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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending NYSE Amex Equities Rule 70 in Order To Update Functi onality Relating to the Entry of D-Quotes and Peg ging E-Quotes

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Start Preamble April 6, 2010.

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 April 1, 2010, 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 prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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 70 in order to update functionality relating to the entry of d-Quotes and pegging e-Quotes. The text of the proposed rule change is available at the Exchange, on the Commission's Web site at http://www.sec.gov, 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.Start Printed Page 18936

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 its equities rules to provide that d-Quotes and pegging e-Quotes that are entered 10 seconds or less before the scheduled close will automatically be rejected by Exchange systems. Accordingly, on a regular trading day, Exchange systems will reject d-Quotes or pegging e-Quotes entered at or after 3:59:50 p.m. On days where trading closes at 1 p.m., e.g., the day after Thanksgiving, Exchange systems will reject d-Quotes or pegging e-Quotes eligible for the close entered at or after 12:59:50 p.m.[4]

The Exchange believes that the 10-second cut-off will contribute to a more orderly closing process, by providing an opportunity for contra-side interest, including the new Closing Offset (“CO”) order, to flow into the Exchange market. This proposed change is consistent with the Exchange's ongoing effort to streamline the closing process and enhance transparency at the close. In light of recent enhancements to the imbalance feed information, the Exchange believes that designating a cut-off time before the close for the entry of d-Quotes and pegging e-Quotes will contribute to these objectives.

Currently, d-Quotes and pegging e-Quotes are added to the pre-close data feed beginning at 3:55 p.m., and updated every five seconds until the close. The Exchange believes that a 10-second cut-off prior to the close for entry of d-Quotes and pegging e-Quotes will provide sufficient time for all market participants to electronically recognize and respond to this information by entering offsetting interest to mitigate market impact, by entering limit orders or the new CO order.[5] The Exchange further believes that the 10-second cut-off will not materially impact a Floor broker's ability to represent customer interest in the closing transaction because, like other market participants, Floor brokers can enter offsetting market-on-close or limit-on-close orders or CO orders in that 10-second period. Floor brokers also continue to have the ability to represent interest orally at the close. However, the Exchange believes that the proposed cut-off period will have minimal impact on current trading practices of Floor brokers because the manual entry process for d-Quotes in the handheld devices creates physical constraints that naturally limit the number of d-Quotes that can be sent in the last 10 seconds. Therefore, the cut-off time should not impose a significant limitation on Floor brokers that is not already present because of the manual aspect of d-Quote entry. The proposed change is also consistent with ongoing regulatory guidance that encourages all market participants, including Floor brokers, to avoid holding back large interest until at or near the close.[6]

To effect this change, the Exchange proposes to amend NYSE Amex Equities Rules 70.25(a)(ii) and 70.26(iii) to provide that Exchange systems will reject d-Quotes or pegging e-Quotes, as applicable, that are entered 10 seconds or less before the scheduled close. The Exchange also proposes to add to NYSE Amex Equities Rule 70(h)(i) to cross reference Supplementary Material .25 and .26 of Rule 70 to reflect that those rules also impact how Floor broker agency interest interacts in the closing process. The Exchange notes that any d-Quotes or pegging e-Quotes eligible for the close that were entered before this proposed cut-off time remain eligible to participate in the close. The Exchange will notify members and member organizations, including Floor brokers, of these rule changes and the date they will be implemented by issuing a Trader Notice and/or publication of an Information Memorandum.

2. Statutory Basis

The statutory basis for the proposed rule change is Section 6(b)(5) of the Act,[7] which requires the rules of an exchange 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] of the Act in that it seeks to assure fair competition among brokers and dealers and among exchange markets and the practicability of brokers executing investor's orders in the best market. The Exchange believes that the proposed updates to Floor broker functionality meet such goals as it will contribute to a more orderly closing process, by providing an opportunity for contra-side interest to flow into the Exchange market.

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

Because the foregoing 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 for 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act [9] and Rule 19b-4(f)(6) thereunder.[10]

At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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:Start Printed Page 18937

Electronic Comments

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-2010-34. 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 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-NYSEAmex-2010-34 and should be submitted on or before May 4, 2010.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[11]

Florence E. Harmon,

Deputy Secretary.

End Signature End Preamble

Footnotes

4.  New York Stock Exchange LLC has filed a companion rule proposal to conform its rules to the changes proposed in this filing. See SR-NYSE-2010-31.

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5.  See Securities Exchange Act Release Nos. 61233 (Dec. 23, 2009), 74 FR 69169 (Dec. 30, 2009) (SR-NYSE-2009-111); 61244 (Dec. 28, 2009), 75 FR 4797 (Jan. 5, 2010) (SR-NYSEAmex-2009-81). The Exchange implemented these rule changes for both NYSE and NYSE Amex Equities on March 1, 2010.

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6.  See. e.g., NYSE Regulation Information Memo 09-29 (June 19, 2009), published at http://www.nyse.com.

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10.  17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires the self-regulatory organization to submit to the Commission 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 satisfied this requirement.

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[FR Doc. 2010-8362 Filed 4-12-10; 8:45 am]

BILLING CODE 8011-01-P