
[Federal Register Volume 76, Number 131 (Friday, July 8, 2011)]
[Notices]
[Pages 40410-40412]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17123]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64797; File No. SR-NYSEAmex-2011-46]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Exchange 
Rule 1000(a)(iv) To Provide for a Different Liquidity Replenishment 
Point Value Range During the First Day of Trading of an Initial Public 
Offering on the Exchange

July 1, 2011.
    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 28, 2011, NYSE Amex LLC (``NYSEAmex'' 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 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend NYSE Amex Equities Rule 1000(a)(iv) 
to provide for a different liquidity replenishment point (``LRP'') 
value range during the first day of trading of an initial public 
offering (``IPO'') on the Exchange. 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 Exchange 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 these 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 aspects 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 1000(a)(iv) 
to provide for a different LRP value range during the first day of 
trading of an IPO on the Exchange. Specifically, the Exchange proposes 
to add proposed Rule 1000(a)(iv)(E) to provide that on the first day of 
trading of an IPO, the LRP value shall be the greater of $2.00 or the 
LRP value range that would be applicable based on the offering price of 
the IPO.
I. Background
    Pursuant to NYSE Amex Equities Rule 1000(a)(iv), LRPs are pre-
determined price points that function to moderate volatility in a 
particular security, improve price continuity, and foster market 
quality by temporarily converting the electronic market to an auction 
market and permitting new trading interest to add liquidity.\3\
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    \3\ See also NYSE Amex Equities Rules 60(e)(i).
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    Pursuant to NYSE Amex Equities Rule 60, Autoquote is suspended when 
an LRP is reached, i.e., when the unfilled balance of an incoming 
automatically executing order is able to trade at a price above (below) 
the LRP, or if the incoming interest would create a locked or crossed 
market. Autoquote resumes after a manual trade or when the lock or 
cross is cleared.\4\
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    \4\ See NYSE Amex Equities Rule 60(d)(i)(C).
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    LRPs are calculated by adding and subtracting a value to the 
security's last

[[Page 40411]]

sale price. The LRP values are based on an examination of trading data 
and vary based on the security's Exchange average daily volume 
(``ADV''), price, and volatility. The values used to calculate the 
LRPs' range do not change intraday and are disseminated daily by the 
Exchange on its Web site.
II. Modification to LRP Value Ranges
    The Exchange proposes to amend NYSE Amex Equities Rule 1000(a)(iv) 
to provide for a different LRP value range during the first day of 
trading of an IPO on the Exchange. Specifically, the Exchange proposes 
to provide that for the first day of trading of an IPO on the Exchange, 
the LRP value will be the greater of $2.00 or the LRP value that would 
be applicable based on the offering price.
    The Exchange currently uses the offering price of an IPO, as set by 
the investment bank syndicate the night before the first day of 
trading, to determine the LRP value range in that security. However, 
trading prices on the first day of an IPO can often be volatile, both 
compared to the offering price as well as intra-day. As a result, using 
the offering price to determine the LRP value range may be inconsistent 
with the actual trading prices, resulting in more frequent triggering 
of LRPs than is typical on the Exchange, thus unnecessarily limiting 
automatic execution of orders on the first day of trading.
    A recent example of how an IPO can trade at prices beyond the 
original offering prices recently occurred on the New York Stock 
Exchange LLC (``NYSE''), which has the same rules as the Exchange 
governing LRPs.\5\ For the May 19, 2011, IPO of LinkedIn Corp. (LNKD) 
on the NYSE, the offering price was set the night before at $45 per 
share and based on that price and pursuant to Rule 1000(a)(iv)(C), the 
NYSE set the LRP value for the security at $0.70 for the first day of 
trading. Notwithstanding the offering price, the opening price for LNKD 
at the NYSE was $83.00 and the stock reached a trading high of $122.70 
during the first day of trading, closing at $94.25. LNKD therefore 
traded at prices throughout the day that would have otherwise warranted 
a higher LRP value and as a result, there was a greater occurrence of 
LRPs being reached than would have otherwise occurred on a regular 
trading day. The first day of trading in LNKD is illustrative of the 
type of volatility and price fluctuations that can occur on the first 
day of trading of an IPO.
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    \5\ See NYSE Rule 1000(a)(iv).
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    The Exchange proposes to widen the LRP values for the first day of 
trading of an IPO in order to reflect that the first day of trading of 
an IPO generally differs from regular trading days in that there is 
often greater volume and volatility, with wider price fluctuations. The 
NYSE is similarly filing to amend NYSE Rule 1000.\6\ While the Exchange 
does not have the same volume of IPOs as occur on the NYSE, the 
Exchange believes that the changes to LRP values that are being 
proposed for NYSE should also be adopted at the Exchange. As proposed, 
the LRP value range would be the greater of $2.00 or the LRP value 
range that would be applicable based on the IPO's offering price. For 
example, if the IPO's offering price were priced above $150, the LRP 
value range could be $4.00 rather than $2.00.
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    \6\ See SR-NYSE-2011-31.
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    The Exchange believes that widening the LRP value ranges for the 
first day of trading of an IPO would allow for more continuous 
automatic executions of securities before hitting an LRP. While the 
purpose of the LRP is to dampen volatility and to provide market 
participants with time to react, the Exchange believes that the 
proposed amendment is necessary to lessen artificial limitations on 
trading. If an LRP is triggered too frequently, such as when the price 
of a security increases during the trading day well beyond the LRP 
value that has been assigned to that security for the day, trading in 
the security may be overly restrained. As such, the Exchange believes 
that allowing for an expanded value range on the first day of trading 
of an IPO will better facilitate the natural trading of a particular 
security.
2. Statutory Basis
    The basis under the Act for these proposed rule changes are the 
requirement under Section 6(b)(5) \7\ that an Exchange have rules that 
are designed 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 is 
designed to support the principles of Section 11A(a)(1) \8\ in that it 
seeks to assure economically efficient execution of securities 
transactions, make it practicable for brokers to execute investors' 
orders in the best market and provide an opportunity for investors' 
orders to be executed without the participation of a dealer. The 
Exchange's proposal to provide flexibility in setting the LRP range on 
the first day of trading for an IPO is intended to provide for faster 
executions of securities by limiting the amount of time automatic 
executions are suspended when an LRP is triggered.
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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 fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \12\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\13\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
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    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay so that the proposal may become

[[Page 40412]]

operative upon filing. The Commission hereby grants that request. The 
New York Stock Exchange LLC has proposed a similar change to its Rule 
1000, and the Commission is waiving the 30-day operative delay for that 
proposal.\14\ Waiving the operative delay for this proposal will thus 
keep Exchange Rule 1000 consistent with NYSE Rule 1000 in this respect. 
In addition, waiving the 30-day operative delay will enable this change 
to be implemented immediately so that the wider LRP values will be 
available for the next IPO that takes place on the Exchange. 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.\15\
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    \14\ See SR-NYSE-2011-31.
    \15\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of 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-2011-46 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-2011-46. 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 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 offices of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEAmex-2011-46, and should be submitted on or before 
July 29, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-17123 Filed 7-7-11; 8:45 am]
BILLING CODE 8011-01-P


