Self-Regulatory Organizations; NYSE Amex LLC.; Order Granting Approval of Proposed Rule Change Amending NYSE Amex Equities Rules 504 and 509 To Modify the Quoting Requirements Applicable to Designated Market Maker Units Registered in Nasdaq Stock Market Securities Traded on the Exchange Subject to the Unlisted Trading Privileges Pilot Program
Table of Contents Back to Top
- I. Introduction
- II. Description of the Proposal
- III. Discussion and Commission Findings
- IV. Conclusion
February 10, 2012.
I. Introduction Back to Top
On December 15, 2011, NYSE Amex LLC (“NYSE Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)  and Rule 19b-4 thereunder,  a proposed rule change to modify the quoting requirements applicable to Designated Market Maker (“DMM”) units registered in Nasdaq Stock Market securities traded on the Exchange pursuant to a grant of unlisted trading privileges (“UTP”). The proposed rule change was published for comment in the Federal Register on December 30, 2011.  The Commission received no comment letters on the proposal. This order approves the proposed rule change.
II. Description of the Proposal Back to Top
Certain securities listed on Nasdaq may be traded on NYSE Amex pursuant to a grant of unlisted trading privileges as part of a pilot program on the Exchange (“UTP Pilot Program”).  NYSE Amex's proposal seeks to modify the UTP Pilot Program's obligations imposed on DMM units who quote in such securities.
Currently, under NYSE Amex Equities Rule 509(a)(1), DMM units who are registered in securities subject to the UTP Pilot Program must maintain continuous two-sided quotes at the National Best Bid or Offer (“NBBO”) with reasonable size for each such security for at least 10% of the time during the regular business hours of the Exchange for each calendar month.  The proposal would amend NYSE Amex Equities Rule 509(a)(1) to lower a DMM unit's quoting obligations for “more active”  securities in the UTP Pilot Program from at least 10% of the time during the regular trading day to at least 5% of the time during the regular trading day.  The proposed quoting obligations would continue to apply on a security-by-security basis. The current quoting obligation for “less active” securities, i.e., those with a consolidated average daily volume of less than one million shares per calendar month, would remain unchanged at 10% of the time during the regular trading day.
The Exchange also proposes to delete from NYSE Amex Equities Rule 504(b)(1)(A) the text that references NYSE Amex Equities Rule 103B(II), which provides for security allocation eligibility. The Exchange represented that this reference is not necessary within Rule 504(b)(1)(A), and that, despite the proposed deletion, DMM units would remain subject to NYSE Amex Equities Rule 103B(II) with respect to security allocation eligibility.
III. Discussion and Commission Findings Back to Top
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.  In particular, the proposed change is consistent with Section 6(b)(5) of the Act,  because it would promote just and equitable principles of trade, and, in general, protect investors and the public interest.  The Commission also finds that the proposed rule change is consistent with Section 12(f) of the Act,  because it furthers the goals of maintaining fair and orderly markets, and protecting investors and the public interest, for securities traded pursuant to UTP.
The Exchange proposes to reduce DMM units' quoting obligations applicable to “more active” securities traded in the UTP Pilot Program to quoting at the NBBO for 5% of the trading day. The Commission notes that this percentage would reflect the quoting requirement currently applicable to DMM units quoting non-UTP Pilot Program securities, i.e., those listed on the Exchange.  There would be one significant difference between the proposed quoting obligation for the UTP Pilot Program and the current quoting obligation for non-UTP Pilot Program securities—UTP Pilot Program quoting obligations are and would continue to be calculated on a security-by-security basis, rather than averaged across a portfolio of all of a DMM unit's assigned securities. The Commission believes that this security-by-security basis calculation is reasonably designed to maintain robust quotes for all UTP Pilot Program securities. In addition, the Exchange's proposal would reduce quoting obligations only for “more active” securities, which by definition are more liquid and may, therefore, be less reliant on quoting obligations for continued liquidity. Finally, based on the Exchange's experience during the UTP Pilot Program, the proposed quoting obligation is designed to ensure the continued active participation by DMM units in such securities.
The Commission also finds that the proposed deletion in NYSE Amex Equities Rule 504(b)(1)(A) to the reference to NYSE Amex Equities Rule 103B(II) is consistent with the Act. The Exchange represented that this reference is not necessary within Rule 504(b)(1)(A), and that, despite the proposed deletion, DMM units would remain subject to NYSE Amex Equities Rule 103B(II) with respect to security allocation eligibility.
For the foregoing reasons, the Commission finds that the proposal to amend the UTP Pilot Program is consistent with the requirements of the Act.
IV. Conclusion Back to Top
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,  that the proposed rule change (SR-NYSEAmex-2011-101) be, and it hereby is, approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 
Kevin M. O'Neill,
[FR Doc. 2012-3611 Filed 2-15-12; 8:45 am]
BILLING CODE 8011-01-P
Footnotes Back to Top
3. Securities Exchange Act Release No. 66043 (December 23, 2011), 76 FR 82329 (“Notice”).Back to Context
4. The UTP Pilot Program is scheduled to expire on the earlier of Commission approval to make such pilot permanent or July 31, 2012. See Securities Exchange Act Release No. 66040 (December 23, 2011), 76 FR 82324 (December 30, 2011).Back to Context
5. These obligations are also included within current NYSE Amex Equities Rule 504.Back to Context
6. Under NYSE Amex Equities Rule 103B(II)(C), “more active” securities are those with a consolidated average daily volume equal to or greater than one million shares per calendar month.Back to Context
7. The Exchange proposed to make conforming changes to NYSE Amex Equities Rule 504(b)(1)(A), which contains a requirement similar to NYSE Amex Equities Rule 509(a)(1) requiring DMM Units to quote at the NBBO on average at least 10% of the trading day.Back to Context
10. In approving the proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).Back to Context
12. See NYSE Amex Equities Rule 104(a)(1)(A).Back to Context