program will include both listed and 
traded securities, as it is in the process of submitting a separate 
filing to permit it to trade Nasdaq-listed securities on a UTP basis. 
See, e.g., NYSE Amex Trader Notice, dated September 8, 2009.
    The Exchange believes that the SLP pilot program will provide the 
Exchange with a unique opportunity to monitor the success of the SLP 
incentives by starting with a cross section of securities. By doing so, 
the Exchange will be better equipped to address actual and potential 
administrative and operational problems without unnecessary risk to the 
Exchange and to its customers. The SLP pilot program will also provide 
the Exchange with the opportunity to identify and address any such 
problems and make beneficial changes to the SLP program.
    In addition to its usefulness to the Exchange, the SLP pilot 
program will provide the SLPs with essential practical experience with 
the new program and enable the SLPs to become proficient in the SLP 
role before expanding the assigned securities to include all Exchange-
listed or traded securities.
    The SLP Liaison Committee, in its discretion, will assign one or 
more SLPs to each security depending upon the trading activity of the 
security. The SLP Liaison Committee will likely assign a greater number 
of SLPs to more actively traded securities.
Qualifications of the Supplemental Liquidity Provider
    A member organization of the Exchange must have the following 
qualifications in order to obtain SLP status:
    (1) Adequate technology to support electronic trading through the 
related systems and facilities of the Exchange and report qualifying 
trading activity to Exchange systems utilizing unique and separate 
mnemonics specifically dedicated to SLP trading activity;
    (2) Adequate trading infrastructure to support SLP trading 
activity, which includes support staff to maintain operational 
efficiencies in the SLP program and adequate administrative staff to 
manage the member organization's SLP program;
    (3) Quoting performance that demonstrates an ability to meet the 5% 
quoting requirement in each assigned security;
    (4) A disciplinary history that is consistent with just and 
equitable business practices; and
    (5) The business unit of the member organization acting as an SLP 
must have in place adequate information barriers between the SLP unit 
and the member organization's customer, research and investment banking 
business.
    Adequate Technology for Trading and Reporting: Because the SLP will 
only be permitted to trade electronically from off the Floor of the 
Exchange, a member organization's off-Floor technology must be fully 
automated to accommodate the Exchange's trading and reporting systems 
that are relevant to operating as an SLP. If a member organization is 
unable to support the relevant electronic trading and reporting systems 
of the Exchange for SLP trading activity, it will not qualify as an 
SLP.
    Adequate Trading Infrastructure: Upon applying for status as an 
SLP, a member organization must have adequate trading infrastructure, 
which includes support staff to maintain operational efficiencies in 
the SLP program and adequate administrative staff to manage the member 
organization's SLP program.
    Quoting Performance: Upon applying for SLP status, a member 
organization's ability to meet the 5% quoting requirement may be 
demonstrated by past and/or current trading activity. If an applicant 
has not demonstrated an ability to meet the 5% quoting requirement to 
the satisfaction of the SLP Liaison Committee, the applicant may not 
qualify as an SLP.

[[Page 2575]]

    Disciplinary History: Upon applying for SLP status, a member 
organization's disciplinary history must reflect conduct that is 
consistent with just and equitable business practices.
    Information Barriers: The business unit of the SLP that submits 
orders on behalf of the member organization must have in place adequate 
information barriers between the SLP unit and the member organization's 
customer, research and investment banking business.
SLP Application Process
    To become an SLP, a member organization must submit an SLP 
application form with all supporting documentation to the SLP Liaison 
Committee. The SLP Liaison Committee will determine whether an 
applicant is qualified to become an SLP based on the qualifications 
described in Section (c) of the proposed Rule (``Qualifications of a 
Supplemental Liquidity Provider''). The qualifications focus on the 
adequacy of the applicant's trading and reporting technology and 
trading infrastructure. The applicant's disciplinary history will be 
considered as well.
    After submission of the SLP application form and supporting 
documentation, the SLP Liaison Committee will notify the applicant 
member organization of its decision. If an applicant is approved by the 
SLP Liaison Committee to receive SLP status, the applicant must 
establish connectivity with relevant Exchange systems and facilities.
    The processing of all applications may be suspended when the SLP 
Liaison Committee has determined that there is a sufficient number of 
SLPs assigned to each eligible security in the SLP program (see Section 
(g)(2) of the proposed Rule).
    If an applicant is disapproved or ``disqualified,'' pursuant to 
Section (i)(2) of the proposed Rule, by the SLP Liaison Committee, such 
applicant may request an appeal of such disapproval or disqualification 
by the SLP Panel as provided in Section (j) (``Appeal of Non-Regulatory 
Penalties'') of this Rule, and/or reapply for SLP status three (3) 
months after the month in which the applicant received disapproval or 
disqualification notice from the Exchange (see Section (d)(6) of the 
proposed Rule).
Voluntary Withdrawal of SLP Status
    An SLP may withdraw from the status of an SLP at any time by giving 
notice to the SLP Liaison Committee, the Market Surveillance Division 
of NYSE Regulation, Inc. and NYSE Euronext employees of the Operations 
Division (see Section (e) (``Voluntary Withdrawal of Supplemental 
Liquidity Provider Status'' of the proposed Rule). However, withdrawal 
of SLP status will not become effective until the withdrawing SLP's 
assigned securities are reassigned to other SLPs. After the notice of 
withdrawal is received by the SLP Liaison Committee, the Market 
Surveillance Division and the Operations Division, the SLP Liaison 
Committee will reassign said securities as soon as practicable but no 
later than 30 days of the date said notice is received by the SLP 
Liaison Committee, the Market Surveillance Division and the Operations 
Division. In the event the reassignment of securities takes longer than 
the 30-day period, the withdrawing SLP will have no obligations under 
this Rule 107B-NYSE Amex Equities and will not be held responsible for 
any matters concerning its previously assigned SLP securities upon 
termination of this 30-day period.
Quoting Requirements of the Supplemental Liquidity Provider
    In order to maintain SLP status, an SLP is required to maintain a 
bid or an offer at the NBB or NBO on the Exchange averaging at least 5% 
of the trading day in round lots for each assigned security.\6\ While 
the SLP may provide displayed and non-displayed liquidity (e.g., 
reserve and dark orders), the 5% average quoting requirement can only 
be satisfied when an SLP posts displayed liquidity in its assigned 
securities in round lots at the NBB or the NBO. Thus, non-displayed 
liquidity will not be counted as credit towards the 5% quoting 
requirement. Additionally, tick sensitive orders (i.e., ``Sell Plus,'' 
``Buy Minus'' (see Rule 13) and ``Buy Minus Zero Plus'') will not be 
counted as credit towards the 5% quoting requirement.
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    \6\ See Exhibit 5, Section (a) of the proposed Rule.
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    In order for an SLP to be entitled to a rebate, an SLP must post 
liquidity on the Exchange that executes against incoming orders and 
meet the monthly minimum quoting requirement averaging at least 3% at 
the NBB or the NBO in round lots in its assigned securities (see 
Section (b) (``Financial Rebates for Executed Transactions'') in the 
proposed Rule). If the SLP does not meet a minimum monthly quoting 
requirement averaging at least 3%, an SLP will not be entitled to a 
rebate on executed volume in that given month in that particular 
affected security (see Section (i) (``non-Regulatory Penalties'') of 
the proposed Rule).
    The SLP is not subject to any minimum or maximum quoting size 
requirement apart from the requirement that an order be for at least 
one round lot (see Section (f)(2) of the proposed Rule).
    An SLP must use its SLP mnemonic when trading as an SLP in its 
assigned securities in order to obtain credit for their SLP trading 
activity (see Section (f)(2) of the proposed Rule). Quoting and rebate 
credit will be measured only by using the SLP's unique mnemonics 
specifically designated for SLP trading activity.
Calculation of the Quoting Requirements
    The SLP's quoting requirements will not be in effect in the first 
month the SLP operates as an SLP. The Exchange will provide the SLP 
with a one-month grace period to allow preparation time for the SLP. 
Therefore, this quoting requirement will not take effect until the 
second month of an SLP's operation as an SLP.
    Beginning with the second month an SLP is operating as an SLP, an 
SLP must satisfy the 5% quoting requirement for each assigned 
security.\7\ The SLP Liaison Committee will determine whether an SLP 
has met its quoting requirement for the trading days \8\ in a calendar 
month by calculating the following:
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    \7\ NYSE Euronext's Strategic Analysis Department will be 
responsible for generating SLP performance data and providing such 
data to the SLP Liaison Committee in order to determine which SLPs 
are meeting their quoting requirements and are eligible for 
financial rebates.
    \8\ For purposes of Section (f)(1) of the proposed rule text 
(Exhibit 5), ``trading day'' shall mean any day on which the 
Exchange is scheduled to be open for business. Days on which the 
Exchange closes prior to 4 p.m. (Eastern Time) for any reason, which 
may include any regulatory halt or trading halt, shall be considered 
a trading day.
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    (1) The ``Daily NBB Quoting Percentage'' by determining the 
percentage of time an SLP has at least one round lot of displayed 
interest in an Exchange bid at the NBB during each trading day for a 
calendar month;
    (2) The ``Daily NBO Quoting Percentage'' by determining the 
percentage of time an SLP has at least one round lot of displayed 
interest in an Exchange offer at the NBO during each trading day for a 
calendar month;
    (3) The ``Average Daily NBBO Quoting Percentage'' for each trading 
day by summing the ``Daily NBB Quoting Percentage'' and the ``Daily NBO 
Quoting Percentage'' in each assigned security then dividing such sum 
by two; and
    (4) The ``Monthly Average NBBO Quoting Percentage'' for each 
assigned security by summing the security's ``Average Daily NBBO 
Quoting

[[Page 2576]]

Percentages'' for each trading day in a calendar month then dividing 
the resulting sum by the total number of trading days in such calendar 
month.
Example of Quoting Requirement Calculation
    Below is an example of a quoting requirement calculation. For 
purposes of this example, it is assumed that SLP No. 1 has two assigned 
securities, A and B, and that there were 5 trading days in the selected 
calendar month.
    The ``Average Daily NBBO Quoting Percentage'' for SLP No. 1 is 
calculated for each security by summing the daily NBB and NBO of each 
security for that day and dividing that number by two:

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                                                                                                     ``Average
                                                                  Calculation of ``Average Daily    Daily NBBO
          Trading days                  NBB             NBO        NBBO Quoting Percentage'' for      Quoting
                                                                             SLP No. 1             Percentage''
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                                                   Security A
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T1..............................              4%              6%  4% + 6% = 10% divided by 2 =                5%
                                                                   5%.
T2..............................              3%              5%  3% + 5% = 8% divided by 2 = 4%              4%
T3..............................              4%              4%  4% + 4% = 8% divided by 2 = 4%              4%
T4..............................              6%              8%  6% + 8% = 14% divided by 2 =                7%
                                                                   7%.
T5..............................              5%              5%  5% + 5% = 10% divided by 2 =                5%
                                                                   5%.
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                                                   Security B
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T1..............................              5%              7%  5% + 7% = 12% divided by 2 =                6%
                                                                   6%.
T2..............................              4%              6%  4% + 6% = 10% divided by 2 =                5%
                                                                   5%.
T3..............................              6%              8%  6% + 8% = 14% divided by 2 =                7%
                                                                   7%.
T4..............................              7%              9%  7% + 9% = 16% divided by 2 =                8%
                                                                   8%.
T5..............................              9%              9%  9% + 9% = 18% divided by 2 =                9%
                                                                   9%.
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    The ``Monthly Average NBBO Quoting Percentage'' for each security 
is then calculated by summing the security's ``Average Daily NBBO 
Quoting Percentages'' for all five trading days of the calendar month 
and then dividing the resulting total by the number of trading days in 
the calendar month (in this instance 5).

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    ``Average Daily NBBO Quoting Percentage''                                                        ``Monthly
-------------------------------------------------  Calculation of ``Monthly Average NBBO Quoting   Average NBBO
                                                            Percentage'' for SLP No. 1                Quoting
   T1        T2        T3        T4        T5                                                      Percentage''
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                                                   Security A
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     5%        4%        4%        7%        5%   5% + 4% + 4% + 7% + 5% = 25% divided by 5 = 5%              5%
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                                                   Security B
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     6%        5%        7%        8%        9%   6% + 5% + 7% + 8% + 9% = 35% divided by 5 = 7%              7%
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Financial Rebates for Executed Transactions
    When an SLP posts liquidity, displayed or non-displayed, on the 
Exchange in its SLP assigned securities and such liquidity is executed 
against an incoming order, the SLP will receive a financial rebate for 
that executed transaction provided the SLP has met it rebate quoting 
requirement averaging at least 3% at the NBB or the NBO in each 
assigned security pursuant to Section (i)(1)(A) and (B) (``Non-
Regulatory Penalties''). An SLP will only receive a rebate when it has 
met the monthly 3% or better quoting requirement in its assigned 
securities and the SLP's posted displayed or non-displayed liquidity 
results in an execution.
SLP Rebate Calculation
    The SLP rebate will be $0.0020 per share priced at or above $1.00, 
and $0.0005 per share priced below $1.00, for executions when the SLP 
provides liquidity.\9\ The rebate will be paid for displayed and non-
displayed orders provided that the SLP meets the quoting requirement 
averaging 3% or more at the NBB or NBO in its assigned securities for a 
given month. If an SLP does not meet the average quoting requirement 
described above, such SLP will not be entitled to a rebate. As 
discussed previously, if an SLP does not meet its quoting requirement 
averaging 5% at the NBB or the NBO for each assigned security for 3 
consecutive months, such SLP may be disqualified from SLP status. The 
Exchange will track the volume and quoting requirement of SLPs by their 
designated SLP mnemonics.
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    \9\ The Exchange will file a separate fee filing with the SEC 
pursuant to the provisions of Section 19b-4 that will outline the 
SLP rebate program described above. The calculation and amount of 
the SLP rebate will be published in the NYSE Amex Equities Price 
List, available on the Exchange's Web site.
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    Except for the rebate, all other SLP fees are the same as existing 
customer fees on the Exchange (see the NYSE Amex Equities Price List on 
the Exchange Web site).
SLP Parity With Other Market Participants Pursuant to Rule 72--NYSE 
Amex Equities
    Exchange systems are responsible for share allocation and create 
interest files for each market participant. Individual Floor brokers 
and the DMM registered in a security each constitute single 
participants. All off-Floor orders entered in Exchange systems at the 
Exchange BBO together constitute a single participant (``Book 
Participant'') for the purpose of share allocation. SLP orders will be 
in the ``Book Participant''

[[Page 2577]]

category pursuant to Rule 72--NYSE Amex Equities.
Market Data and Trading Information Available to the SLP
    The universe of trading information and market data available to 
the SLP will include market data published by the Exchange and all 
other automated trading centers (as defined in Rule 600 of Regulation 
NMS), trading information published on the Consolidated Tape and on the 
NYSE Amex OpenBook[supreg].\10\ Thus, the SLP will have the same 
published trading information and market data that all other Exchange 
customers have available to them.
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    \10\ The NYSE Amex OpenBook[supreg] is provided by the Exchange 
to vendors and customers in two modes. The first displays the depth 
of the market refreshed every five seconds. The second displays the 
depth of the market in real time. NYSE Amex OpenBook[supreg] 
discloses limit order interest at the price at the best bid and 
offer and at prices below the best bid and above the best offer.
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Non-Regulatory Penalties
    If an SLP fails to meet the 5% quoting requirement for any assigned 
security, the SLP may be subject to non-regulatory penalties imposed by 
the SLP Liaison Committee (see Section (i) of the proposed Rule). Such 
non-regulatory penalties include: (1) Denial of the financial rebate; 
(2) removal of one or more assigned securities from the SLP; and (3) 
disqualification. These non-regulatory penalties and the conditions 
under which such penalties are imposed may be appealed by an SLP as 
provided in Section (j) (``Appeal of a Non-Regulatory Penalty'') of the 
proposed Rule and described in more detail below.
Penalties for Quoting Less Than 5% in a Given Calendar Month
    In a given calendar month, if an SLP maintains a quote at the NBB 
or NBO averaging 3% of the trading day, but less than the average of 5% 
of the trading day in any assigned security, the SLP will receive a 
financial rebate for that calendar month for executed transactions in 
that particular security as described in Section (b) (``Rebates for 
Executed Transactions'') of the proposed Rule. Failure to meet the 5% 
quoting requirement for each assigned security in that month will be 
counted towards the three-month disqualification period provided in 
paragraph (i)(C) of the proposed Rule.
    In a given calendar month, if an SLP maintains a quote at the NBB 
or the NBO averaging less than 3% of the regular trading day in an 
assigned security, the SLP will not receive the financial rebate for 
that month for transactions executed in that particular assigned 
security. The failure to meet the 5% quoting requirement for any 
assigned security in that month will also be counted towards the three-
month disqualification period.
    If an SLP fails to meet the 5% quoting requirement for three 
consecutive calendar months in any assigned security, the SLP Liaison 
Committee may, in its discretion, take the following non-regulatory 
action:
    (1) Revoke the assignment of the affected security(ies);
    (2) Revoke the assignment of an additional, unaffected security 
from an SLP; or
    (3) Disqualify a member organization's status as an SLP.
Disqualification Determinations
    In the second calendar month that an SLP fails to meet the 5% 
quoting requirement, the SLP Liaison Committee will notify the SLP in 
writing that the SLP may be disqualified if it fails to meet the 
quoting requirement the third consecutive month.\11\ If the SLP fails 
to meet the 5% quoting requirement for a third consecutive month, the 
SLP may be disqualified from SLP status.
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    \11\ The SLP Liaison Committee will be responsible for issuing 
the letter to an SLP that fails to meet its quoting requirement for 
three consecutive months. It will also be responsible for advising 
an SLP of its eligibility or ineligibility to become an SLP.
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    When disqualification determinations are made, the SLP Liaison 
Committee will provide a disqualification notice to the member 
organization informing the member organization of its disqualification 
as an SLP.
    If a member organization is disqualified from its status as an SLP 
pursuant to Section (i)(1)(C)(iii) of the proposed Rule, the member 
organization may appeal the disqualification pursuant to Section (j) 
(``Appeal of a Non-Regulatory Penalties'') of the proposed Rule, or re-
apply for SLP status in accordance with Section (d)(6) (``Re-
application for SLP Status'') of the proposed Rule. However, the re-
application process may not begin until three calendar months after the 
month in which the member organization received its disqualification 
notice.
Appeal of Non-Regulatory Penalties
    An SLP may request an appeal of the decision to impose a non-
regulatory penalty as provided in Section (j) of the proposed Rule. 
Upon receiving a request for an appeal, a panel of NYSE Euronext 
employees referred to as the ``SLP Panel'' will review the decision to 
impose non-regulatory penalties. The SLP Panel shall consist of the 
Exchange's Chief Regulatory Officer (``CRO''), or a designee of the 
CRO, and two (2) officers of the Exchange designated by the NYSE 
Euronext Head of the U.S. Markets Division.
    The SLP Panel will review the facts of the subject non-regulatory 
penalty and render a decision as to the correctness of the decision to 
impose the penalty. The SLP Panel may overturn or modify an action 
taken by the SLP Liaison Committee, and all determinations by the SLP 
Panel will constitute final action by the Exchange on the disputed 
matter.
Regulatory Oversight of SLPs
    Member organizations that act as SLPs will be subject to regulatory 
oversight by the Exchange and FINRA.
Proposed amendments to Rule 2A--NYSE Amex Equities
    In conjunction with the adoption of Rule 107B--NYSE Amex Equities, 
the Exchange also proposes to amend Rule 2A(c)--NYSE Amex Equities to 
accommodate the Exchange's authority to approve or disapprove the 
designation of a member or member organization as an SLP.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with, and furthers the objectives of, Section 6(b)(5) of the Act,\12\ 
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 proposed rule change also supports the principles 
of Section 11A(a)(1) \13\ of the Act in that it seeks to ensure the 
economically efficient execution of securities transactions and fair 
competition among brokers and dealers and among exchange markets.
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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78k-1(a)(1).
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    The Exchange believes that the proposed Rule is consistent with 
these principles in that it seeks to establish a new class of market 
participant that will provide additional liquidity to the market and 
add competition to the existing group of liquidity providers. The 
Exchange believes that by requiring an SLP to quote at the NBB or the 
NBO a percentage of the regular trading day in their assigned 
securities, and by paying an SLP a rebate when its posted interest 
results in an execution, the Exchange is rewarding aggressive liquidity 
providers in the market, and

[[Page 2578]]

by doing so, the Exchange will encourage the additional utilization of, 
and interaction with, the NYSE Amex Equities market and provide 
customers with the premier venue for price discovery, liquidity, 
competitive quotes and price improvement.

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 \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
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.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ In addition, Rule 19b-4(f)(6) requires a self-regulatory 
organization to give the Commission written notice of its intent to 
file the proposed rule change, 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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    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-2009-98 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-2009-98. 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,\17\ 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 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 publicly available. All submissions should refer to 
File Number SR-NYSEAmex-2009-98 and should be submitted on or before 
February 5, 2010.
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    \17\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-637 Filed 1-14-10; 8:45 am]
BILLING CODE 8011-01-P

