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SECURITIES AND EXCHANGE COMMISSION
Securities and Exchange Commission
DOCUMENT ID: [Release No. 34-56908; File No. NYSEArca-2007-121]
NOTICE: NOTICES
ACTION: Self-regulatory organizations; proposed rule changes:
SUBJECT CATEGORY: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Rule 6.37B and the Quoting Obligations of Lead Market Makers
DOCUMENT SUMMARY: December 5, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on November 27, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III below, which
Items have been substantially prepared substantially by NYSE Arca. The
Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
NYSE Arca proposes to amend Exchange Rule 6.37B in order to update the quoting obligations of Lead Market Makers (``LMMs''). The text of the proposed rule change is available at NYSE Arca, the Commission's Public Reference Room, and http://www.nysearca.com. II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE Arca 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. NYSE Arca has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule change is to update the quoting obligations for LMMs, contained in NYSE Arca Rule 6.37B.
In 2003, the Exchange established a continuous quoting obligation
for LMMs,\3\ in conjunction with the introduction of its electronic
trading system then known as PCX Plus.\4\ This obligation called for an
LMM to provide continuous two sidedquotations throughout the trading
day in its appointed issues. The quoting obligation was subsequently
amended in 2005 \5\ so that an LMM needed only to supply continuous
quotations for 99% of the time that the Exchange is open for trading in each issue.
\3\ See Securities Exchange Act Release No. 47838 (May 13, 2003), 68 FR 27129 (May 19, 2003) (SRPCX200236).
\4\ PCX Plus was replaced in 2006 by the OX system, NYSE Arca's present electronic trading platform.
\5\ See Securities Exchange Act Release No. 51740 (May 25, 2005), 70 FR 32686 (June 3, 2005) (SRPCX200564).
Under the PCX Plus system, in addition to LMMs, there were three
other categories of Market Makers: Remote Market Makers, Floor Market
Makers, and Supplemental Market Makers. Of these three, only Remote
Market Makers had a minimum continuous quoting obligation. Given that
fact that not all Market Makers had minimum quoting requirements,
coupled with the fact that the Exchange had a relatively small number
of registered Remote Market Makers,\6\ the Exchange believed that a 99%
continuous quoting obligation for LMMs would serve as a mechanism to
help ensure that there would be adequate liquidity in any issue, throughout the trading day.
\6\ At the time PCX Plus was introduced in October 2003, in
addition to LMMs, there were five registered Remote Market Makers subject to continuous quoting obligations.
With the introduction of the Exchange's current electronic trading
platform, the OX system, in 2006, the Exchange reclassified the Remote
Market Maker, Supplemental Market Maker, and Floor Market Maker into
one classification, simply called Market Maker. Under rules adopted by
the Exchange in conjunction with the implementation of the OX system,
all Market Makers now have minimum continuous quoting obligations.\7\
Due to the fact that all Market Makers now have some minimum quoting
obligations, coupled with an increase in the number of Market Makers
providing quotations on a continuous basis,\8\ the Exchange no longer
believes that it necessary for an LMM to be held to a 99% quoting
obligation in order for there to be adequate liquidity in a given
issue. Therefore, the Exchange is proposing to update Rule 6.37B(b) by
reducing an LMMs continuous quoting obligation from 99% to 90%.
\7\ NYSE Arca Rule 6.37B(c) states that a Market Maker must
provide continuous two sided quotations throughout the trading day
in its appointed issues for 60% of the time the Exchange is open for trading in each issue.
\8\ As of October 31, 2007, in addition to Lead Market Makers,
there were fiftyfive registered Market Makers subject to continuous quoting obligations.
The Exchange also seeks to add certain exemptions to Rule 6.37B. Specifically, when determining whether a LMM has met its 90% quoting obligation, the Exchange would not consider the duration of any periods where a technical failure on the part of the Exchange prevents the LMM from providing continuous quotations. Also, the Exchange would retain the discretion to consider other exceptions to this continuous electronic quote obligation based on demonstrated legal or regulatory requirements or other mitigating circumstances. Finally, the Exchange proposes to amend the review period for this obligation, from a quarterly basis to a monthly basis. The shorter time period would allow the Exchange to better monitor an LMMs performance.
The Exchange does not believe that lowering the LMM quoting
obligation would adversely affect the quality of the Exchange's markets
or lead to a material decrease in liquidity. Rather, the Exchange
believes its current market structure with its high rate of
participation by LMMs and Market Makers permits the lowering of the quoting obligation without fear of losing liquidity.\9\
\9\ Also, the Exchange notes that NYSE Arca Rule 6.37B(d), which
states that in the interest of maintaining a fair and orderly
market, a Market Maker may be called upon by a Trading Official to
maintain continuous quotes in one or more series of an option issue, shall continue to apply.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster
[[Page 70640]]
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanisms of a free and open market and a national market system. \10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to which NYSE Arca consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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
Paper Comments
All submissions should refer to File Number SRNYSEArca2007121. This file number should be included on the subject line if email 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 inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of NYSE Arca. 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 SRNYSEArca2007121 and should be submitted on or before January 2, 2008.
\12\ 17 CFR 200.303(a)(12).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E723972 Filed 121107; 8:45 am]
BILLING CODE 801101P
SUMMARY: NYSE Arca, Inc.,
DOCUMENT BODY 2: December 5, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b4 thereunder,\2\ notice is hereby given that
on November 27, 2007, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III below, which
Items have been substantially prepared substantially by NYSE Arca. The
Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b4.
I. SelfRegulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
NYSE Arca proposes to amend Exchange Rule 6.37B in order to update the quoting obligations of Lead Market Makers (``LMMs''). The text of the proposed rule change is available at NYSE Arca, the Commission's Public Reference Room, and http://www.nysearca.com. II. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE Arca 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. NYSE Arca has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. SelfRegulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule change is to update the quoting obligations for LMMs, contained in NYSE Arca Rule 6.37B.
In 2003, the Exchange established a continuous quoting obligation
for LMMs,\3\ in conjunction with the introduction of its electronic
trading system then known as PCX Plus.\4\ This obligation called for an
LMM to provide continuous two sidedquotations throughout the trading
day in its appointed issues. The quoting obligation was subsequently
amended in 2005 \5\ so that an LMM needed only to supply continuous
quotations for 99% of the time that the Exchange is open for trading in each issue.
\3\ See Securities Exchange Act Release No. 47838 (May 13, 2003), 68 FR 27129 (May 19, 2003) (SRPCX200236).
\4\ PCX Plus was replaced in 2006 by the OX system, NYSE Arca's present electronic trading platform.
\5\ See Securities Exchange Act Release No. 51740 (May 25, 2005), 70 FR 32686 (June 3, 2005) (SRPCX200564).
Under the PCX Plus system, in addition to LMMs, there were three
other categories of Market Makers: Remote Market Makers, Floor Market
Makers, and Supplemental Market Makers. Of these three, only Remote
Market Makers had a minimum continuous quoting obligation. Given that
fact that not all Market Makers had minimum quoting requirements,
coupled with the fact that the Exchange had a relatively small number
of registered Remote Market Makers,\6\ the Exchange believed that a 99%
continuous quoting obligation for LMMs would serve as a mechanism to
help ensure that there would be adequate liquidity in any issue, throughout the trading day.
\6\ At the time PCX Plus was introduced in October 2003, in
addition to LMMs, there were five registered Remote Market Makers subject to continuous quoting obligations.
With the introduction of the Exchange's current electronic trading
platform, the OX system, in 2006, the Exchange reclassified the Remote
Market Maker, Supplemental Market Maker, and Floor Market Maker into
one classification, simply called Market Maker. Under rules adopted by
the Exchange in conjunction with the implementation of the OX system,
all Market Makers now have minimum continuous quoting obligations.\7\
Due to the fact that all Market Makers now have some minimum quoting
obligations, coupled with an increase in the number of Market Makers
providing quotations on a continuous basis,\8\ the Exchange no longer
believes that it necessary for an LMM to be held to a 99% quoting
obligation in order for there to be adequate liquidity in a given
issue. Therefore, the Exchange is proposing to update Rule 6.37B(b) by
reducing an LMMs continuous quoting obligation from 99% to 90%.
\7\ NYSE Arca Rule 6.37B(c) states that a Market Maker must
provide continuous two sided quotations throughout the trading day
in its appointed issues for 60% of the time the Exchange is open for trading in each issue.
\8\ As of October 31, 2007, in addition to Lead Market Makers,
there were fiftyfive registered Market Makers subject to continuous quoting obligations.
The Exchange also seeks to add certain exemptions to Rule 6.37B. Specifically, when determining whether a LMM has met its 90% quoting obligation, the Exchange would not consider the duration of any periods where a technical failure on the part of the Exchange prevents the LMM from providing continuous quotations. Also, the Exchange would retain the discretion to consider other exceptions to this continuous electronic quote obligation based on demonstrated legal or regulatory requirements or other mitigating circumstances. Finally, the Exchange proposes to amend the review period for this obligation, from a quarterly basis to a monthly basis. The shorter time period would allow the Exchange to better monitor an LMMs performance.
The Exchange does not believe that lowering the LMM quoting
obligation would adversely affect the quality of the Exchange's markets
or lead to a material decrease in liquidity. Rather, the Exchange
believes its current market structure with its high rate of
participation by LMMs and Market Makers permits the lowering of the quoting obligation without fear of losing liquidity.\9\
\9\ Also, the Exchange notes that NYSE Arca Rule 6.37B(d), which
states that in the interest of maintaining a fair and orderly
market, a Market Maker may be called upon by a Trading Official to
maintain continuous quotes in one or more series of an option issue, shall continue to apply.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\10\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\11\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster
[[Page 70640]]
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanisms of a free and open market and a national market system. \10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
B. SelfRegulatory 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. SelfRegulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to which NYSE Arca consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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
Paper Comments
All submissions should refer to File Number SRNYSEArca2007121. This file number should be included on the subject line if email 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 inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of NYSE Arca. 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 SRNYSEArca2007121 and should be submitted on or before January 2, 2008.
\12\ 17 CFR 200.303(a)(12).
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E723972 Filed 121107; 8:45 am]
BILLING CODE 801101P
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