The New York Stock Exchange (the “Exchange”) has
decided to study the future viability of Competitive Traders (“CTs”)
and Registered Competitive Market Makers (“RCMMs”) in light of the
new Hybrid Market environment. While the Exchange conducts this
study it considers it appropriate to place a moratorium on the
qualification and registration of new CTs and RCMMs. The Exchange
filed with the Securities and Exchange Commission its intention to
impose this moratorium earlier this year, and had several
discussions with the Commission staff prior to the formal filing.
This filing was published by the SEC and the abrogation period
during which the Commission could have demonstrated its disapproval
of this action has now passed.
CTs
and RCMMs were first authorized by the Commission in
19641 and 19782, respectively, to generate
competition to specialists, add depth and liquidity to the market
and create supplemental market making traders on the Exchange. The
Exchange Rules 110 and 111 govern CTs and Rule 107A governs RCMMs.
CTs and RCMMs can both conduct proprietary trading under the market
maker exemption found in paragraph (2)(b) of Section 11(a)
3 of the Securities Exchange Act of 1934.4 CTs
trading must be at least 75% stabilizing and RCMMs must be ready to
enter the market with one round lot if called upon by a floor
official or broker so as to narrow the quotation spread or add
liquidity to the market.
Exchange
rules require that members must be registered by the Exchange before
they are able to conduct business as a CT or RCMM and in order to be
registered must, besides meeting other requirements, pass an
examination prescribed by the Exchange.
The volume and speed of the market has increased
dramatically since CTs and RCMMs were first created and significant
changes have occurred with respect to market dynamics. These changes
coupled with the Exchange’s move to a Hybrid Market makes this
review timely and appropriate. As part of this review, the Exchange
will review, among other things, the impact and usage of RCMMs and
CTs, resources required to surveil trading and any regulatory
requirements needed to increase market-maker liquidity obligations.
This moratorium is effective
immediately.
Questions concerning
this memorandum may be addressed to James G. Buckley, Vice
President, Market Surveillance at 212-656-2534 or David Matta,
Principal Rule Counsel, Market Surveillance, at
212-656-4717.
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