[Federal Register: September 4, 2008 (Volume 73, Number 172)]
[Notices]
[Page 51676-51678]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04se08-72]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58429; File No. SR-NYSE-2008-71]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 123B (Exchange Automated Order Routing System) To
Allow a Member Organization To Provide Other Market Participants With
Access to the Exchange on an Agency Basis
August 27, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on August 18, 2008, 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 prepared by NYSE. NYSE filed the
proposed rule change as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which renders it 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
NYSE proposes to amend NYSE Rule 123B to set forth the requirements
that would allow a member organization to provide other market
participants with access to the Exchange on an agency basis for the
entry and execution of orders on the Exchange.\5\ The text of the
proposed rule change is available at NYSE, the Commission's Public
[[Page 51677]]
Reference Room, and http://www.nyse.com.
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\5\ NYSE Rule 54 provides that only members are permitted to
``make or accept bids or offers, consummate transactions, or
otherwise transact business on the Floor for any security admitted
to dealings on the [Exchange].* * * '' See also NYSE Rule 2.
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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, 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
text of these statements may be examined at the places specified in
Item IV below. NYSE 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
NYSE proposes to amend NYSE Rule 123B to set forth the requirements
for a member or member organization (``Sponsoring Member
Organization'') to provide access (``sponsored access'') to a non-
member firm or customer (``Sponsored Participant'') for the entry and
execution of orders on the Exchange. The Exchange seeks the proposed
rule amendment to provide a uniform rule for sponsored access to the
Exchange as described below.
Background
Currently, there are sponsored access provisions included in
certain NYSE rules that govern specific Exchange products or
facilities; \6\ however, the Exchange does not have a general sponsored
access rule. The Exchange therefore proposes to adopt the sponsored
access rule of its affiliate exchange, NYSE Arca, Inc. (``NYSE
Arca'').\7\ Other exchanges, namely The NASDAQ Stock Market LLC,\8\
have similarly adopted identical sponsored access provisions.\9\
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\6\ See NYSE MatchPointSM (NYSE Rule 1500) and NYSE
BondsSM (NYSE Rule 86). The provisions of this proposed
rule will not apply to NYSE Rules 1500 and 86.
\7\ See NYSE Arca Rules 7.29 (Access) and 7.30 (Authorized
Traders).
\8\ See Securities Exchange Act Release No. 55550 (March 28,
2007), 72 FR 16389 (April 4, 2007) (SR-NASDAQ-2007-010) (amending
NASDAQ Rule 4611(d) to conform its requirements to match NYSE Arca
Rules 7.29 and 7.30).
\9\ In adopting NYSE Arca's sponsored access rule, NASDAQ stated
its intent was, ``to match the regulatory requirements imposed by
other exchanges and, thereby, to promote uniform regulation of
sponsored access relationships.'' See Securities Exchange Act
Release No. 55550 (March 28, 2007) at 2, 72 FR 16389, 16390 (April
2007) (SR-NASDAQ-2007-010).
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Proposed NYSE Rule 123B Sponsored Access
According to the proposed rule, Sponsored Participants must enter
into and maintain customer agreements with one or more Sponsoring
Member Organizations establishing proper relationship(s) and account(s)
through which the Sponsored Participant may trade on the Exchange. As
more fully described below, the Sponsoring Member Organization and the
Sponsored Participant must agree in writing to specific sponsorship
provisions (``Sponsorship Access Agreement'') in order for the
Sponsored Participant to obtain and maintain authorized access to the
Exchange.\10\ The first sponsorship provision of the proposed rule
requires the Sponsoring Member Organization to enter into and maintain
an agreement with the Exchange, designating the Sponsored Participant
by name in such agreement.
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\10\ Commentary .30, Section (c)(3) of proposed NYSE Rule 123B
requires that the Sponsoring Member Organization provide the
Exchange with a notice of consent acknowledging its responsibility
for the orders, execution, and conduct of the Sponsored Participant
at issue (alteration to original citation that referenced ``Section
(b)(3) of proposed NYSE Rule 123B'').
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The Sponsoring Member Organization also agrees to be responsible
for the conduct of the Sponsored Participant and/or any person acting
on its behalf or in the name of such Sponsored Participant. Further,
all orders entered by the Sponsored Participant and/or any person
acting on its behalf or in the name of such Sponsored Participant are
binding on the Sponsoring Member Organization. Both the Sponsored
Participant and the Sponsoring Member Organization agree to comply with
the rules and procedures of the Exchange.
In order to ensure compliance with the Sponsorship Access
Agreement, it is the responsibility of the Sponsored Participant to
implement such internal controls as may be necessary to prevent
unauthorized the use of and access to the Exchange facilities.
Sponsored Participants will be required to establish adequate
procedures and controls to monitor use and access to the Exchange by
their employees, agents, and customers. The Sponsored Participant also
agrees to pay to the Sponsoring Member Organization, the Exchange, or
any third party, all amounts (including but not limited to exchange and
regulatory fees) related to the Sponsored Participant's access to and
the use of Exchange facilities when due.
The proposed rule contemplates that the Sponsored Participant may
permit one or more person(s) to submit orders to the Exchange on its
behalf (``Authorized Trader'').\11\ The Sponsored Participant is
required to maintain, keep current and provide, upon request, a list of
Authorized Traders to the Sponsoring Member Organization. The
Sponsoring Member Organization is required to maintain a current list
of the same to be made available to the Exchange upon request.
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\11\ See Commentary .30, Sections (c)(2)(D) and (d) of proposed
NYSE Rule 123B (alteration to original citation that referenced
``proposed NYSE Rule 123B sections (b)(2)(D) and (d)'').
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Although the Sponsored Participant is required to familiarize its
Authorized Traders with the obligations of a Sponsored Participant
under the proposed rule and ensure that the Authorized Trader receives
appropriate training prior to any use or access to the Exchange, it is
the Sponsoring Member Organization that bears the ultimate
responsibility regarding the conduct and trading activity of Authorized
Traders. Specifically, the Sponsoring Member Organization must have
reasonable procedures to: (a) Ensure compliance with Exchange rules and
procedures; and (b) maintain, as appropriate, the physical security of
any equipment on its premises for accessing the Exchange to prevent
against improper access or use (including unauthorized entry of
information into Exchange systems). Pursuant to the proposed rule, at
the direction of the Exchange, the Sponsoring Member Organization must
suspend or withdraw the status of Authorized Trader from any person
whom the Exchange has determined has caused the Sponsoring Member
Organization to fail to comply with Exchange Rules.
Insofar as the amendments proposed herein have been determined by
the Commission to be consistent with the protection of investors and
the public interest; the Exchange believes that the proposed amendments
to NYSE Rule 123B to codify the requirements for sponsored access on
the Exchange are necessary to align NYSE rules with what has become the
industry standard.\12\
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\12\ See Securities Exchange Act Release No. 44983 (October 25,
2001), 66 FR 55225 (November 1, 2001) (SR-PCX-00-25) (alteration to
original citation that referenced ``53615 (April 7, 2006), 71 FR
19226 (April 13, 2006) (SR-PCX-2006-24) (adopting NYSE Arca Equities
Rules 7.29 and 7.30)'').
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
and furthers the objectives of Section 6(b)(5) of the Act,\13\ in that
it is designed to prevent fraudulent and manipulative practices, to
promote just and equitable principles of trade, to remove impediments
to and perfect the
[[Page 51678]]
mechanisms 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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\13\ 15 U.S.C. 78f(b)(5).
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B.Self-Regulatory Organization's Statement on Burden on Competition
NYSE 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
No written comments were solicited or received with respect to 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 as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\16\
However, Rule 19b-4(f)(6)(iii) \17\ 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 so that the proposal may
become operative immediately upon filing. The Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest. The Commission hereby grants the
Exchange's request and designates the proposal as operative upon
filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
NYSE has complied with this requirement.
\17\ Id.
\18\ For purposes only of waiving the 30-day operative delay of
this proposal, 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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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.
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 No. SR-NYSE-2008-71 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, Station Place, 100 F Street, NE., Washington, DC
20549-1090.
All submissions should refer to File Number SR-NYSE-2008-71. 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, on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also
will be available for inspection and copying at the principal office of
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-2008-71 and should be submitted on or before September 25, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20465 Filed 9-3-08; 8:45 am]
BILLING CODE 8010-01-P