[Federal Register: April 6, 2006 (Volume 71, Number 66)]
[Notices]
[Page 17534-17537]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06ap06-112]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53579; File No. SR-NYSE-2006-12]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendment No. 1 Thereto Relating to NYSE Rule 103.12 Regarding Time
Tracking Requirements of Specialists and Clerks
March 30, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 17535]]
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 28, 2006, 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 by the Exchange. The Exchange
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under Section 19(b)(3)(A)(iii) of the
Act,\3\ and paragraph (f)(6) of Rule 19b-4 under the Act,\4\ which
renders the proposal effective upon receipt of this filing by the
Commission.\5\ On March 30, 2006, NYSE filed Amendment No. 1 to the
proposed rule change.\6\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, 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).
\5 \ NYSE has requested that the Commission waive both the five-
day pre-filing notification requirement and the 30-day operative
delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-
4(f)(6)(iii).
\6 \ Amendment No. 1 replaces and supersedes the original filing
in its entirety. In Amendment No. 1, the Exchange: (i) Revised the
purpose section of the filing to provide additional details
regarding how the IDTrack reports and electronic signature component
will work; (ii) removed unnecessary language from the rule text; and
(iii) withdrew the proposed addition of subparagraph (C) of NYSE
Rule 103.12 to the ``List of Exchange Rule Violations and Fines
Applicable Thereto Pursuant to Rule 476A,'' which the Exchange
represents it will file separately at a later date.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend NYSE Rule 103.12 (Registration
of Specialists) by requiring specialists and specialist clerks to
electronically sign and certify as accurate the end-of-day
IDTrackSM reports identifying: (1) The time they spent on
the Floor of the Exchange working in those capacities; and (2) the
identity of the specialty stocks in which they worked during the
trading day. IDTrack is an electronic touch screen application that
electronically records the login and logout time of specialists and
specialist clerks during the trading day and the names of the specialty
stock in which they work during a particular trading day. The text of
the proposed rule change is available on the NYSE's Web site (http://www.nyse.com
), at the NYSE's Office of the Secretary, and at the
Commission's Public Reference Room.
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. 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
As part of the settlement with the Commission,\7\ the Exchange
agreed to undertake certain initiatives concerning the oversight of the
Floor. In one of these undertakings, the Exchange is required to
develop systems to track the identity of specialists and their clerks
and the times when each specialist and clerk act as such while on the
Floor.
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\7\ See Securities Exchange Act Release No. 51524 (April 12,
2005) announcing Administrative Proceeding File No. 3-11892 (the
``Administrative Proceeding'').
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NYSE Rule 103.12, adopted in 2005,\8\ requires specialist firms to
track the identity of specialists and their clerks, the times when each
specialist and clerk acts as such while on the Floor, and the identity
of the specialty stocks in which the specialist and the clerk worked on
any given trading day. The rule also requires that specialist firms
independently make and keep, in the regular course of business, records
of the times that each of the firm's specialists and clerks work in
these capacities on the Floor. The specialist firms must be able to
provide these records to the Exchange within the time frame and in a
format determined by the Exchange.
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\8\ See Securities Exchange Act Release No. 52251 (August 12,
2005), 70 FR 48790 (August 19, 2005) (SR-NYSE-2005-47).
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To facilitate the Exchange's ability to monitor specialist and
clerk activity, in November 2005 the Exchange installed a system to
capture this information electronically. This system, known as IDTrack,
requires specialists and clerks to log in to the IDTrack system and
register their presence with respect to specialty stocks in which they
worked. IDTrack is an electronic touch screen application that
electronically records the login and logout times of specialists and
specialist clerks during the trading day, and the names of the
specialty stocks in which they are working. The IDTrack system also
provides electronic reports and information to the Exchange's Division
of Market Surveillance and to specialist firms with respect to this
information. The IDTrack reports do not replace the specialist firms'
obligations under NYSE Rule 103.12 to make and keep their own records
regarding specialist and specialist clerk activity during the trading
day.
The Exchange is proposing to enhance the IDTrack application and
improve accountability by developing supplemental components to the
end-of-day report. The end-of-day report will continue to detail the
login and logout times and the specialty stocks of specialists and
clerks throughout the trading day. However, the Exchange will further
require that each specialist and clerk provide their electronically
written signature to certify as accurate the daily IDTrack report at
the end of the trading day, thereby improving the reliability of the
information in the reports.
The electronic signature will be written using an optical pen
attached to the touch screen terminal. In the event a specialist or
clerk disagrees with the information in the end-of-day report, a
``comment'' section is available on the electronic screen to enter a
comment regarding a disputed fact, i.e., a disputed login/logout time
or stock name. Comments added by the specialists and specialist clerks
on the actual trading day of the report in question will become part of
the end-of-day report. If the specialists and clerks do not make
entries in the comment section on that day, then they forfeit their
ability to directly enter such comments in their IDTrack end-of-day
report.\9\
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\9\ Comments may be entered in a separate electronic screen by a
firm's ``administrative user'' when the administrative user reviews
the ``pending report'' list, but the original end-of-day report
cannot be altered by any user after the trade date in question.
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The proposed rule requires each specialist and specialist clerk to
electronically sign and certify as accurate each end-of-day report,
even if they disagree or have comments regarding information in the
report. In the event that a specialist or clerk has a question or
concern about the information in the end-of-day report, the IDTrack
system directs them to contact Exchange personnel as soon as the issue
arises. Specialists and clerks are also directed to inform their firms'
compliance officers with concerns or questions about their end-of-day
report. Despite any questions, concerns or
[[Page 17536]]
comments about the information in the end-of-day report, the
specialists and clerks are required to electronically sign the report
at the end of each trading day.
IDTrack includes an ``administrative user'' screen to administer
certain aspects of the system. The administrative user may be the
firm's compliance office or a designee of the compliance officer. The
administrative user may view a list of unsigned ``pending'' reports of
their firm's specialists and clerks. Through the use of this screen,
administrative users may file an end-of-day report for their firm's
specialists or clerks without the required signatures, but the
administrative user must enter a comment into their electronic screen
explaining this action. To ensure the integrity of IDTrack electronic
reports, IDTrack users, including specialists, clerks and
administrative personnel, will not be able to override the information
in IDTrack reports.
Thus, under the proposed rule change, the Exchange will have an
electronically signed record of the times that specialists and their
clerks spend on the Floor of the Exchange working in those capacities,
and the identity of specialty stocks in which the specialists and
clerks worked on any given trading day. As with other Exchange rules,
failure by a specialist or specialist clerk to sign the end-of-day
report at the end of the trading day or comply with IDTrack obligations
may result in disciplinary action.\10\
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\10\ See Securities Exchange Act Release No. 52768 (November 10,
2005), 70 FR 70014 (November 18, 2005) (SR-NYSE-2005-64) (adding
NYSE Rule 103.12 to the NYSE List of Exchange Rule Violations and
Fines under Rule 476A). The Exchange intends to propose, in a
separate rule filing, an amendment to Rule 476A that will apply to
all requirements under Rule 103.12, including this proposed rule
change, Rule 103.12(C).
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2. Statutory Basis
The Exchange believes that the basis under the Act for this
proposed rule change is the requirement under Section 6(b)(5) \11\ that
an Exchange have rules that are designed to prevent fraudulent and
manipulative acts and practices, 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.
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\11\ 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
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) does not become
operative for 30 days after the date of the 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
Rule 19b-4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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 for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a
self-regulatory organization to provide 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 filing of the proposed rule change,
or such shorter time as designated by the Commission.
The Exchange has asked the Commission to waive the five-day pre-
filing requirement and the 30-day operative delay to allow NYSE to
immediately enhance its IDTrack system, so that the tracking of the
time specialists and clerks spend on the Floor, and the signing and
certification of the daily IDTrack reports comply with the requirements
of the Administrative Proceeding. The Commission has decided,
consistent with the protection of investors and the public interest, to
waive the five-day pre-filing notice and 30-day operative delay so that
the NYSE may meet the requirement in the Administrative Proceeding.\14\
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\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. 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.\15\
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\15\ For purposes of calculating the 60-day abrogation period,
the Commission considers the proposed rule change to have been filed
on March 30, 2006, the date the NYSE filed Amendment No. 1.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, 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-2006-12 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 No. SR-NYSE-2006-12. 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. Copies of the 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
[[Page 17537]]
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 No. SR-NYSE-2006-12 and should be
submitted on or before April 27, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
Nancy M. Morris,
Secretary.
[FR Doc. E6-4987 Filed 4-5-06; 8:45 am]
BILLING CODE 8010-01-P