[Federal Register: February 13, 2007 (Volume 72, Number 29)]
[Notices]
[Page 6799-6801]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13fe07-80]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55244; File No. SR-NYSE-2007-11]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Rule 122 (Orders With More Than One Broker) Until the
Availability of Full d-Quote Functions in a Particular Security or
March 5, 2007, Whichever Comes First
February 5, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 5, 2007, the New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the self-
regulatory organization. NYSE filed the proposed rule change pursuant
to Section 19(b)(3) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposed rule change effective upon filing with the
Commission. 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\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to continue the Floor brokers' ability to
maintain discretionary e-Quotes (``d-Quotes'') \5\ and CAP-DI orders
\6\ in a security on the same side of the market for the same order
that are capable of trading at the same price until the completion of
Phase IV implementation of the HYBRID MARKETSM (``Hybrid
Market'') in the relevant security or until March 5, 2007, whichever
comes first. The text of the proposed rule change is available on the
Exchange's Web site (http://www.nyse.com), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.
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\5\ See Securities Exchange Act Release No. 54577 (October 5,
2006), 71 FR 60208 (October 12, 2006) (SR-NYSE-2006-36).
\6\ See Exchange Rules 13 and 123A.30(a). Exchange Rule
123A.30(a) describes a CAP-DI order as: ``The elected or converted
portion of a `percentage order that is convertible on a
destabilizing tick and designated immediate execution or cancel
election' (``CAP-DI order'') may be automatically executed and may
participate in a sweep.''
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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. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On October 25, 2006, the Exchange filed with the Commission an
amendment to Rule 122 to permit Floor brokers to enter d-Quotes and
CAP-DI orders in a security on the same side of the market for the same
underlying order that are capable of trading at the same price until
the implementation of full d-Quoting functionality in the relevant
security or until February 5, 2007, whichever came first.\7\
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\7\ See Securities Exchange Act Release No. 54653 (October 26,
2006), 71 FR 64594 (November 2, 2006) (SR-NYSE-2006-94).
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On January 25, 2007, the Exchange commenced the implementation of
Phase IV of the Hybrid Market, which includes the remaining d-Quote
functions: (i) The ability to trade against non-marketable interest
within a Floor broker's discretionary range and (ii) routing control
for Floor brokers with respect to d-Quotes.\8\
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\8\ Other d-Quote functions were implemented in Phase III.
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The Exchange anticipates that the implementation of Phase IV will
not be completed as originally anticipated by February 5, 2007. Through
this filing the Exchange therefore requests to extend Floor brokers'
ability to enter d-Quotes and CAP-DI orders in a security on the same
side of the market for the same orders that are capable of trading at
the same price until the implementation of
[[Page 6800]]
full d-Quoting functionality in the relevant security or until March 5,
2007 whichever comes first.
The Exchange believes that extending the time period in which Floor
brokers have this capability is necessary in order to ensure that Floor
brokers remain competitive. Currently, the specialist can send
electronically a ``hit bid'' or ``take offer'' message based on an
incoming order that would create a new best bid or best offer; thus
allowing the specialist to trade electronically with the newly
published bid or offer. Without complete d-Quote functionality, a Floor
broker only has the ability to interact manually with such new bid or
offer. As a result, the speed disparity between a manual action and an
electronic one places the Floor broker at a competitive disadvantage.
While a Floor broker can seek to trade at the bid or offer price by
manually ``hitting the bid'' or ``taking the offer'' the Floor broker
can also send a CAP-DI order to the specialist for conversion or
election at that price. Marketable CAP-DI orders are automatically
converted and trade along with specialist proprietary executions.
Accordingly, by allowing Floor brokers to have CAP-DI orders and d-
Quotes, they retain the ability to compete with specialist algorithmic
trading for executions involving marketable incoming orders via
discretionary pricing instructions, but do not miss participating in
executions when specialists algorithmically hit a bid or take an offer.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) of the Act \9\ 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 proposed rule change also is
designed to support the principles of Section 11A(a)(1) of the Act \10\
in that it seeks to assure economically efficient execution of
securities transactions, make it practicable for brokers to execute
investors' orders in the best market and provide an opportunity for
investors' orders to be executed without the participation of a dealer.
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\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78k-1(a)(1).
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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
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
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)
by its terms, 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 \11\
and Rule 19b-4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \13\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay and designate the proposed
rule change immediately operative upon filing. The Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Specifically, the
Commission believes that the proposal would enable floor brokers to
continue to compete with specialists in certain trades on behalf of
their customers, while the Exchange is in the process of implementing
the d-Quote functions. Accordingly, the Commission designates the
proposal to be effective and operative upon filing with the Commission
until the availability of full d-Quote functions in a particular
security or March 5, 2007, whichever comes first.\14\
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\13\ 17 CFR 240.19b-4(f)(6)(iii).
\14\ For purposes only of waiving the operative delay for this
proposal, the Commission has considered the proposed rule's impact
on efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such proposed 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 rule-comments@sec.gov. Please include
File Number SR-NYSE-2007-11 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2007-11. 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 inspection
and copying in the Commission's Public Reference Room. 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
[[Page 6801]]
submissions should refer to File Number SR-NYSE-2007-11 and should be
submitted on or before March 6, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2406 Filed 2-12-07; 8:45 am]
BILLING CODE 8010-01-P