[Federal Register: August 4, 2005 (Volume 70, Number 149)]
[Notices]
[Page 44963-44966]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au05-75]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52160; File No. SR-NYSE-2005-49]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendment No. 1 Thereto Relating To Removal of Size and Frequency
Restrictions on Orders Entered Through Direct+ in Investment Company
Units, Trust Issued Receipts and StreetTRACKS [supreg] Gold Shares
July 28, 2005.
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 July 15, 2005, the New York Stock Exchange, Inc. (``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 the Exchange. On July 26,
2005, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ The Exchange filed the proposed rule change as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) under the Act,\4\
which rendered the proposal effective upon filing with the Commission.
The Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange made non-substantive
changes to the text of the proposed rule change.
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would amend NYSE Rule 13 in order to
eliminate the 10,000 share size restriction for orders entered through
NYSE Direct+ [supreg] (``Direct+'') in Investment Company Units, as
defined
[[Page 44964]]
in paragraph 703.16 of the Listed Company Manual, Trust Issued Receipts
(such as HOLDRs), as defined in NYSE Rule 1200, streetTRACKS [supreg]
Gold Shares, as defined in NYSE Rule 1300, and any other product
subject to the same rules as Investment Company Units (collectively
``ETFs''). In addition, the 30-second time restriction in NYSE Rule
1005 is proposed to be eliminated for ETF orders entered through
Direct+. Below is the text of the proposed rule change. Proposed
additions are in italics and proposed deletions are in [brackets].
* * * * *
Rule 13. Definitions of Orders
* * * * *
Auto Ex Order
Except as provided below, [A] an auto ex order is a limit order of
1099 shares or less priced at or above the Exchange's published offer
(in the case of an order to buy) or at or below the Exchange's
published bid (in the case of an order to sell), which a member or
member organization has entered for automatic execution in accordance
with, and to the extent provided by, Exchange Rules 1000-1005.
[Pursuant to a pilot program to run until December 23, 2004,] Auto
ex orders in Investment Company Units (as defined in paragraph 703.16
of the Listed Company Manual), [or] Trust Issued Receipts (as defined
in Rule 1200), streetTRACKS [supreg] Gold Shares (as defined in Rule
1300), or any product subject to the same rules as Investment Company
Units may be entered as limit orders in an amount greater than 1099
shares. [The pilot program shall provide for a gradual, phased-in
raising of order size eligibility, up to a maximum of 10,000 shares.
Each raising of order size eligibility shall be preceded by a minimum
of a one-week advance notice to the Exchange's membership.]
* * * * *
Rule 1005. Orders May Not Be Broken Into Smaller Amounts
Except for orders in Investment Company Units (as defined in
paragraph 703.16 of the Listed Company Manual), Trust Issued Receipts
(as defined in Rule 1200), or streetTRACKS[supreg] Gold Shares (as
defined in Rule 1300), or any product subject to the same rules as
Investment Company Units, [A] an auto ex order for any account in which
the same person is directly or indirectly interested may only be
entered at intervals of no less than 30 seconds between entry of each
such order in a stock[, Investment Company Unit (as defined in
paragraph 703.16 of the Listed Company Manual), or Trust Issued Receipt
(as defined in Rule 1200)], unless the orders are entered by means of
separate order entry terminals, and the member or member organization
responsible for entry of the orders to the Floor has procedures in
place to monitor compliance with the separate terminal requirement.
* * * * *
Rule 1300. streetTRACKS[reg] Gold Shares
(a) The provisions of this Rule 1300 series apply only to
streetTRACKS[supreg] Gold Shares, which represent units of fractional
undivided beneficial interest in and ownership of the streetTRACKS
[supreg] Gold Trust. While streetTRACKS [supreg] Gold Shares are not
technically Investment Company Units and thus are not covered by Rule
1100, all other rules that reference ``Investment Company Units,'' as
defined and used in [Para.] paragraph 703.16 of the Listed Company
Manual, including, but not limited to Rules 13, 36.30, 98, 104, 460.10,
and 1002[, and 1005] shall also apply to streetTRACKS [supreg] Gold
Shares. When these rules reference Investment Company Units, the word
``index'' (or derivative or similar words) will be deemed to be ``gold
spot price'' and the word ``security'' (or derivative or similar words)
will be deemed to be ``streetTRACKS [supreg] Gold Trust''.
(b) As is the case with Investment Company Units, paragraph (m) of
the Guidelines to Rule 105 shall also apply to streetTRACKS [supreg]
Gold Shares. Specifically, Rule 105(m) shall be deemed to prohibit an
equity specialist, his member organization, other member, allied member
or approved person in such member organization or officer or employee
thereof from acting as a market maker or functioning in any capacity
involving market-making responsibilities in physical gold, gold futures
or options on gold futures, or any other gold derivatives. However, an
approved person of an equity specialist entitled to an exemption from
Rule 105(m) under Rule 98 may act in a market making capacity, other
than as a specialist in the streetTRACKS [supreg] Gold Shares on
another market center, in physical gold, gold futures or options on
gold futures, or any other gold derivatives.
(c) Except to the extent that specific provisions in this Rule
govern, or unless the context otherwise requires, the provisions of the
Constitution, all other Exchange Rules and policies shall be applicable
to the trading of streetTRACKS [supreg] Gold Shares on the Exchange.
Pursuant to Exchange Rule 3 (``Security''), streetTRACKS [supreg] Gold
Shares are included within the definition of ``security'' or
``securities'' as those terms are used in the Constitution and Rules of
the Exchange.
* * * * *
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 Exchange 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. 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
Executions of ETF Orders in Direct+ Under Existing Rules
With respect to ETFs, Direct+ currently provides for the automatic
execution of straight limit orders (i.e. orders without tick
restrictions) of 10,000 shares or less \5\ against trading interest
reflected in the Exchange's published quotation. ETF orders capable of
execution via Direct+ are defined in NYSE Rule 13 as ``auto ex''
orders. It is not mandatory that all eligible ETF limit orders be
entered as auto ex orders; rather, the member organization entering the
ETF order (or its customer if enabled by the member organization) can
choose to enter an ETF auto ex order when such member organization (or
customer) believes that the speed and certainty of an execution at the
Exchange's published bid or offer price is in the customer's best
interest. Where the customer's interests are best served by being
afforded the opportunity for price improvement, the member organization
(or customer) may enter a limit or market order in an ETF by means of
the SuperDot([supreg]) (``DOT'') system for representation in the
auction market.
---------------------------------------------------------------------------
\5\ See Information Memorandum 03-28 (June 20, 2003) (Amendments
to Direct+). The Commission approved increasing the size of Direct+
orders in Investment Company Units and Trust Issued Receipts to a
maximum level of 10,000 shares. See Securities Exchange Act Release
Nos. 47024 (December 18, 2002), 67 FR 79217 (December 27, 2002) (SR-
NYSE-2002-37) and 50828 (December 9, 2004), 69 FR 75579 (December
17, 2004) (SR-NYSE-2004-66) (extending Direct+ through December 23,
2005).
---------------------------------------------------------------------------
ETF Direct+ orders are entered through DOT with the indicator NX
[[Page 44965]]
added to identify the order as an auto ex order. The ETF auto ex order
receives an automatic execution when its limit price is equal to or
better than the published bid or offer, without being exposed to the
price improvement mechanism of the auction market, provided the bid or
offer is still available.\6\ The transaction report is returned through
DOT to the member organization (or customer) that entered it.
---------------------------------------------------------------------------
\6\ See NYSE Rule 1000.
---------------------------------------------------------------------------
Current Direct+ rules restrict the frequency of entry of all auto
ex orders including those in ETFs. An ETF auto ex order for any account
in which the same person is directly or indirectly interested may only
be entered at intervals of no less than 30 seconds between entry of
each such ETF order, unless the orders are entered by means of separate
order entry terminals, and the member or member organization
responsible for entry of the orders to the Floor has procedures in
place to monitor compliance with the separate terminal requirement.\7\
---------------------------------------------------------------------------
\7\ See NYSE Rule 1005.
---------------------------------------------------------------------------
Proposed Rule Change
In the hybrid market filings,\8\ the Exchange is proposing, among
other things, to remove size and frequency restrictions on auto ex
orders. However, in order to increase the ability of customers to
automatically execute orders in ETFs, the Exchange is proposing to:
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release Nos. 50173 (August 10,
2004), 69 FR 50407 (August 16, 2004); 50667 (November 15, 2004), 69
FR 67980 (November 22, 2004); and 51906 (June 22, 2005), 70 FR 37463
(June 29, 2005) (SR-NYSE-2004-05).
---------------------------------------------------------------------------
(i) Amend NYSE Rule 13 to eliminate the 10,000 share restriction
for auto ex orders in ETFs; and
(ii) Eliminate the 30-second frequency restriction in NYSE Rule
1005 for orders in ETFs.
These proposals would be implemented prior to the implementation of the
hybrid market.
The Exchange believes that this proposed change should be
implemented for ETFs because of their unique nature (i.e., they are
derivatively priced in relation to the values of the underlying
component securities, and the high degree of liquidity in ETFs), and to
enable the Exchange to remain competitive with other market centers,
where there are no size and frequency restrictions on orders in ETFs.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \9\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \10\ 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. The proposed rule change also is
designed to support the principles of Section 11A(a)(1),\11\ 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.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any inappropriate burden on competition 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 proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) by its terms,
does not 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
\12\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
As required under Rule 19b-4(f)(6)(iii),\14\ the Exchange provided
the Commission with 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 the
filing of the proposed rule change. The Exchange has requested that the
Commission waive the 30-day operative delay to immediately expand the
availability of Direct+ for orders in ETFs by eliminating order size
and frequency restrictions. The Commission believes that waiver of the
30-day operative delay is consistent with the protection of investors
and the public interest, because this filing should enhance the
execution of transactions in ETFs. For this reason, the Commission
designates the proposal to be effective and operative upon filing with
the Commission.\15\
---------------------------------------------------------------------------
\14\ 17 CFR 240.19b-4(f)(6)(iii).
\15\ For the purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition and capital formation. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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 the 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-2005-49 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549-9309.
All submissions should refer to File Number SR-NYSE-2005-49. 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
[[Page 44966]]
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 Section, 100 F Street, NE, Washington, DC 20549. 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 submissions should refer to
File Number SR-NYSE-2005-49 and should be submitted on or before August
25, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4133 Filed 8-3-05; 8:45 am]
BILLING CODE 8010-01-P