[Federal Register: November 15, 2002 (Volume 67, Number 221)]
[Notices]
[Page 69281-69283]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15no02-105]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46781; File No. SR-NYSE-2002-54]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by the New York Stock Exchange,
Inc. Amending NYSE Rule 60 to Eliminate Depth Indications and Depth
Conditions
November 7, 2002.
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 October 22, 2002, 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, II
and III below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to delete Supplementary Material .30 of NYSE
Rule 60 (``Dissemination of Quotations'') relating to the dissemination
of depth indications and depth conditions that reflect market interest
in a security below the current published bid and above the current
published offer. The text of the proposed rule change is available at
the NYSE or at the Commission.
[[Page 69282]]
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 and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In March 2001, the Exchange amended NYSE Rule 60 to permit an
Exchange specialist to indicate that there is additional market
interest in a security not shown in the published quotation (i.e.,
interest to buy below the current published bid, or interest to sell
above the current published offer).\3\ The additional market interest
reflected in the depth indication and depth condition could include the
specialist's proprietary interest, orders the specialist has on his or
her book, and other orders, such as percentage orders, which the
specialist is representing as agent.
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\3\ See Securities Exchange Act Release No. 44084 (March 16,
2001), 66 FR 16307 (March 23, 2001) (SR-NYSE-01-06).
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The dissemination of a depth indication or depth condition by a
specialist is made on a ``best efforts basis.'' The specialist is
allowed to use his or her professional judgment to determine whether
disseminating additional market interest would be useful with respect
to current conditions in the security or the market in general. Depth
indications and depth conditions are purely informational in nature
and, therefore, do not themselves constitute a ``firm'' quotation for
purposes of NYSE Rule 60 or Rule 11Ac1-1 under the Act.\4\
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\4\ 17 CFR 240.11Ac1-1.
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The Exchange now proposes to discontinue the use of depth
indications and depth conditions. Since the initiation of depth
indication and depth condition, the Exchange has undertaken the
development of other means to provide market participants with current
and useful market information to provide greater transparency with
respect to the actual depth of the market below the best bid and above
the best offer. One such initiative is NYSE OpenBookTM,
which was launched on January 24, 2002.\5\ OpenBook provides a
comprehensive view of NYSE limit order books for all Exchange-traded
securities, enabling market participants to see aggregate limit order
interest at price levels outside the displayed Exchange quotation.
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\5\ For further details on NYSE OpenBookTM, see
Securities Exchange Act Release No. 45138 (December 18, 2001), 66 FR
66491 (December 26, 2001) (order approving the establishment of
Exchange fees for NYSE OpenBookTM).
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The Exchange is currently developing another mechanism to provide
greater transparency with respect to the existence of additional
interest in Exchange-traded securities, which will consist of the
display of a ``liquidity quote'' along with the best quote.\6\ In the
Liquidity Quote Proposal, the Exchange will be proposing to have
liquidity quotes reflect aggregated trading interest at a specific
price interval below the best bid or above the best offer. In addition,
in the Liquidity Quote Proposal, the Exchange will be proposing that
liquidity quotes are ``firm'' quotes for the purposes of NYSE and
Commission rules. The Exchange therefore believes that the
discontinuance of depth indications and depth conditions will allow the
Exchange to utilize system capacity currently dedicated to depth
conditions and depth indications to facilitate the development and
testing of liquidity quotes.\7\
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\6\ On October 28, 2002, the NYSE filed with the Commission a
proposed rule change to amend its rules to display additional
quotations showing the depth of market. See File No. SR-NYSE-2002-55
(``Liquidity Quote Proposal'').
\7\ The Exchange intends to provide notice before discontinuing
dissemination of the depth condition and depth indicator to members
via a floor memorandum, subscribers via e-mail, and vendors by
telephone. Telephone conversation between Donald Siemer, Director,
Market Surveillance, NYSE, and Kelly Riley, Senior Special Counsel,
Division of Market Regulation, Commission, dated November 5, 2002.
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2. Statutory Basis
The Exchange believes that the statutory basis for this proposed
rule change is Section 6(b)(5) of the Act,\8\ which requires that an
exchange have rules that are 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.
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\8\ 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
The foregoing proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\
because the proposal: (1) Does not significantly affect the protection
of investors or the public interest; (2) does not impose any
significant burden on competition; and (3) does not become operative
for 30 days from the date of filing, provided that the NYSE has given
the Commission written notice of its intent to file the proposed rule
change at least five business days prior to the filing date of the
proposed rule change or such shorter time as designated by the
Commission.\11\ 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.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
\11\ The NYSE has requested and the Commission has agreed to
waive the five-day pre-filing notice requirement.
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The Exchange believes that the advent of the OpenBook service and
the Exchange's plan to introduce liquidity quote information will
adequately replace information provided by depth indications and
conditions and, therefore, the proposal is non-controversial.
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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 69283]]
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 NYSE.
All submissions should refer to File No. SR-NYSE-2002-54 and should
be submitted by December 6, 2002.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-28994 Filed 11-14-02; 8:45 am]
BILLING CODE 8010-01-P