
[Federal Register Volume 76, Number 43 (Friday, March 4, 2011)]
[Notices]
[Pages 12202-12204]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-4890]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63972; File No. SR-NYSEAMEX-2011-09]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Adopting 
Supplementary Material .20 to NYSE Amex Equities Rule 123C To Provide 
for the Treatment of Short Sale Orders at the Close

February 25, 2011.
    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 February 24, 2011, 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 substantially 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 Supplementary Material .20 to NYSE 
Amex Equities Rule 123C (The Closing Procedures) to provide for the 
treatment of short sale orders at the close, for purposes of execution 
priority, as orders subject to tick restrictions \4\ during a period 
when a restriction on the prices at which covered securities may be 
sold short is in effect (``Short Sale Price Test'') under NYSE Amex 
Equities Rule 440B \5\ (which implements the provisions of Rule 201 of 
Regulation SHO (``Rule 201'') under the Act). The text of the proposed 
rule change is available at the Exchange, the Commission's Public 
Reference Room, and http://www.nyse.com.
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    \4\ Orders subject to tick restrictions are sell ``plus'' and 
buy ``minus'' orders. See NYSE Amex Equities Rule 13.
    \5\ Amendments to NYSE Amex Equities Rule 440B to implement the 
short sale price test restriction requirements of Rule 201 are the 
subject of a separate rule filing. See SR-NYSEAmex-2011-08.
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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
    On February 26, 2010, the Commission adopted amendments to Rule 
201.\6\ Among other things, the amendments establish a short sale-
related circuit breaker that, if triggered with respect to a covered 
security,\7\ imposes a short sale price test.\8\ Amended Rule 201 
became effective on May 10, 2010 and the compliance date for the Rule 
is February 28, 2011.\9\
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    \6\ Amendments to Regulation SHO, Securities Exchange Act 
Release No. 61595 (Feb. 26, 2010), 75 FR 11232 (Mar. 10, 2010) 
(``Rule 201 Adopting Release''). In the Rule 201 Adopting Release, 
the Commission also adopted amendments to Rule 200(g) of Regulation 
SHO to include a ``short exempt'' marking requirement. 17 CFR 
242.200(g). See also Division of Trading and Markets: Responses to 
Frequently Asked Questions Concerning Rule 201 of Regulation SHO 
(``T&M FAQs'').
    \7\ The term ``covered security'' shall have the same meaning as 
in Rule 201 of Regulation SHO. Rule 201(a)(1) defines the term 
``covered security'' to mean any ``NMS stock'' as defined under Rule 
600(b)(47) of Regulation NMS. Rule 600(b)(47) of Regulation NMS 
defines an ``NMS stock'' as ``any NMS security other than an 
option.'' Rule 600(b)(46) of Regulation NMS defines an ``NMS 
security'' as ``any security or class of securities for which 
transaction reports are collected, processed, and made available 
pursuant to an effective transaction reporting plan, or an effective 
national market system plan for reporting transactions in listed 
options.'' 17 CFR 242.201(a)(1); 17 CFR 242.600(b)(47); and 17 CFR 
242.600(b)(46).
    \8\ 17 CFR 242.201(b).
    \9\ Rule 201 Adopting Release, 75 FR 11232. The Rule 201 
compliance date, originally set for November 10, 2010, was extended 
to February 28, 2011 in Securities Exchange Act Release No. 63247 
(Nov. 4, 2010), 75 FR 68702 (Nov. 9, 2010). The May 10th effective 
date and February 28th compliance date also apply to amended Rule 
200(g).
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    Rule 201(b) requires that trading centers,\10\ including NYSE Amex, 
establish, maintain, and enforce written policies and procedures 
reasonably designed to prevent the execution or display of a short sale 
order of a covered security at a price that is less than or equal to 
the current national best bid \11\ if the price of that covered 
security decreases by 10% or more from the covered security's closing 
price as determined by the listing market \12\ for the covered security 
as of the end of regular trading hours on the prior day.\13\ In 
addition, Rule 201(b) requires that trading centers establish, 
maintain, and enforce written policies and procedures reasonably 
designed to impose the Short Sale Price Test for the remainder of the 
day and the following day (including the close on both days) when a 
national best bid for the covered security is calculated and 
disseminated on a current and continuing basis by a plan processor 
pursuant to an effective national market system plan.\14\
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    \10\ Rule 201(a)(9) states that the term ``trading center'' 
shall have the same meaning as in Rule 600(b)(78) of Regulation NMS. 
Rule 600(b)(78) defines a ``trading center'' as ``a national 
securities exchange or national securities association that operates 
an SRO trading facility, an alternative trading system, an exchange 
market maker, an OTC market maker, or any other broker or dealer 
that executes orders internally by trading as principal or crossing 
orders as agent.'' 17 CFR 242.600(b)(78).
    \11\ The term ``national best bid'' shall have the same meaning 
as in Rule 201 of Regulation SHO. Rule 201(a)(4) states that such 
term shall have the same meaning as in Rule 600(b)(42) of Regulation 
NMS. 17 CFR 242.201(a)(4); 17 CFR 242.600(b)(42).
    \12\ The term ``listing market'' shall have the same meaning as 
in Rule 201 of Regulation SHO. Rule 201(a)(3) defines the term 
``listing market'' to have the same meaning as the term ``listing 
market'' as defined in the effective transaction reporting plan for 
the covered security. 17 CFR 242.201(a)(3). See also 17 CFR 
242.201(a)(2).
    \13\ 17 CFR 242.201(b)(1)(i).
    \14\ 17 CFR 242.201(b)(1)(ii). In addition, if the price of a 
covered security declines intra-day by at least 10% on a day on 
which the security is already subject to the short sale price test 
restriction of Rule 201, the restriction will be re-triggered and, 
therefore, will continue in effect for the remainder of that day and 
the following day. See Rule 201 Adopting Release, 75 FR 11232, 
11253, n. 290. Rule 201 does not place any limit on the frequency or 
number of times the circuit breaker can be re-triggered with respect 
to a particular stock. See T&M FAQs, at Q&A 2.2.

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[[Page 12203]]

    In order to implement the provisions of Rule 201, the Exchange has 
proposed amendments to NYSE Amex Equities Rule 440B to establish the 
protocols for determining when a Short Sale Price Test is to be 
triggered for a covered security where the Exchange is the listing 
market. The proposed Rule 440B amendments also provide that, except for 
certain permissible and short exempt orders,\15\ during the period a 
Short Sale Price Test is in effect for a covered security, Exchange 
systems will not execute or display a short sale order with respect to 
that security at a price that is less than or equal to the current 
national best bid.
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    \15\ See paragraphs (f) and (g) of proposed Rule 440B regarding 
the treatment of permissible and short exempt orders. See SR-
NYSEAmex-2011-08.
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    NYSE Amex Equities Rule 123C prescribes the method for determining 
the closing print to be reported to the Consolidated Tape for each 
security at the close of trading. Interest executed in the closing 
transaction is allocated pursuant to NYSE Amex Equities Rule 72 and 
consistent with the hierarchy of allocation of trading interest in NYSE 
Amex Equities Rule 123C(7). In the hierarchy of allocation, better 
priced interest \16\ must receive an execution in whole or in part 
(``must execute interest'') \17\ in order for the security to close. 
Included in this category are MOC orders without tick restrictions, MOC 
orders with tick restrictions that are eligible to be executed at a 
price better than the closing price,\18\ better priced limit orders, 
better priced limit on close (``LOC'') orders with or without tick 
restrictions that are eligible for execution at a better price than the 
closing price and Crowd interest.\19\
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    \16\ Better priced interest means an order that is priced lower 
than the closing price (in the case of an order to sell) or priced 
higher than the closing price (in the case of an order to buy).
    \17\ A market on close (``MOC'') order without tick restrictions 
must be executed in its entirety at the closing price. Marketable 
limit orders receive an execution subject to the availability of 
contra side volume.
    \18\ References in NYSE Amex Equities Rule 123C(7) to orders 
with tick restrictions mean sell ``plus'' or buy ``minus'' orders, 
as defined in Rule 13.
    \19\ Crowd interest means verbal floor broker interest at the 
market entered by the designated market maker (``DMM'') to interact 
with orders in the Display Book. See note 20 infra.
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    After the ``must execute interest'' is satisfied, then any limit 
orders represented in the Display Book \20\ at the closing price may be 
used to offset the remaining imbalance.\21\ Next eligible for execution 
in the hierarchy of allocation for the closing transaction are LOC 
orders without tick restrictions limited to the closing price, then MOC 
orders that have tick restrictions which limit the order's price to the 
price of the closing transaction,\22\ followed by LOC orders limited to 
the price of the closing transaction that have tick restrictions, ``G'' 
orders,\23\ and finally closing offset orders.
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    \20\ The Display Book system is an order management and 
execution facility. The Display Book system receives and displays 
orders to the DMM, contains order information, and provides a 
mechanism to execute and report transactions and published reports 
to the Consolidated Tape. The Display Book system is connected to a 
number of other Exchange systems for the purposes of comparison, 
surveillance, and reporting information to customers and other 
market data and national market systems.
    \21\ DMM interest, including better priced DMM interest entered 
into the Display Book prior to the closing transaction that is 
eligible to participate in the closing transaction is always 
included in the hierarchy of execution as if it were interest equal 
to the price of the closing transaction.
    \22\ For example, the last sale on the Exchange was at a price 
of $46.00 on a minus tick, the closing price is $46.01, all sell 
plus MOC orders are limited to the closing price of $46.01 because 
the closing transaction would be the next plus tick.
    \23\ See Section 11(a)(1)(G) of the Act. G orders are orders for 
an Exchange member's own account where the member meets a business 
mix test that requires it to be primarily engaged in the business of 
underwriting and distributing securities, selling securities to 
customers, and/or acting as a broker and provided more than 50% of 
its gross revenues is derived from such businesses and related 
activities. G orders on the Exchange are required to yield priority, 
parity and precedence to non-G orders.
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    The Exchange proposes to establish the execution priority for short 
sale orders at the close during a period when the Short Sale Price Test 
is in effect. As provided for in proposed NYSE Amex Equities Rule 
440B(h)(3), when the Short Sale Price Test is in effect, Exchange 
systems will, in connection with the closing transaction, re-price all 
short sale market orders and short sale orders limited to the last 
published Exchange bid or lower to one minimum price increment above 
the last published Exchange bid. If the closing price will be at or 
below the last published Exchange bid, such re-priced short sale orders 
will not participate in the close. If the closing price is above the 
last published Exchange bid, the re-priced short sale orders may 
participate in the closing transaction, depending on whether the 
proposed closing price is the same as the re-priced order, or if the 
re-priced order is priced better than the closing price. If the re-
priced order is priced better than the closing price, such re-priced 
short sale order will participate in the closing transaction.\24\ If 
the re-priced order is priced at the same price as the closing price, 
such re-priced short sale order plus all other short sale orders 
limited at that price \25\ may (but are not required to) participate in 
the closing transaction consistent with how NYSE Amex Equities Rule 
123C(7)(b) treats market or limit orders with tick restrictions.
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    \24\ See NYSE Amex Equities Rule 123C(7)(a).
    \25\ These would include short sale orders that were already 
priced above the last published Exchange bid.
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    The Exchange therefore proposes to add new Supplementary Material 
.20 to NYSE Amex Equities Rule 123C providing that short sale orders 
for a covered security during a period when a Short Sale Price Test is 
in effect will be treated, for purposes of execution at the close under 
NYSE Amex Equities Rule 123C(7)(b), as orders that have tick 
restrictions.\26\ Thus, short sale orders that are eligible to 
participate in the closing transaction and that are priced at the same 
price as the closing transaction will be treated in the same manner as 
sell ``plus'' and buy ``minus'' tick restrictive orders priced at the 
closing price.\27\ As a result, re-priced short sale orders priced at 
the closing price will be eligible for participation at the close 
following limit orders represented in the Display Book with a price 
equal to the closing price and LOC orders with a price equal to the 
closing price.
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    \26\ The Exchange will not be making any changes in its opening 
and re-opening procedures in connection with the implementation of 
the short sale price test restrictions of Rule 201. The presence of 
short sale price test restrictions will have no impact on the 
priority of orders eligible to participate in openings and re-
openings.
    \27\ See NYSE Amex Equities Rule 13 (defining Sell ``Plus''-Buy 
``Minus'' Orders). A sell ``plus'' order is an order to sell a 
specified amount of stock as long as the price of the trade is not 
lower than the price of the last sale if the last sale was a plus or 
zero plus tick, and is not lower than the last sale plus the minimum 
change in the price if the last sale was a minus or zero minus tick. 
A buy ``minus'' order is an order to buy a specified amount of stock 
as long as the price to be executed is not higher than the price of 
the last sale if the last sale was a minus or zero minus tick, and 
is not higher than the price of the last sale less than the minimum 
change in the price of the stock if the last sale was a plus tick or 
zero plus tick.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\28\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\29\ in particular, in that it is designed to, among 
other things, prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest. The proposal is designed to 
implement the provisions of Rule 201 of Regulation SHO by establishing, 
maintaining and enforcing written policies and procedures reasonably 
designed to prevent the execution or display of a short sale order of a 
covered security at

[[Page 12204]]

the close in violation of the Short Sale Price Test established in that 
rule. To that end, the proposed rule change will, among other things, 
amend the Exchange's procedures for determining the closing price by 
treating short sale orders as orders subject to tick restrictions 
during a period when a Short Sale Price Test is in effect.
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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \30\ and Rule 19b-4(f)(6) thereunder.\31\ 
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 \32\ and Rule 19b-
4(f)(6)(iii) thereunder.\33\
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    \30\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \31\ 17 CFR 240.19b-4(f)(6).
    \32\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \33\ 17 CFR 240.19b-4(f)(6)(iii). 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 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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    A proposed rule change filed under Rule 19b-4(f)(6) \34\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\35\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission hereby 
grants the request.\36\ Waiving the 30-day operative delay will allow 
the Exchange to implement the proposed amendments by February 28, 2011, 
which, as noted by the Exchange, is the compliance date for amendments 
to Regulation SHO under the Act. By waiving the operative delay, the 
Exchange will be able to comply with the amendments to Regulation SHO 
by February 28, 2011. Therefore, the Commission believes it is 
consistent with the protection of investors and the public interest to 
waive the 30-day operative delay and designates the proposal as 
operative upon filing.
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    \34\ 17 CFR 240.19b-4(f)(6).
    \35\ 17 CFR 240.19b-4(f)(6)(iii).
    \36\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule change's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend 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-2011-09 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-2011-09. 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 20549-1090. Copies of the filing will also 
be available for inspection and copying at the Exchange's principal 
office and on its Internet Web site at http://www.nyse.com. 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-2011-09 and should 
be submitted on or before March 25, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-4890 Filed 3-3-11; 8:45 am]
BILLING CODE 8011-01-P


