[Federal Register: February 7, 2006 (Volume 71, Number 25)]
[Notices]
[Page 6304-6305]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07fe06-68]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53195; File No. SR-NSX-2006-02]
Self-Regulatory Organizations; National Stock Exchange; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Exchange Rule 11.3 To Allow for Sub-Penny Quoting in Certain Securities
January 30, 2006.
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 January 30, 2006, the National Stock Exchange \SM\ (``NSX'' or the
``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 filed this proposal pursuant to Section 19(b)(3)(A) 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).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is proposing to amend Exchange Rule 11.3 to allow for
sub-penny quoting in securities that are listed on the Nasdaq Stock
Market where such quotes are priced less than $1.00 per share, and in
any other security approved by the Commission for sub-penny quoting.
Exchange Rule 11.3 currently prohibits, and will continue to prohibit,
sub-penny quoting in securities whose quotes are at $1.00 or more per
share, except to the extent otherwise approved by the Commission. The
text of the proposed rule change is below. Proposed new language is
italicized. Proposed deletions are indicated in [brackets].\5\
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\5\ Certain technical changes to the rule text have been made
pursuant to a telephone conversation between James C. Yong, Chief
Regulatory Officer, NSX and Sara Gillis, Attorney, Division of
Market Regulation, Commission on January 30, 2006.
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RULES OF NATIONAL STOCK EXCHANGE
* * * * *
CHAPTER XI
Trading Rules
* * * * *
Rule 11.3 Price Variations
Bids, [or] offers, orders or indications of interests in [stocks]
securities traded on the Exchange shall not be made [at a] in an
increment smaller [variation] than:
(i) $0.01 [per share; and in bonds at a smaller variation than \1/
8\ of 1% of the principal amount.] if those bids, offers or indications
of interests are priced equal to or greater than $1.00 per share; or
(ii) $0.0001 if those bids, offers or indications of interests are
priced less than $1.00 per share and the security is listed on the
Nasdaq Stock Market and is trading on the Exchange; or
(iii) Any other increment established by the Commission for any
security which has been granted an exemption from the minimum price
increments requirements of SEC Rule 612(a) or 612(b).
* * * * *
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
Exchange Rule 11.3 currently provides that bids or offers in stocks
traded on the Exchange shall not be made at a smaller variation than
$0.01 per share. Rule 612 of Regulation NMS under the Act provides, in
relevant part, that no national securities exchange shall ``display,
rank, or accept from any person a bid or offer, an order, or an
indication of interest in any NMS stock priced in an increment smaller
than $0.01 if that bid or offer, order, or indication of interest is
priced equal to or greater than $1.00 per share.'' \6\ Rule 612 also
prohibits national securities exchanges from displaying, ranking or
accepting bids, offers, orders, or indications of interest priced in
increments smaller than $0.0001 if the bid, offer, order, or indication
of interest is priced less than $1.00 per share.\7\ Finally, Rule
612(c) of Regulation NMS provides that the Commission may grant
exemptions from the minimum price increment requirements of Rule 612(a)
and 612(b) ``if the Commission determines that such exemption is
necessary or appropriate in the public interest, and is consistent with
the protection of investors.'' \8\ The compliance date for Rule 612 is
January 31, 2006 (the ``Compliance Date'').\9\
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\6\ 17 CFR 242.612(a).
\7\ 17 CFR 242.612(b).
\8\ 17 CFR 242.612(c).
\9\ See Securities Exchange Act Release No. 52196 (Aug. 2,
2005), 70 FR 45529 (Aug. 8, 2005).
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The Exchange is now proposing to prohibit the submission of bids,
offers, orders, or indications of interest priced in increments smaller
than (i) $0.0001 if the bid, offer, order, or indication of interest is
priced less than $1.00 per share on securities that are listed in the
Nasdaq Stock Market and traded on the Exchange, or (ii) the minimum
price increment established by the Commission for any security that has
been granted an exemption from the minimum price increment requirement
of Rule 612(a) or 612(b) of Regulation NMS. Exchange Rule 11.3
currently prohibits, and will continue to prohibit, sub-penny orders
and quotes priced at $1.00 or more per share, except to the extent
otherwise approved by the Commission, and will maintain a minimum
increment of $0.01 for any security traded on the Exchange and listed
by the New York Stock Exchange or American Stock Exchange.
[[Page 6305]]
In connection with these revisions to Exchange Rule 11.3, the
Exchange is also removing the language in Exchange Rule 11.3 relating
to minimum price variations in bonds. The Exchange does not trade bonds
and has not traded bonds for several years.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\10\ in general, and
Section 6(b)(5) of the Act,\11\ in particular, in that it is designed
to promote just and equitable principles of trade and to remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system and, generally, in that it protects
investors and the public interest. The Exchange also believes that the
proposal is consistent with the quoting restrictions of Rule 612 of
Regulation NMS.
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\10\ 15 U.S.C. 78f(b).
\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 inappropriate burden on competition.
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\ The Exchange has asked the Commission
to waive the 30-day operative delay and allow the proposed rule change
to become operative on January 31, 2006, the compliance date for Rule
612. The Commission hereby grants that request.\14\ The Commission
believes that waiving the operative delay is consistent with the
protection of investors and the public interest. The Commission
previously has considered whether, for NMS stocks, quoting below $1.00
in sub-penny increments should be permitted. The Commission determined
that it should and codified that view in Rule 612(b) of Regulation
NMS.\15\ The Exchange's proposal to permit its members to make bids or
offers--in NMS stocks that are listed on Nasdaq--priced below $1.00 in
increments as small as $0.0001 is consistent with Rule 612(b) and
raises no new regulatory issues.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required 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 Commission has determined to waive 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).
\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37555 (June 29, 2005).
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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:
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-NSX-2006-02 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-NSX-2006-02. 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 such
filing will also 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-NSX-2006-02 and should be submitted on or before
February 28, 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).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-1615 Filed 2-6-06; 8:45 am]
BILLING CODE 8010-01-P