
[Federal Register: June 24, 2010 (Volume 75, Number 121)]
[Notices]               
[Page 36138-36140]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jn10-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62312; File No. SR-NYSE-2010-20]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending NYSE Rule 123C To 
Allow Exchange Systems To Provide Order Imbalance Information With 
Respect to Market At-The-Close and Marketable Limit At-the-Close 
Interest to Floor Brokers Beginning Two Hours and Until Fifteen Minutes 
Prior to the Scheduled Close of Trading on Every Trading Day

June 17, 2010.
    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 June 9, 2010, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III 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\ 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 amend proposes to amend [sic] NYSE Rule 
123C (``The Closing Procedures'') to describe the manner in which 
Exchange systems provide order imbalance information to Floor brokers. 
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 New York Stock Exchange LLC (``NYSE'' or ``Exchange'') proposes 
to amend NYSE Rule 123C(6) to specify that, beginning at 2:00 p.m. on 
every trading day,\3\ Floor brokers will receive an electronic 
communication from Exchange systems that provides the amount of, and 
any imbalance between, Market ``At-The-Close'' (``MOC'') interest and 
marketable Limit ``At-The-Close'' (``LOC'') interest to buy and MOC 
interest and marketable LOC interest to

[[Page 36139]]

sell in certain securities.\4\ The MOC/LOC interest is executable only 
on the Close and is subject to cancellation at any time before 3:45 
p.m.\5\
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    \3\ On any day that the scheduled close of trading on the 
Exchange is earlier than 4:00 p.m., the information will be 
disseminated beginning two hours prior to the scheduled close of 
trading.
    \4\ The Exchange notes that parallel changes are proposed to the 
rules of its affiliate, NYSE Amex LLC. See SR-NYSEAmex-2010-25.
    \5\ See NYSE Rule 123C(3) and (9).
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Background
    Pursuant to NYSE Rule 115 (``Disclosure of Orders by DMMs''), DMMs 
may, while acting in a market making capacity, provide information 
about buying or selling interest in the market, including (a) 
Aggregated buying or selling interest contained in Floor broker agency 
interest files other than interest the broker has chosen to exclude 
from the aggregated buying and selling interest, (b) aggregated 
interest of Minimum Display Reserve Orders and (c) the interest 
included in DMM interest files, excluding CCS interest as described in 
Rule 1000(c), in response to an inquiry from a member conducting a 
market probe in the normal course of business. Market probes assist 
Floor brokers in representing customer orders efficiently and 
effectively. There is no limitation in Rule 115 as to the number of 
market probes permitted during the trading day.
    Historically, Floor brokers could only orally request a market 
probe from the specialist.\6\ As the NYSE evolved to a more automated 
trading venue, the Exchange and the Floor community endeavored to 
address an increase in the volume of market probes by Floor brokers to 
specialists in the afternoon hours leading up to the closing 
transaction. In May 2008, Exchange systems began electronically 
providing to Floor brokers, the amount of, and any imbalance between 
MOC interest and marketable LOC interest to buy and MOC interest and 
marketable LOC interest to sell in each security in which a Floor 
broker is representing an order or in any security that the Floor 
broker electronically requests such information. In March 2010, as part 
of changes to the Exchange's closing process, Exchange systems began 
decrementing the total imbalance between MOC interest and marketable 
LOC interest to buy and MOC interest and marketable LOC interest to 
sell by any Closing Offset Orders on the opposite side of the imbalance 
to calculate the imbalance (the ``MOC/LOC imbalance information''). The 
dissemination of the MOC/LOC imbalance information to Floor brokers 
between 2:00 and 3:45 p.m. was deactivated on May 17, 2010. Floor 
brokers may still orally request and receive responses to market probes 
directly from DMMs.
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    \6\ The specialist is the predecessor to the DMM.
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Proposed Amendments to NYSE Rule 123C(6)
    The Exchange proposes to amend NYSE Rule 123C(6) to state that, 
between 2 p.m. and 3:45 p.m. on any trading day (or two hours prior to 
the closing transaction until 15 minutes prior to the closing 
transaction on any day that the scheduled close of trading on the 
Exchange is earlier than 4 p.m.), Exchange systems shall automatically 
provide the MOC/LOC imbalance information to Floor brokers, 
approximately every 15 seconds, for any security in which the Floor 
broker is representing an order and in any security that the Floor 
broker specifically requests. Specific requests for information by 
Floor brokers will not carry over to the next trading day and must be 
re-entered on each trade date Floor brokers want to receive the 
information. Beginning at 3:45 p.m., Floor brokers may receive the 
Exchange's proprietary Order Information Imbalance datafeed pursuant to 
NYSE Rule 123C(6)(a)(iv). The Exchange provides the Order Information 
Imbalance datafeed to subscribers for a fee.
    The Exchange's proposed dissemination of this MOC/LOC imbalance 
information is the electronic evolution of the market probe response 
that Floor brokers have always been entitled to receive and may 
otherwise orally request directly from DMMs. While a vast majority of 
the transactions executed on the Exchange are automated, Floor brokers 
play an important role for customers in those transactions that require 
the expertise of a professional trading floor agent. Providing the MOC/
LOC imbalance information to Floor brokers is appropriate because a key 
component of their role as agent for these sophisticated customers is 
to provide market ``color'' to the extent permitted under applicable 
rules. The Exchange's electronic dissemination of this information 
would be limited to the Floor broker hand-held devices, which are 
unable to automatically forward or re-transmit the electronic datafeed 
to any other location, although Floor brokers are permitted to provide 
their customers with specific data points from the feed.\7\
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    \7\ Current NYSE rules permit a Floor broker to communicate 
information obtained through a market probe to a customer using a 
wired telephone line (NYSE Rule 36.20), an NYSE approved portable 
phone (NYSE Rule 36.21), or through a written electronic 
communication from the Floor brokers' hand-held device as permitted 
by the NYSE's ``Wireless Data Communications Initiatives'' (See 
Securities Exchange Act Release No. 59626 (March 25, 2009), 74 FR 
14831 (April 1, 2009) (SR-NYSE-2009-33). The Exchange records all of 
the information sent to and transmitted from the hand-held devices.
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    Finally, the Exchange proposes to correct erroneous rule text in 
123C(6)(a)(v). The rule text incorrectly states that the dissemination 
of the Order Imbalance Datafeed commences 10 minutes prior to the 
scheduled close of trading on any day that the scheduled close of 
trading on the Exchange is earlier than 4 p.m. The 10 minute interval 
is a legacy time frame related to the Exchange's prior publication of 
imbalance at 3:40 p.m. and 3:50 p.m. When the Exchange moved to a 
single imbalance publication at 3:45 p.m., the rule text should have 
been modified to reflect that dissemination of the Order Imbalance 
Information on any day that the scheduled close was prior to 4 p.m. 
would commence approximately 15 minutes before the scheduled closing 
time consistent with the single imbalance publication. The Exchange 
therefore seeks to amend NYSE Rule 123C(6)(a)(v) accordingly.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5),\8\ which requires that an exchange 
have rules that are designed to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, 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 is 
consistent with these objectives in that the dissemination of MOC/LOC 
imbalance information would provide Floor brokers with an understanding 
of developing trends early enough to get appropriate direction from 
their customers and to know where on the physical Trading Floor it 
needs to deploy its brokers in preparation for the closing transaction. 
Overall, the Exchange believes that dissemination of MOC/LOC imbalance 
information to Floor brokers is consistent with the above objectives 
because it removes impediments to and perfects the mechanism of a free 
and open market through the efficient operation of the Exchange.
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    \8\ 15 U.S.C. 78f(b)(5).
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    Dissemination of MOC/LOC imbalance information to Floor brokers 
would serve as an efficiency tool to

[[Page 36140]]

enhance the Floor brokers' ability to meet their best execution 
obligations in the face of a dilemma that is unique to a physical 
Trading Floor, i.e., how to position resources so that they are in the 
correct place to execute orders on behalf of sophisticated customers 
whose needs are not effectively met by strictly electronic trading. 
While the imbalance information is important to Floor brokers in 
carrying out their obligations to those customers, the Exchange 
believes this information would not be material to market participants 
executing automated orders. In this regard, the Exchange believes it is 
appropriate to provide Floor brokers with specific types of information 
that is directly related to the unique functions they perform on the 
Trading Floor.
    In this particular case, the Exchange believes that the 
dissemination of MOC/LOC information to Floor brokers would promote the 
efficient operation of the Exchange's market by reducing the frequency 
of time-consuming Floor broker oral market probes leading up to the 
closing transaction, thus affording DMMs more time to monitor trading. 
As trading has become more electronic, staffing on the trading Floor 
has declined, so that there are now fewer Floor brokers even as the 
number of listed securities has increased.\9\ Similarly, DMM units and 
individual DMMs on the Floor are managing trading in greater numbers of 
stocks than ever before. The need for DMMs to be focused on their 
assigned securities, particularly on high volume trading days, such as 
an Expiration Friday or an index rebalancing event, or trading days 
with high levels of market volatility, is critical to the maintenance 
of fair and orderly markets.\10\
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    \9\ The number of Floor brokers operating on the Exchange Floor 
has decreased since 2004 from approximately 800 Floor brokers to 
approximately 325 Floor brokers operating on the Floor today.
    \10\ It should be noted that NYSE rules and the Federal 
securities laws provide safeguards that are designed to deter the 
potential abuse of market probe information. For example, Floor 
broker member organizations are not permitted to initiate 
proprietary orders on the Floor. In addition, Floor brokers 
representing a principal or proprietary order that has been 
initiated in the off-Floor premises of the firm are subject to the 
requirements of Section 11(a) of the Securities Exchange Act of 
1934.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-NYSE-2010-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2010-20. 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 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 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-NYSE-2010-20 and should be 
submitted on or before July 15, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15246 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P

