[Federal Register: September 9, 2010 (Volume 75, Number 174)]
[Notices]
[Page 54937-54938]
[DOCID:fr09se10-128]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62819; File No. SR-NYSE-2010-61]

Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC
Extending the Operation of its New Market Model Pilot Until the Earlier
of Securities and Exchange Commission Approval To Make Such Pilot
Permanent or January 31, 2011

September 1, 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 August 26, 2010, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') 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.
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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 extend the operation of its New Market
Model Pilot, currently scheduled to expire on September 30, 2010, until
the earlier of Securities and Exchange Commission (``SEC'' or
``Commission'') approval to make such pilot permanent or January 31,
2011. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, on the Commission's
website at http://www.sec.gov 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 extend the operation of its New Market
Model Pilot (``NMM Pilot''),\4\ currently scheduled to expire on
September 30, 2010, until the earlier of Securities and Exchange
Commission approval to make such pilot permanent or January 31, 2011.
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    \4\ See Securities Exchange Act Release No. 58845 (October 24,
2008), 73 FR 64379 (October 29, 2008) (SR-NYSE-2008-46); See also
Securities Exchange Act Release No. 60756 (October 1, 2009), 74 FR
51628 (October 7, 2009) (SR-NYSE-2009-100) (extending Pilot to
November 30, 2009); See also Securities Exchange Act Release No.
61031 (November 19, 2009), 74 FR 62368 (November 27, 2009) (SR-NYSE-
2009-113) (extending Pilot to March 30, 2010); See also Securities
Exchange Act Release No. 61724 (March 17, 2010), 75 FR 14221 (March
24, 2010) (SR-NYSE-2010-25) (extending Pilot to September 30, 2010).
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    The Exchange notes that parallel changes are proposed to be made to
the rules of the NYSE Amex LLC.\5\
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    \5\ See SR-NYSE Amex-2010-86.
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Background \6\
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    \6\ The information contained herein is a summary of the NMM
Pilot, for a fuller description of the pilots see supra note 1
[sic].
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    In October 2008, the NYSE implemented significant changes to its
market rules, execution technology and the rights and obligations of
its market participants all of which were designed to improve execution
quality on the Exchange. These changes are all elements of the
Exchange's enhanced market model. Certain of the enhanced market model
changes were implemented through a pilot program.
    As part of the NMM Pilot, NYSE eliminated the function of
specialists on the Exchange creating a new category of market
participant, the Designated Market Maker or DMM.\7\ The DMMs, like
specialists, have affirmative obligations to make an orderly market,
including continuous quoting requirements and obligations to re-enter
the market when reaching across to execute against trading interest.
Unlike specialists, DMMs have a minimum quoting requirement \8\ in
their assigned securities and no longer have a negative obligation.
DMMs are also no longer agents for public customer orders.\9\
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    \7\ See NYSE Rule 103.
    \8\ See NYSE Rule 104.
    \9\ See NYSE Rule 60; See also NYSE Rules 104 and 1000.
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    In addition, the Exchange implemented a system change that allowed
DMMs to create a schedule of additional non-displayed liquidity at
various price points where the DMM is willing to interact with interest
and provide price improvement to orders in the Exchange's system. This
schedule is known as the DMM Capital Commitment Schedule (``CCS'').\10\
CCS provides the Display Book[reg] \11\ with the amount of
shares that the DMM is willing to trade at price points outside, at and
inside the Exchange Best Bid or Best Offer (``BBO''). CCS interest is
separate and distinct from other DMM interest in that it serves as the
interest of last resort.
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    \10\ See NYSE Rule 1000.
    \11\ The Display Book system is an order management and
execution facility. The Display Book system receives and displays
orders to the DMMs, contains the order information, and provides a
mechanism to execute and report transactions and publish the results
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.
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    The NMM Pilot further modified the logic for allocating executed
shares among market participants having trading interest at a price
point upon execution of incoming orders. The modified logic rewards
displayed orders that establish the Exchange's BBO. During the
operation of the NMM Pilot orders, or portions thereof, that establish
priority \12\ retain that priority until the portion of the order that
established priority is exhausted. Where no one order has established
priority, shares are distributed among all market participants on
parity.
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    \12\ See NYSE Rule 72(a)(ii).
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    The NMM Pilot was originally scheduled to end operation on October
1, 2009, or such earlier time as the Commission may determine to make
the rules permanent. The Exchange filed to extend the operation of the
Pilot on

three occasions in order to prepare a rule filing seeking permission to
make the above described changes permanent.\13\ The Exchange is
currently still preparing such formal submission but does not expect
that filing to be completed and approved by the Commission before
September 30, 2010.
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    \13\ See Securities Exchange Act Release Nos. 60756 (October 1,
2009), 74 FR 51628 (October 7, 2009) (SR-NYSE-2009-100) (extending
Pilot to November 30, 2009); 61031 (November 19, 2009), 74 FR 62368
(November 27, 2009) (SR-NYSE-2009-113) (extending Pilot to March 30,
2010); and 61724 (March 17, 2010), 75 FR 14221 (March 24, 2010) (SR-
NYSE-2010-25) (extending Pilot to September 30, 2010).
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Proposal To Extend the Operation of the NMM Pilot
    The NYSE established the NMM Pilot to provide incentives for
quoting, to enhance competition among the existing group of liquidity
providers and to have its market maker be a new competitive market
participant. The Exchange believes that the NMM Pilot allows the
Exchange to provide its market participants with a trading venue that
utilizes an enhanced market structure to encourage the addition of
liquidity, facilitate the trading of larger orders more efficiently and
operates to reward aggressive liquidity providers. As such, the
Exchange believes that the rules governing the NMM Pilot should be made
permanent. Through this filing the Exchange seeks to extend the current
operation of the NMM Pilot until January 31, 2011, in order to allow
the Exchange time to formally submit a filing to the Commission to
convert the pilot rules to permanent rules.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'')
for this proposed rule change is the requirement under Section 6(b)(5)
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 Exchange
believes that the instant filing is consistent with these principles
because the NMM Pilot provides its market participants with a trading
venue that utilizes an enhanced market structure to encourage the
addition of liquidity, facilitate the trading of larger orders more
efficiently and operates to reward aggressive liquidity providers.
Moreover, the instant filing requesting an extension of the Pilot will
permit adequate time for: (i) The Exchange to prepare and submit a
filing to make the rules governing the NMM Pilot permanent; (ii) public
notice and comment; and (iii) completion of the 19b-4 approval process.

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 \14\
and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 5 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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    At any time within 60 days of the filing of the 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<EMAIL_ADDRESS>Please include
File Number SR-NYSE-2010-61 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-NYSE-2010-61. 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-
NYSE-2010-61 and should be submitted on or before September 30, 2010.

    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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22444 Filed 9-8-10; 8:45 am]
BILLING CODE 8010-01-P