[Federal Register: January 30, 2007 (Volume 72, Number 19)]
[Rules and Regulations]
[Page 4202-4204]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30ja07-6]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 242
[Release No. 34-55160; File No. S7-10-04]
Regulation NMS
AGENCY: Securities and Exchange Commission.
ACTION: Final rule; extension of compliance dates.
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SUMMARY: The Commission is extending for a limited period of time three
of the future compliance dates for Rule 610 and Rule 611 of Regulation
NMS (``Rule 610'' and ``Rule 611,'' respectively) under the Securities
Exchange Act of 1934 (``Exchange Act''). Rule 610 requires fair and
non-discriminatory access to quotations, establishes a limit on access
fees, and requires each national securities exchange and national
securities association to adopt, maintain, and enforce written rules
that prohibit their members from engaging in a pattern or practice of
displaying quotations that lock or cross protected quotations. Rule 611
requires trading centers to establish, maintain, and enforce written
policies and procedures reasonably designed to prevent the execution of
trades at prices inferior to protected quotations displayed by other
trading centers, subject to an applicable exception. The Commission is
extending the three compliance dates to give automated trading centers
additional time to complete the rollout
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of their new or modified trading systems.
DATES: The effective date for Rule 610 and Rule 611 remains August 29,
2005. Three compliance dates for different functional stages of
compliance with Rule 610 and Rule 611 have been extended as set forth
in section I of this release, beginning with the ``Trading Phase
Date,'' as defined in section I of this release, which has been
extended from February 5, 2007 to March 5, 2007. The effective date for
this release is January 30, 2007.
FOR FURTHER INFORMATION CONTACT: Raymond Lombardo, Special Counsel, at
(202) 551-5615, or David Liu, Special Counsel, at (202) 551-5645,
Division of Market Regulation, Securities and Exchange Commission, 100
F Street, NE., Washington, DC 20549-6628.
SUPPLEMENTARY INFORMATION:
I. Discussion
In June 2005, the Commission published its release adopting
Regulation NMS.\1\ The adopted regulatory requirements include: (1) New
Rule 610, which addresses access to markets and locking or crossing
quotations; (2) new Rule 611, which provides intermarket protection
against trade-throughs (i.e., trades at inferior prices) for certain
displayed quotations that are automated and accessible; and (3) an
amendment to the joint industry plans for disseminating market
information to the public that modifies the formulas for allocating
plan revenues to the self-regulatory organization (``SRO'')
participants in the plans (``Allocation Amendment'').
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\1\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496 (June 29, 2005) (``NMS Release'').
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Given the new regulatory framework created by Regulation NMS and
the desire of investors and other market participants for more
automated and efficient trading services, many SROs have announced
major revisions of their trading systems. The SROs and other securities
industry participants have been working to comply with the new NMS
regulatory requirements. In May 2006, the Commission extended the
original compliance dates for Rules 611 and 610 to a series of five
dates for phased-in compliance that incorporated the major functional
steps required to achieve full implementation of Regulation NMS.\2\ The
extended dates were as follows:
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\2\ Securities Exchange Act Release No. 53829 (May 18, 2006), 71
FR 30038 (May 24, 2006) (``Extension Release'').
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October 16, 2006 (``Specifications Date''): Final date for
publication on Internet Web sites of applicable SROs (i.e., the
exchange for SRO trading facilities and the NASD for ADF participants)
of final technical specifications for interaction with Regulation NMS-
compliant trading systems of all automated trading centers (both SRO
trading facilities and ADF participants) that intend to qualify their
quotations for trade-through protection under Rule 611 during the
Pilots Stocks Phase and All Stocks Phase (as defined below).
February 5, 2007 (``Trading Phase Date''): Final date for full
operation of Regulation NMS-compliant trading systems of all automated
trading centers (both SRO trading facilities and ADF participants) that
intend to qualify their quotations for trade-through protection under
Rule 611 during the Pilots Stocks Phase and All Stocks Phase (as
defined below). The period from February 5, 2007 till May 21, 2007 was
the ``Trading Phase.''
May 21, 2007 (``Pilot Stocks Phase Date''): Start of full industry
compliance with Rule 610 and Rule 611 for 250 NMS stocks (100 NYSE
stocks, 100 Nasdaq stocks, and 50 Amex stocks). The period from May 21,
2007 till July 9, 2007 was the ``Pilot Stocks Phase.''
July 9, 2007 (``All Stocks Phase Date''): Start of full industry
compliance with Rule 610 and Rule 611 for all remaining NMS stocks. The
period from July 9, 2007 till October 8, 2007 was the ``All Stocks
Phase.''
October 8, 2007 (``Completion Date''): Completion of phased-in
compliance with Rule 610 and Rule 611.
In addition, the Commission, by separate order, exempted the SRO
participants in the joint industry market data plans from compliance
with the Allocation Amendment until April 1, 2007.\3\
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\3\ Securities Exchange Act Release No. 53828 (May 18, 2006)
(order exempting SROs from compliance with the Allocation Amendment
until April 1, 2007).
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The revised compliance dates were designed to provide additional
time for the SROs to develop and install their new trading systems, as
well as to give all securities industry participants an enhanced
opportunity to complete their compliance preparations in the least
disruptive and most cost-effective manner possible. Recently, the New
York Stock Exchange,\4\ a major U.S. equity market, requested a four-
week extension of the Trading Phase Date. The NYSE stated that, due to
delays in the rollout schedule for its Hybrid Market, the NYSE would
not be in a position to comply with the requirements for ``automated
quotations,'' as defined in Rule 600(b)(3) of Regulation NMS, until the
end of February 2007. The NYSE believed that continuing with the
scheduled implementation of Rule 611, without appropriate testing and
quality assurance for the NYSE trading systems, would jeopardize best
execution for investors and put the securities industry and investors
at risk.
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\4\ See letter from Mary Yeager, Assistant Secretary, New York
Stock Exchange to Nancy Morris, Secretary, Commission, dated January
8, 2007.
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The Commission agrees that implementing Regulation NMS without full
participation by a major market such as the NYSE would jeopardize the
smooth functioning of the U.S. equity markets. It therefore has decided
to extend the Trading Phase Date until March 5, 2007. To reflect the
extended Trading Phase Date and avoid coinciding with major trading
days in June 2007, the Commission also has decided to extend the Pilot
Stocks Phase Date until July 9, 2007, and the All Stocks Phase Date
until August 20, 2007. In contrast, the Specifications Date of October
16, 2006 has already passed and is not affected by this release. In
addition, the Completion Date of October 8, 2007 remains unchanged.
Accordingly, the future compliance dates for Rule 610 and Rule 611,
as revised by this release, are as follows:
Trading Phase Date: March 5, 2007. The revised Trading Phase now
will extend from March 5, 2007 till July 9, 2007.
Pilot Stocks Phase Date: July 9, 2007. The revised Pilot Stocks
Phase now will extend from July 9, 2007 till August 20, 2007.
All Stocks Phase Date: August 20, 2007. The revised All Stocks
Phase now will extend from August 20, 2007 till October 8, 2007.
Completion Date: October 8, 2007.
In addition, the April 1, 2007 date for SRO participants in the
joint-industry market data plans to comply with the Allocation
Amendment is not affected by this release and remains April 1, 2007.
II. Conclusion
For the reasons cited above, the Commission, for good cause, finds
that notice and solicitation of comment regarding the extension of the
compliance dates set forth herein are impractical, unnecessary, or
contrary to the public interest.\5\ All industry
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participants will receive substantial additional time to comply with
Rule 610 and Rule 611 beyond the compliance dates originally set forth
in the NMS Release, as modified by the Extension Release. In addition,
the Commission recognizes that industry participants urgently need
notice of the extended compliance dates so that they do not expend
unnecessary time and resources in meeting the previous compliance
dates. Providing immediate effectiveness upon publication of this
release will allow industry participants to adjust their implementation
plans accordingly.\6\
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\5\ See Section 553(b)(3)(B) of the Administrative Procedure Act
(5 U.S.C. 553(b)(3)(B)) (``APA'') (an agency may dispense with prior
notice and comment when it finds, for good cause, that notice and
comment are ``impractical, unnecessary, or contrary to the public
interest'').
\6\ The compliance date extensions set forth in this release are
effective upon publication in the Federal Register. Section
553(d)(1) of the APA allows effective dates that are less than 30
days after publication for a ``substantive rule which grants or
recognizes an exemption or relieves a restriction.'' 5 U.S.C.
553(d)(1).
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By the Commission.
Dated: January 24, 2007.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1384 Filed 1-29-07; 8:45 am]
BILLING CODE 8011-01-P