
[Federal Register: September 24, 2010 (Volume 75, Number 185)]
[Notices]               
[Page 58453-58455]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24se10-150]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62947; File No. SR-NYSEAmex-2010-96]

 
 Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
of a Proposed Rule Change Amending NYSE Amex Equities Rule 104 To Adopt 
Pricing Obligations for Designated Market Makers

September 20, 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 September 17, 2010, NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to

[[Page 58454]]

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 NYSE Amex Equities Rule 104 to adopt 
pricing obligations for Designated Market Makers (``DMMs''). 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend NYSE Amex Equities Rule 104 to adopt 
pricing obligations for DMMs. Under the proposal, the Exchange will 
require DMMs to continuously maintain two-sided bid and offer interest 
within a Designated Percentage \3\ from the National Best Bid and 
National Best Offer (``NBBO'') for each security in which they are 
registered. These pricing obligations are intended to eliminate trade 
executions against DMM placeholder quotations traditionally priced far 
away from the inside market, commonly known as ``stub quotes.'' They 
are also intended to augment and work in conjunction with Trading 
Pauses in individual securities due to extraordinary market volatility, 
which are already in place on a pilot basis for stocks in the S&P 
500[reg] Index and the Russell 1000[reg] Index, under Exchange Rule 
80C.\4\
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    \3\ The term Designated Percentage is defined in proposed Rule 
104(a)(1)(B)(iii).
    \4\ See Securities Exchange Act Release No. 62252 (June 10, 
2010), 75 FR 34186 (June 16, 2010) (SR-NYSEAmex-2010-46). See also 
Securities Exchange Act Release No. 62884 (September 10, 2010), 75 
FR 56618 (September 16, 2010) (SR-NYSEAmex-2010-63). See also Rule 
80C.
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    Under the proposal, the Exchange will require DMMs to enter and 
maintain quotes priced no more than the Designated Percentage away from 
the NBBO. Permissible quotes are determined by the individual character 
of the security, the time of day in which the quote is entered, and 
other factors which are summarized below.
    For purposes of the proposed rule, Designated Percentage shall mean 
the Threshold Move as defined under Rule 80C less two (2) percentage 
points. Because the Threshold Move across all exchanges is currently 
10%, a DMM's quote in a security may not be more than 8% away from 
NBBO. Once a permissible quote is entered, it may rest without 
adjustment until such time as it is more than the Defined Limit away 
from the NBBO. For purposes of the proposed rule, the Designated Limit 
shall mean the Threshold Move as defined under Rule 80C less one-half 
percentage point (i.e. 9.5%). If the DMM's resting interest exceeds the 
Defined Limit the DMM must enter new interest at a price not more than 
the Designated Percentage of 8% away from the NBBO (or identify to the 
Exchange current resting interest that satisfies the DMM's obligation). 
For times during the trading day when a Trading Pause is not in effect 
under Rule 80C (e.g., before 9:45 a.m. and after 3:35 p.m.), the 
Designated Percentage calculation will assume a trigger percentage of 
22%. Therefore, a DMM must maintain a quote no further than 20% away 
from the NBBO and the quote may rest without adjustment until it is 
more than 21.5% from the NBBO. In the absence of an NBBO, the above 
calculations will remain the same, but will use the last reported sale 
from the single plan processor responsible for consolidation of 
information for the security pursuant to Rule 603 of Regulation NMS.\5\
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    \5\ 17 CFR 240.603.
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    For securities that are not subject to Trading Pauses, the 
Designated Percentage will assume a trigger percentage of 32% and apply 
the same 2% reduction. Thus, DMMs registered in those securities shall 
be required to maintain quotes no more than 30% away from NBBO. As with 
securities subject to Trading Pauses, once a permissible quote is 
entered it may rest without adjustment until such time as it becomes 
more than the Defined Limit away from the NBBO (31.5%), whereupon the 
DMM must enter new interest at a price not more than the Designated 
Percentage of 30% away from the NBBO (or identify to the Exchange 
current resting interest that satisfies the DMM's obligation). The 
Exchange proposes that these requirements shall apply to NMS Stocks (as 
defined in Rule 600 under Regulation NMS) \6\ during the trading day.
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    \6\ 17 CFR 240.600.
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    Nothing in the proposal shall preclude a DMM from quoting at price 
levels that are closer to the NBBO than the levels required under the 
proposal.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\7\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\8\ 
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 that the proposed rule change also is consistent with the 
principles of Section 11A(a)(1) \9\ of the Act in that it seeks to 
assure fair competition among brokers and dealers and among exchange 
markets. The Exchange believes the proposed rule change meets these 
requirements in that it promotes transparency and uniformity concerning 
pricing obligations across markets for certain market participants.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78k-1(a)(1).
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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 45 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

[[Page 58455]]

organization consents, the Commission will:
    (A) By order approve or disapprove 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-NYSEAmex-2010-96 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEAmex-2010-96. 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 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-2010-96 and should 
be submitted on or before October 15, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23970 Filed 9-23-10; 8:45 am]
BILLING CODE 8010-01-P

