[ by Howard Haykin ]

The NYSE adopted an amendment to Rule 107B that changes the Existing Supplemental Liquidity Provider Monthly Volume Requirement in all assigned SLP securities.  The Exchange concurrently amended its Price List to specify the applicable percentage of NYSE CADV (consolidated average daily volume) for the Monthly Volume Requirement under Section 19(b)(1) of the Securities Exchange Act of 1934 ("Act") and Rule 19b-4 thereunder.  The changes currently are in force, having become effective on 9/1/12.

With this rule filing, the Exchange revised Rule 107B3 to change the existing Supplemental Liquidity Provider ("SLP") monthly volume requirement from an average daily volume ("ADV") of more than 10 million shares to an ADV that is a specified percentage of NYSE CADV.  The rule filing also amended the Exchange's Price List to specify the applicable percentage of NYSE CADV for the monthly volume requirement.

An SLP is a member organization that ...  electronically enters orders or quotes from off the Floor of the Exchange into the systems and facilities of the Exchange and is obligated to maintain a bid or an offer at the National Best Bid ("NBB") or the National Best Offer ("NBO") in each assigned security in round lots averaging at least 10% of the trading day (the "percentage quoting requirement"). In addition, for all assigned SLP securities, an SLP is required to satisfy a monthly volume requirement by adding liquidity of an ADV of more than 10 million shares on a monthly basis.

An SLP can either be a proprietary trading unit of a member organization ("SLP-Prop") or a registered market maker at the Exchange ("SLMM").
An SLP that fails to satisfy the applicable percentage quoting requirement provided in Rule 107B(a) would be subject to certain non-regulatory penalties imposed by the Exchange, including, for example, having its SLP status revoked. However, an SLP that fails to satisfy the monthly volume requirement would not be subject to a non-regulatory penalty, but instead could fail to qualify for the credits available to SLPs. Because, unlike the applicable percentage quoting requirement, the monthly volume requirement only has an impact with respect to the credits available to SLPs, the Exchange believes that it is more appropriate to include the applicable monthly volume requirement in the Price List, rather than in Rule 107B.
The Exchange therefore proposes to amend Rule 107B(a) to change the current monthly volume requirement of adding liquidity of an ADV of more than 10 million ADV shares in all assigned SLP securities to specify instead that the monthly volume requirement would be based on a specified percentage of NYSE CADV. The Exchange believes that a monthly volume requirement based on a percentage of NYSE CADV, rather than a fixed volume requirement, is more appropriate because it would reasonably assure that the monthly volume requirement is consistent relative to fluctuations in market volume over time. In particular, in August 2010, when the Exchange adopted the current monthly volume requirement, NYSE CADV was 4.039 billion shares. In contrast, NYSE CADV for July 2012 was 3.484 billion shares.
Accordingly, the Exchange proposes to change references in Rule 107B, generally, from

For further details, go to:   [NYSE Rule Filing 12-38, 8/30/12]