[Federal Register: February 20, 2007 (Volume 72, Number 33)]
[Notices]
[Page 7804-7806]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20fe07-36]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55281; File No. SR-NYSE-2007-07]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Extension of the Crossing Session III and IV Pilot
February 12, 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 January 26, 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 Exchange.
The Exchange filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder, which
renders it effective upon filing with the Commission.\4\ 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 NYSE proposes to extend until February 1, 2008 the following
pilot programs (``Pilots''): Crossing Session III, for the execution of
guaranteed price coupled orders by member organizations to fill the
balance of customer orders at a price that was guaranteed to a customer
prior to the close of the Exchange's 9:30 a.m. to 4:00 p.m. trading
session; and Crossing Session IV, whereby an unfilled balance of an
order may be filled at a price such that the entire order is filled at
no worse price than the Volume Weighted Average Price (``VWAP'') for
the subject security. The text of the proposed rule change is available
at the NYSE, the Commission's Public Reference Room, and http://www.nyse.com
.
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 NYSE 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
Exchange 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
In SR-NYSE-2002-40,\5\ the Commission approved an order
establishing two new crossing sessions (Crossing Sessions III and IV)
in the Exchange's Off-Hours Trading Facility (``OHTF'') as a pilot
program (``Pilot''), expiring on December 1, 2004. Subsequently, the
Commission published two notices of filing and immediate effectiveness
of a proposed rule change extending the Pilot until
[[Page 7805]]
February 1, 2006 \6\ and until February 1, 2007.\7\
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\5\ See Securities Exchange Act Release No. 48857 (December 1,
2003), 68 FR 68440 (December 8, 2003).
\6\ See Securities Exchange Act Release No. 51091 (January 28,
2005), 70 FR 6484 (February 7, 2005) (SR-NYSE-2005-01).
\7\ See Securities Exchange Act Release No. 53275 (February 13,
2006), 71 FR 8626 (February 17, 2006) (SR-NYSE-2006-02).
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This proposal extends the Pilot until February 1, 2008.\8\ Crossing
Sessions III and IV are described below.
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\8\ The NYSE confirmed that the Pilots will continue to function
in the same manner that they operated prior to the one-year
extension. Telephone conversation between Jean Walsh, Principal Rule
Counsel, Office of General Counsel, NYSE, and Tim Fox, Special
Counsel, Division of Market Regulation, Commission and Johnna B.
Dumler, Attorney, Division, Commission on February 8, 2007.
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Background
The purpose of the original proposed rule change was to add two
additional ``Crossing Sessions'' (Crossing Sessions III and IV) to the
Exchange's OHTF. Before the proposed rule change, the OHTF consisted of
Crossing Sessions I and II. Crossing Session I permits the execution,
at the Exchange's closing price, of single-stock, single-sided closing
price orders and crosses of single-stock, and closing price buy and
sell orders. Crossing Session II permits the execution of crosses of
multiple-stock (``basket'') aggregate priced buy and sell orders. For
Crossing Session II, trade reporting is accomplished by reporting to
the Consolidated Tape the total number of shares and the total market
value of the aggregate-price trades. There is no indication of the
individual component stocks involved in the aggregate-price
transactions.
Crossing Session III
The Exchange is proposing to extend until February 1, 2008, the
Pilot in Crossing Session III. Crossing Session III is described in
Exchange Rule 907. This Pilot would continue to allow for the execution
on the NYSE of ``guaranteed price coupled orders'' whereby member
organizations could fill the unfilled balance of a customer order at a
price which was guaranteed to the customer prior to the close of the
Exchange's 9:30 a.m. to 4:00 p.m. trading session.
The Granting of ``Upstairs Stops''
In serving their institutional customers, member firms may offer
them a guarantee that a large size order will receive no worse than a
particular price. Such a practice is usually referred to as an
``upstairs stop'' meaning that the firm guarantees that its customer's
order will be executed at no worse price than the agreed-upon,
guaranteed price, with the member firm trading for its own account, if
necessary, to effectuate the guarantee.
Typically, a member firm will seek to execute as much of the order
as possible during the trading day at or below the ``stop'' price (in
the case of a buy order) or at or above the ``stop'' price (in the case
of a sell order). Any portion of the order not filled during the
trading day will be completed after hours, with the firm either buying
from, or selling to, its customer at a price which ensures that the
entire order is executed at a price which is no worse than the ``stop''
price.
Member firms typically execute the unfilled balance of the order,
after the U.S. Consolidated Tape is closed, in the London over-the-
counter market, where trades are not reported in real time. The purpose
of this is simply to minimize the possibility that other market
participants may ascertain the firm's, or the customer's inventory
position, and possibly trade in the subject security to the detriment
of the firm that granted the ``upstairs stop.'' It is more transparent
to print the trade in the NYSE primary market during U.S. Consolidated
Tape hours.
Crossing Session IV
The Exchange is also proposing to extend the Pilot in Crossing
Session IV (which is also described in NYSE Rule 907), until February
1, 2008. Crossing Session IV is a facility whereby member organizations
may fill the unfilled balance of a customer's order at a price such
that the overall order is filled at a price that is no worse than the
VWAP for the subject security on that trading day. The member
organization would be required to document its VWAP agreement with the
customer and the basis upon which the VWAP price would be determined.
Operation of Crossing Sessions
As described in NYSE Information-Memos 04-30 and 05-57 and NYSE
Rule 907, Crossing Sessions III and IV would continue to operate as
follows:
(i) The original order as to which an ``upstairs stop'' or ``VWAP''
has been granted may be of any size;
(ii) The customer must have received a ``stop'' (guaranteed price)
or VWAP for the entire order;
(iii) The member firm must record all details of the order,
including the price it has guaranteed its customer or that the entire
order will be filled at no worse than the VWAP;
(iv) An order or the unfilled balance of an order that would be
executed in Crossing Session III or Crossing Session IV may be of any
size;
(v) The customer's order must be executed in Crossing Session III
or Crossing Session IV at a price that ensures that the entire order is
executed at a price that is no worse than the guaranteed price or the
VWAP;
(vi) Orders may be entered in Crossing Session III or Crossing
Session IV between 4 p.m. and 6:30 p.m., and must be identified as
either a Crossing Session III or Crossing Session IV order;
(vii) Member firms will receive an immediate report of execution
upon entering an order into Crossing Session III or Crossing Session
IV; (viii) Orders may be entered into Crossing Session III for
execution at prices outside the trading range in the subject security
during the 9:30 a.m. to 4 p.m. trading session;
(ix) Orders may not be entered into Crossing Session III or
Crossing Session IV in a security that is subject to a trading halt at
the close of the regular 9:30 a.m. to 4 p.m. trading session; and
(x) At 6:30 p.m., the Exchange will print trades reported through
Crossing Session III as guaranteed price coupled orders or in Crossing
Session IV as VWAP executions.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \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.
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\9\ 15 U.S.C. 78f(b)(5).
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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)
become operative for 30 days from the date on which it was filed, or
such shorter time
[[Page 7806]]
as the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A) \10\ and Rule 19b-4(f)(6) thereunder.\11\ At any
time within 60 days of the filing of the proposed rule change, the
Commission may summarily abrogate such 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.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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NYSE has asked the Commission to waive the five-day pre-filing
notice requirement and the 30-day operative delay. The Commission
believes such waivers are consistent with the protection of investors
and the public interest because they would allow the Pilots to operate
without interruption.\12\ For this reason, the Commission designates
the proposal to be operative upon filing with the Commission.
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\12\ For purposes only of waiving the 30-day pre-operative
period, the Commission has considered the proposed rule's impact on
efficiency, competition and capital formation. 15 U.S.C. 78c(f).
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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 e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSE-2007-07 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-2007-07. 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 will also be available for inspection and copying at the
principal office of the NYSE. 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 SR-NYSE-2007-07 and should be submitted on or before March
13, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2848 Filed 2-16-07; 8:45 am]
BILLING CODE 8011-01-P