[Federal Register: August 19, 2008 (Volume 73, Number 161)]
[Notices]
[Page 48416-48418]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19au08-78]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58351; File No. SR-NYSE-2008-73]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Amending NYSE Rule 104(b) To Provide for an Automated Opening Message
That Will Be Effectuated Through the Specialist Application Programmed
Interface To Allow Specialists To Automatically Open a Security on a
Trade
August 13, 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 5, 2008, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. NYSE has filed the proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which renders the proposal 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)(iii).
\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 NYSE Rule 104(b) to provide for an
automated opening message that will be effectuated through the
Specialist Application Programmed Interface (``Specialist API\SM\'' or
``SAPI'') to allow specialists to automatically open a security on a
trade. The text of the proposed rule change is available at the
Exchange, 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 self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts 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 is proposing to amend NYSE Rule 104(b) to provide for
an automated opening message that will be effectuated through the SAPI
to allow specialists to automatically open a security on a trade.
Background
Pursuant to NYSE Rule 104, Exchange specialists, in their capacity
as dealers for their assigned securities, maintain systems that use
proprietary algorithms, based on predetermined parameters, to
electronically participate in the Exchange market (``Specialist
Algorithm''). The Specialist Algorithm communicates with the NYSE
Display Book[supreg] system \5\ via the SAPI. The Specialist Algorithm
is intended to replicate electronically some of the activities
specialists are permitted to engage in on the Floor in the auction
market and to facilitate the specialists' ability to fulfill their
obligation to maintain a fair and orderly market.
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\5\ The Display Book[supreg] system is an order management and
execution facility. The Display Book system receives and displays
orders to the specialists, contains the Book, and provides a
mechanism to execute and report transactions and publish the results
to the Consolidated Tape. The Display Book system is connected to a
number of other Exchange systems for the purposes of comparison,
surveillance, and reporting information to customers and other
market data and national market systems.
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Specialists on the Exchange are responsible for initiating trading
(the ``opening'') in their assigned securities. Pursuant to NYSE Rule
123D, it ``is the responsibility of each specialist to ensure that
registered stocks open as close to the opening bell as possible, while
at the same time not unduly hasty, particularly when at a price
disparity from the prior close.'' Specialist Algorithms may generate
quoting and trading messages as prescribed by NYSE Rule 104(b)(i).
Specialists may either open trading in their assigned securities with a
manual transaction or, pursuant to NYSE Rule 104(b), with an automated
quote.\6\
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\6\ See Securities Exchange Release No. 56588 (October 1, 2007),
72 FR 57366 (October 9, 2007) (SR-NYSE-2007-92).
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[[Page 48417]]
Proposed Automated Open on a Trade
Through this filing, the Exchange seeks to amend NYSE Rule 104(b)
to allow a specialist to automatically open his or her assigned
security with an automated trade. Specifically, the Exchange seeks to
amend NYSE Rule 104(b) to add an automated opening message provision
which will allow the SAPI to generate a message to open the security
with an automated transaction. In so doing the Exchange seeks merely to
automate a currently approved specialist function.
Because opening securities in a timely, fair, and orderly manner is
consistent with the specialist's obligations under NYSE Rules 104 and
123D, the Exchange believes it is important to provide the specialists
with the ability to have the SAPI generate an automated message that
will assist the specialists in opening their assigned securities with a
transaction.
The Exchange estimates that the implementation of an automated
message through the SAPI to open a security on a trade would allow for
approximately 30% of the securities traded on the Exchange to be opened
algorithmically on a trade or a quote.
The Exchange notes that specialists must still comply with all NYSE
rules when utilizing the open on trade technology, including but not
limited to, NYSE rules relating to depth and continuity, mandatory
indications, Rule 79A regarding Floor Official Approval for 1 and 2
points price movements, and any other rule that might require Floor
Official consultation in connection with an open. Specialists are not
exempt from requirements regarding the open by using an automated means
for effecting an opening.
The Exchange believes that providing the specialists with this
ability will continue to promote the efficient operation of the NYSE
market and provide customers with continued speed of execution at the
opening. Relying solely on manual trade openings limits the efficiency
of the specialists. By allowing specialists to automatically open
securities with a transaction through the SAPI will promote timelier
openings of securities on the Exchange. Moreover, providing specialists
with the ability to automatically open securities with an automated
transaction will allow specialists to focus their attention on those
securities that require the expertise of specialists to facilitate
price discovery and cushion volatility in securities that may have news
that may impact trading, ultimately benefiting Exchange customers.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
and furthers the objectives of Section 6(b)(5) \7\ of the Act, 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 mechanisms 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 is designed to support the
principles of Section 11A(a)(1) of the Act \8\ in that it seeks to
assure economically efficient execution of securities transactions by
making it easier for specialists to open securities in which they are
registered on a quote in a timely fashion by providing an automated
trading message that is effectuated through the SAPI. Automating this
trading message will promote greater efficiency on the Floor and will
also promote timelier openings of securities.
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\7\ 15 U.S.C. 78f(b)(5).
\8\ 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
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 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 after the date of filing, or such shorter time as the Commission
may designate if consistent with the protection of investors and the
public interest, the proposed rule change has become effective pursuant
to Section 19(b)(3)(A) of the Act \9\ and subparagraph (f)(6) of Rule
19b-4 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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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to the 30th day after the date of
filing.\11\ However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest.\13\ The Exchange has
requested that the Commission waive the 30-day operative delay. Waiver
of this period would allow the Exchange to immediately provide
specialists with the ability to facilitate openings of securities
through the Specialist Algorithm. This should allow a specialist to
focus his or her attention on those securities that require the
expertise of a specialist to facilitate price discovery and cushion
volatility. The Commission also notes that specialists'
responsibilities and obligations with respect to openings remain
unchanged, whether a specialist utilizes its SAPI to open a security or
not. For these reasons, the Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. Accordingly, the Commission hereby designates the
proposal as operative upon filing.\14\
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\11\ See 17 CFR 240.19b-4(f)(6)(iii).
\12\ Id.
\13\ In addition, Rule 19b-4(f)(6)(iii) requires the self-
regulatory organization to give 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
Exchange has satisfied this requirement.
\14\ For purposes only of waiving the 30-day operative delay,
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 the 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-2008-73 on the subject line.
[[Page 48418]]
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2008-73. 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 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-2008-73 and should be
submitted on or before September 9, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Acting Secretary.
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\15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-19130 Filed 8-18-08; 8:45 am]
BILLING CODE 8010-01-P