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SEC Filing

SEC Filing

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Published by zerohedge

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Published by: zerohedge on May 03, 2009
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09/12/2010

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SECURITIES AND EXCHANGE COMMISSION(Release No. 34-58877; File No. SR-NYSE-2008-108)October 29, 2008Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and ImmediateEffectiveness of a Proposed Rule Change for a Six-Month Pilot Program to Establish a NewClass of NYSE Market Participants That Will Be Referred to as “Supplemental LiquidityProviders” (“SLPs”) and Will Be Designated as Exchange Rule 107BPursuant to Section 19(b)(1)
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of the Securities Exchange Act of 1934 (the “Act”)
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and Rule19b-4 thereunder,
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notice is hereby given that on October 24, 2008, New York Stock ExchangeLLC (“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 havebeen prepared by the self-regulatory organization. The Commission is publishing this notice tosolicit comments on the proposed rule change from interested persons.I.
Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed RuleChangeThe Exchange proposes a six-month pilot program (“Pilot” or “program”) to establish anew class of NYSE market participants that will be referred to as “Supplemental LiquidityProviders” (“SLPs”) and will be designated as Exchange Rule 107B.The text of the proposed rule change is available at NYSE,www.nyse.com, and theCommission’s Public Reference Room.II.
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, theProposed Rule ChangeIn its filing with the Commission, the self-regulatory organization included statementsconcerning the purpose of, and basis for, the proposed rule change and discussed any comments it
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15 U.S.C. 78s(b)(1).
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15 U.S.C. 78a.
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17 CFR 240.19b-4.
 
received on the proposed rule change. The text of these statements may be examined at the placesspecified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, andC below, of the most significant aspects of such statements.A.
Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basisfor, the Proposed Rule Change1.
PurposeWith this rule filing, the “NYSE is proposing a six-month pilot program to establish anew class of market participants: Supplemental Liquidity Providers (“SLP”). SLPs willsupplement the liquidity provided by Designated Market Makers (“DMMs”) when the NYSE“New Market Model” is approved by the SEC. SLPs may only enter orders electronically fromoff the Floor of the Exchange and may only enter such orders directly into Exchange systems andfacilities designated for this purpose. All SLP orders must only be for the proprietary account of the SLP member organization. Thus, an SLP will not handle orders from public customers orotherwise act on an agency basis. They will have a 5% average quoting requirement perassigned security. Additionally, if an SLP posts displayed or non-displayed liquidity in itsassigned securities that results in an execution, the Exchange will pay the SLP a financial rebate.By establishing this new class of market participant, the NYSE is seeking to provideincentives for quoting and to add competition to the existing group of liquidity providers. Byrequiring SLPs to quote at the National Best Bid (“NBB”) or the National Best Offer (“NBO”) apercentage of the regular trading day in their assigned securities, and by paying a rebate whenthe SLP’s interest results in an execution, the Exchange is rewarding aggressive liquidityproviders in the market. The Exchange believes that this rebate program will encourage theadditional utilization of, and interaction with, the NYSE and provide customers with the premiervenue for price discovery, liquidity, competitive quotes and price improvement.
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Responsibilities of the Supplemental Liquidity ProviderSLP’s 5% Avearge Quoting RequirementAn SLP is required to maintain a bid or an offer at the NBB or NBO (e.g., the “inside”)averaging at least 5% of the trading day for each assigned security in round lots in order tomaintain its status as an SLP. If an SLP fails to meet the quoting requirement for threeconsecutive months, the Exchange may revoke the SLP status pursuant to Section (i)(1)(C)(iii) of the proposed Rule.SLP’s 3% Average or More Quoting Requirement For Rebate PurposesIf an SLP posts liquidity in its assigned securities that results in an execution, theExchange will pay the SLP a financial rebate of $.0015 per share for such executions providedthe SLP meets its monthly quoting requirement for rebates averaging at least 3% at the NBB orthe NBO in its assigned securities in round lots (see Section (i) (“Non-Regulatory Penalties”) andSection (f) (“Calculation of Quoting Requirements”) of the proposed Rule). Meeting the 3%average quoting requirement for rebates does not satisfy the 5% average quoting requirementwhich SLPs must meet in order to remain in the SLP program. The rebate calculation isdescribed in more detail below.A member organization that acts as an SLP is not permitted to act as a Designated MarketMaker (“DMM”) on the Floor of the Exchange in the same security. Thus, a memberorganization that acts as a DMM on the Floor may not also act as an SLP in those securitiesregistered to the DMM unit.Like all other member organizations of the Exchange, an SLP must abide by NYSE andSEC rules and regulations and must deal in a manner consistent with just and equitable principlesof trade. SLPs are subject to regulatory oversight by NYSE Regulation and FINRA.
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