[Federal Register: March 25, 2008 (Volume 73, Number 58)]
[Notices]
[Page 15819-15821]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25mr08-109]
[[Page 15819]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57523; File No. SR-NYSE-2008-16]
Self-Regulatory Organizations; New York Stock Exchange LLC.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Rule 15 (Pre-Opening Indications)
March 18, 2008.
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 March 11, 2008, 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 prepared substantially by NYSE. NYSE
filed the 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
The Exchange proposes to amend Exchange Rule 15 (Pre-Opening
Indications) to: (1) Utilize the previous day's closing price on the
NYSE in arranging opening transactions; (2) utilize the relevant price
of the underlying security traded on its primary foreign market when
arranging opening transactions for American Depositary Receipts
(``ADRs''); \5\ and (3) revise the price change parameters. The text of
the proposed rule change is available at http://www.nyse.com, the
Exchange, and the Commission's Public Reference Room.
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\5\ See the NYSE glossary, which defines an ADR as ``[a] receipt
that is issued by a U.S. depository bank which represents shares of
a foreign corporation held by the bank. * * * ADRs are quoted in
U.S. dollars and trade just like any other stock. * * *''
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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
The Exchange proposes to amend Exchange Rule 15 to: (1) Utilize the
previous day's closing price on the NYSE in arranging opening
transactions; (2) utilize the relevant price of the underlying security
traded on its primary foreign market when arranging opening
transactions for ADRs; and (3) revise the price change parameters.
Background
NYSE Rule 15 was last amended on December 20, 2007 to re-establish
procedures for the publication of pre-opening price information,
according to the framework established by the national market system
plan (``Linkage Plan'').\6\ The Exchange sought to amend Rule 15 in
response to customer and market participant requests for the pre-
opening price information.
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\6\ See Securities Exchange Act Release No. 57003 (December 20,
2007), 72 FR 73949 (December 28, 2007) (SR-NYSE-2007-112). The
Linkage Plan became effective on October 1, 2006 and terminated on
June 30, 2007. See Securities Exchange Act Release No. 54551
(September 29, 2006), 71 FR 59148 (October 6, 2006).
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Since the re-establishment of the procedures for the publication of
pre-opening price information, the Exchange has reviewed the
implementation of the rule and conferred with customers and market
participants to assess the sufficiency and utility of the pre-opening
price information currently being published. The Exchange seeks to
amend NYSE Rule 15 to enable specialists to provide pre-opening
information that is more accurate and indicative of the current state
of the NYSE market.
Use of NYSE Closing Price
Currently, Rule 15 requires the specialist to publish a pre-opening
price indication whenever the specialist, in arranging an opening
transaction in any security, anticipates that the price of the opening
transaction will be at a price which is different from the previous
day's consolidated closing price by more than the ``applicable price
change.'' The Exchange proposes to amend Rule 15 to use the NYSE
closing price instead of the closing price of the Consolidated Tape.\6\
Since the pre-opening indications of Rule 15 no longer provide
intermarket indications, but are published solely as a means of
providing information about trading on the NYSE, the Exchange believes
it is more appropriate to use the NYSE closing price for the pre-
opening indications to more precisely reflect the market conditions on
the NYSE. Additionally, this proposed rule change is consistent with
NYSE Rule 123D (Openings and Halts in Trading), which utilizes the NYSE
previous closing price in determining the need for a mandatory
indication.
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\6\ See the NYSE glossary, which defines the Consolidated Tape
as ``A high-speed system that continuously provides the last sale
price and volume of any securities transaction in listed stocks to
the public. All trades in NYSE-listed securities, regardless of the
market center on which such trades occur, are reported to and
disseminated on the ticker system.''
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Modifications of Price Groupings
When the procedures for the publication of pre-opening price
information were reinstated, the current price groupings and
corresponding price change parameters were broadened to more accurately
address the volatility of today's markets. However, the Exchange
believes that the recent amendment to the rule did not go far enough to
distinguish the trading characteristics of the differently priced
securities. The NYSE proposes to create five separate price groupings
and related price change parameters. The Exchange believes that these
smaller groupings and price change parameters better reflect the
differences in price movement that occur based on the trading
characteristics of the differently priced securities. The proposed five
price groupings and their related applicable price change parameters
are as follows:
------------------------------------------------------------------------
Applicable
price
Exchange closing price change
(more than)
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Under $20.00............................................... $0.50
$20-$49.99................................................. $1.00
$50-$99.99................................................. $2.00
$100-$500.................................................. $5.00
Above $500................................................. 1.5%
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Pre-Opening Price Indications, ADRs
The Exchange further believes that it is necessary to have a
different procedure for pre-opening indications of ADRs. Where the
trading day of the underlying security in its primary foreign market
for an ADR concludes after trading on the NYSE for the previous day but
before trading on the
[[Page 15820]]
NYSE has opened the next day, use of the closing price for the
underlying security in the primary foreign market is a better indicator
of the current value of the underlying security when arranging the
opening transaction of an ADR on the NYSE. Similarly, in instances
where the underlying security of an ADR is still trading on its primary
foreign market at the time the specialist is arranging the opening of
such ADR on the NYSE, use of the NYSE previous day's closing price may
result in the specialist issuing a pre-opening indication that does not
adequately reflect the current price of the underlying security.
For example, assume the NYSE previous day's closing price of ADR
XYZ was $28.00. On the following day the specialist is arranging the
opening of the ADR XYZ on the NYSE. The primary foreign market for the
underlying security XYZ is still open and the last sale price of the
underlying security is equivalent to $30.00. If the specialist
anticipates the opening price of ADR XYZ to be $28.49, according to
Rule 15 as it exists today, the applicable price change that would
require an indication is $.50; thus no indication would be required.
However, this information is not reflective of the trading in the
primary foreign market because the anticipated opening price is not on
parity with underlying security XYZ trading on the primary foreign
market.
Pursuant to this proposed rule change, however, a specialist will
look at the last sale price of the underlying security in the primary
foreign market and issue a pre-opening indication if the anticipated
opening price of the ADR is not on parity with the last sale price of
the underlying security. The pre-opening indication will be based on
the change in parity between the anticipated opening price of the ADR
and the last sale price of the underlying security on the primary
foreign market. Thus, using the prior example, since the last sale
price of the underlying security XYZ is equivalent to $30.00, there is
a difference in parity of $1.51; thus, the specialist would issue a
pre-opening indication based on the change in parity.
Accordingly, the Exchange proposes to amend Rule 15 to provide that
in the case of an ADR, where the trading day of the underlying security
in the primary foreign market concludes after trading on the NYSE for
the previous day has ended, the specialists, when arranging an opening
transaction on the NYSE, shall use the closing price of the primary
foreign market of the underlying security to determine whether such
opening transaction represents a change of more than the ``applicable
price change.'' Where the primary foreign market on which the
underlying security trades is open at the time of the opening on the
Exchange, the specialist shall issue pre-opening indications based on a
change from parity with the last sale price of the underlying security.
The Exchange believes this proposed rule change will enable
specialists to provide more accurate and timely market information to
all Exchange customers and market participants. Additionally, this
proposed rule change will further consistency of Exchange rules by
aligning Rule 15 with how specialists determine the need for
indications pursuant to other Exchange Rules.
2. Statutory Basis
The Exchange believes that this proposal is consistent with Section
6(b) of the Act \7\ in general, and furthers the objectives of Section
6(b)(5) of the Act \8\ in particular, in that it is 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.
This proposed rule change to Exchange Rule 15 supports the system of a
free and open market and serves to protect investors and the public
interest by ensuring that specialists disseminate more accurate
information based on the most currently available pricing information
when arranging opening transactions on the NYSE.
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\7\ 15 U.S.C. 78f(b).
\8\ 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
Written comments were neither solicited nor received.
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, if
consistent with the protection of investors and public interest, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \9\ and
Rule 19b-4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
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Normally, a proposed rule change filed under 19b-4(f)(6) may not
become operative prior to 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) \11\ 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 set forth in Rule 19b-
4(f)(6)(iii) under the Act.\12\ The Commission believes that the
earlier operative date is consistent with the protection of investors
and the public interest because the proposed rule change permits the
Exchange to immediately implement changes to its pre-opening that
should enable the specialists to disseminate more accurate pre-opening
information that is indicative of the current state of the NYSE market.
For these reasons, the Commission designates the proposal to be
operative upon filing with the Commission.\13\
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\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires that a self-regulatory organization submit to the
Commission written notice of its intent to file the proposed rule
change, along with a brief description and text of 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. The Commission notes that NYSE has satisfied the five-
day pre-filing notice requirement.
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ 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:
[[Page 15821]]
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-2008-16 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-2008-16. 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, 100 F Street, NE.,
Washington, DC 20549, 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-2008-16 and should be
submitted on or before April 15, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-5916 Filed 3-24-08; 8:45 am]
BILLING CODE 8011-01-P