Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Automatic Conversion of CAP-DI Orders, 10736-10738 [06-1962]
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10736
Federal Register / Vol. 71, No. 41 / Thursday, March 2, 2006 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Nancy M. Morris,
Secretary.
[FR Doc. E6–2960 Filed 3–1–06; 8:45 am]
system changes discussed in SR–NYSE–
2005–57.7 The text of the proposed rule
change is available on the Exchange’s
Web site (https://www.nyse.com), at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53359; File No. SR–NYSE–
2006–09]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Automatic Conversion of CAP–DI
Orders
February 24, 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 February
21, 2006, 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.
NYSE filed the proposed rule change as
effecting a change in an existing orderentry or trading system pursuant to
section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(5) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NYSE is proposing to amend
Exchange Rule 123A.30(a)(iv)(P), which
was part of the pilot (‘‘Pilot’’) 5 which
put into operation Phase 1 of the NYSE
HYBRID MARKET SM (‘‘Hybrid Market’’)
initiative, as proposed in SR–NYSE–
2004–05 6 and amendments thereto
(‘‘Hybrid Market filings’’) and certain
14 17
CFR 200.30–3(a)(12).
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)(5).
5 See Securities Exchange Act Release No. 52954
(December 14, 2005), 70 FR 75519 (December 20,
2005).
6 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) See also Amendment No. 6, filed
on September 16, 2005, and Amendment No. 7,
filed on October 11, 2005.
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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
I. Purpose
The Exchange proposed a Pilot to put
into operation Phase 1 of the Hybrid
Market initiative with respect to a group
of securities, known as Phase 1 8 Pilot
securities (‘‘Pilot securities’’). Following
Commission approval, the Pilot
commenced during the week of
December 12, 2005 and will terminate
the earlier of: (1) March 14, 2006, or (2)
Commission approval of the Exchange’s
Hybrid Market proposal, if granted.
Commencing with the Pilot; the
Exchange systemically ensures that the
specialist’s participation when trading
along with CAP–DI orders is in
accordance with the parity requirements
of Exchange Rule 123A.30. The system
assigns the proper number of shares to
the specialist and CAP–DI orders. The
Exchange filed SR–NYSE–2005–57 9 for
immediate effectiveness pursuant to
section 19(b)(3)(A) of the Act 10 and
Rule 19b–4(f)(5) thereunder 11 to effect
this change.
Automatic Conversions of CAP–DI
Orders. Current Exchange Rule 123A.30
provides that specialists have the
ability, subject to certain restrictions
7 See Securities Exchange Act Release No. 52362
(August 30, 2005), 70 FR 53701 (September 9,
2005). While submitted as effective upon filing, the
Exchange intended to implement these changes
upon approval of the Hybrid Market filings by the
Commission, if such approval is granted.
8 See Securities Exchange Act Release No. 51906
(June 22, 2005), 70 FR 37463 (June 29, 2005).
9 See supra note 7.
10 15 U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(5).
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noted in the rule, to convert CAP–DI
orders to participate in transactions or
to bid or offer, without an electing trade.
Exchange Rule 123A.30(a)(P) 12
provides in part that the elected or
converted portion of a ‘‘percentage order
that is convertible on a destabilizing tick
and designated immediate execution
cancel election’’ (‘‘CAP–DI order’’) may
be automatically executed. An elected
or converted CAP–DI order on the same
side of the market as an automatically
executed electing order may participate
in a transaction at the bid (offer) price
if there is volume associated with the
bid (offer) remaining after the electing
order is filled in its entirety. An elected
or converted CAP–DI order on the
contra-side of the market as an
automatically executed electing order
may participate in a transaction at the
bid (offer) price if there is volume
remaining in the electing order.
In addition, the Exchange added new
section (iv)(P) to proposed Exchange
Rule 123A.30(a)(P) to provide that when
a specialist is bidding or offering and an
automatic execution occurs with such
bid/offer, marketable CAP–DI orders on
the Display Book on the same side as
the specialist’s interest will be
automatically converted to participate
in this execution, with the system
assigning the proper number of shares to
the specialist and auto-converted CAP–
DI orders, as discussed above. This will
allow CAP–DI orders to better
participate in executions.
However, in certain instances, an
automatic conversion of marketable
CAP–DI orders will not occur even
though the specialist is trading for its
own account. This will occur where the
execution that included automatically
converted CAP–DI orders elects a
contra-side stop or stop limit order. In
this situation, pursuant to current
Exchange Rule 123A.40, the specialist,
as party to the election of the stop order,
owes such elected stop order an
execution at the same price as the
specialist traded. The execution of such
stop orders, in which the specialist is
the contra-party, may be manual 13 or
automatic,14 depending upon whether
12 This rule is parallel to amendments made to
Rule 123A.30. See Securities Exchange Act Release
No. 51906 (June 22, 2005), 70 FR 37463 (June 29,
2005).
13 If there is no specialist interest remaining in the
bid/offer, and the specialist must guarantee an
execution to the stop order at the electing price
pursuant to Exchange Rule 123A.40, the specialist
must do a manual transaction to guarantee that the
stop order receives the same price as the specialist.
14 If there is specialist interest remaining in the
bid/offer and the specialist must guarantee an
execution to the stop order at the electing price
pursuant to Exchange Rule 123A.40, the Display
Book system will automatically execute the
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Federal Register / Vol. 71, No. 41 / Thursday, March 2, 2006 / Notices
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any specialist interest remains at the
execution price. In either situation,
marketable CAP–DI interest at that price
will not be automatically converted to
participate along with the specialist in
the execution of such elected stop order.
The specialist is, however, alerted to the
fact that there are CAP–DI orders on the
Display Book capable of trading so
that is can take appropriate action and
manually trade such CAP–DI interest.
Modification to the Pilot. The
Exchange is proposing to modify
Exchange Rule 123A.30(a)(iv)(P) to
clarify that when a specialist is bidding,
offering, or trading and an automatic
execution occurs with the specialist’s
proprietary interest, which elects
contra-side stop or stop limit orders,
marketable CAP–DI orders on the
Display Book on the same side as the
specialist will be automatically
converted to participate in the execution
of such contra-side stop or stop limit
orders with the system assigning the
proper number of shares to the
specialist and CAP–DI orders. In other
words, in all circumstances where the
specialist is trading for its own account
and the specialist, as party to the
election of a stop order, owes an elected
stop order an execution at the same
price as the specialist traded pursuant to
current Exchange Rule 123A.40, an
automatic conversion of marketable
CAP–DI orders will occur. This
modification, however, will not effect
the proper allocation of shares to CAP–
DI orders.
The Exchange believes that this
modification is beneficial for the market
in that it reduces the chances for error
by removing the responsibility from the
specialist to manually ensure the CAP–
DI interest trading is allocated correctly.
This will allow CAP–DI orders to better
participate in executions. This
modification is part of a package of
software corrections to the Pilot which
the Exchange would like to implement
as quickly as possible. This
modification will expire upon the
termination of the Pilot.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act,15 in general, and
furthers the objectives of section 6(b)(5)
of the Act,16 in particular, in that it is
designed to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
remaining specialist interest against the elected stop
order at the same price the specialist traded.
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
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processing information with respect to,
and facilitating transactions in
securities, 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
exchange believes that the proposed
rule change is also designed to support
the principles of section 11A(a)(1) of the
act 17 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.
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.18
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission action
Because the proposed rule change
effects a change in an existing orderentry or trading system of a selfregulatory organization that does not:
(i) significantly affect the protection of
investors or the public interest;
(ii) impose any significant burden on
competition; or
(iii) have the effect of limiting access
to or availability of the system, it has
become effective pursuant to section
19(b)(3)(A) of the Act 19 and paragraph
(f)(5) of Rule 19b–4 thereunder.20 The
Exchange believes that this modification
to the Pilot would allow the Pilot to
continue in effect and reduce the chance
of error by the specialist by allowing the
system to automatically convert CAP–DI
orders and execute with the proper
allocation.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
17 15
U.S.C. 78K–1(a)(1).
telephone conversation between Jeffrey
Rosenstrock, Principal Rule Counsel, Market
Surveillance, NYSE, and Kelly Riley, Assistant
Director, Division of Market Regulation,
Commission, dated February 23, 2006.
19 15 U.S.C. 78s(b)(3)(A).
20 20 CFR 240.19b–4(f)(5).
18 See
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10737
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomment@sec.gov. Please include File
Number SR–NYSE–2006–09 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–NYSE–2006–09. 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 (https://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
Commissiona 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 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–2006–09 and should
be submitted on or before March 23,
2006.
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10738
Federal Register / Vol. 71, No. 41 / Thursday, March 2, 2006 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.21
Nancy M. Morris,
Secretary.
[FR Doc. 06–1962 Filed 3–1–06; 8:45 am]
BILLING CODE 8010–01–M
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53354; File No. SR–NYSE–
2006–08]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Supplementary Material .26 to
Exchange Rule 301 To Waive the
Posting Requirements in Relation to
Transfers for Nominal Consideration
Between Employees of the Same
Member Organization and New Leases
February 23, 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 February
17, 2006, the New York Stock Exchange,
Inc. (‘‘Exchange’’ or ‘‘NYSE’’) 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 filed the proposed rule change
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
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The Exchange proposes to amend
Supplementary Material .26 to Exchange
Rule 301 to waive the posting
requirements in relation to transfers for
nominal consideration between
employees of the same member
organization and new leases.
The text of the proposed rule changes
is available on the Exchange’s Web site
(https://www.nyse.com), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
21 17
CFR 200.30–3(a)(12).
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).
1 15
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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
The Exchange proposes to amend
Supplementary Material .26 to Exchange
Rule 301 to waive the posting
requirements in relation to transfers for
nominal consideration between
employees of the same member
organization and new leases.
Article II, section 10, of the Exchange
Constitution authorizes the Exchange’s
board of directors to (i) approve the
transfer of membership of a regular
member and the lease of such a
membership and (ii) adopt, amend and
repeal such rules as it may deem
necessary or proper relating to the
posting of notice of the proposed
transfer or lease of a membership and
other similar matters. Supplementary
Material .26 to Exchange Rule 301 sets
forth the current posting requirements
for transfers and leases of seats,
requiring that a proposed transfer or
lease of a membership must be posted
on the Exchange’s bulletin board and in
the Exchange’s Weekly Bulletin at least
10 days before board consideration of
such transfer or lease.
A large percentage of Exchange
memberships and leases of
memberships are held on behalf of
member organizations by individuals
who are employees of those member
organizations. When an employee who
owns a membership on behalf of a
member organization leaves that
member organization, the member
organization may instruct the employee
to transfer such membership to another
employee of the member organization
for a nominal consideration (‘‘nominal
transfer’’). Similarly, if a lessee member
leaves his member organization, the
member organization may cause another
employee to sign a new lease to enable
the member organization to retain the
departed employee’s floor trading rights.
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On December 6, 2005, the members of
the Exchange and the shareholders of
Archipelago Holdings, Inc.
(‘‘Archipelago’’) voted to approve a
merger between the Exchange and
Archipelago. Upon consummation of
the merger, all membership interests in
the Exchange will be exchanged for a
combination of cash and common stock
of NYSE Group, Inc. After the merger,
the right to trade on the floor of the
Exchange will be pursuant to a system
of trading licenses. In light of the fact
that memberships will cease to exist
upon consummation of the merger and
the time and resources it takes to
process transfers and leases of
membership, the Exchange announced
that it would not process any transfers
or new leases of memberships entered
into after the close of business on
Friday, December 30, 2005.
At the time the Exchange announced
its decision to cease processing transfers
of memberships and new leases, the
Exchange believed that the merger
would be completed before the end of
January 2006. As completion of the
merger has taken longer than
anticipated, a backlog has developed of
memberships beneficially owned by
member organizations that are not
available for use by such member
organizations. This problem is a
consequence of the inability of those
member organizations to cause the
nominal transfer to continuing
employees of memberships held by
departed employees so as to allow those
continuing employees to transact
business on the trading floor. Similarly,
member organizations have been unable
to execute new leases in the names of
continuing employees when the
employee who had been a lessee
member on behalf of the member
organization has departed. In addition,
member organizations frequently meet
their expanding needs for trading floor
personnel by causing employees to enter
into new leases. The Exchange’s
decision not to process new leases has
prevented member firms from
expanding their floor trading capacity in
this manner and has forced them to
operate with fewer floor trading
personnel than they consider desirable.
Some member organizations have
experienced difficulty in effectively
conducting their business as a result of
this inability either to have employees
admitted as members in place of
departed employees or to acquire
memberships by entering into new
leases to expand their trading floor
capacity. The Exchange has responded
to this problem by recommencing the
processing of nominal transfers and new
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]]>Agencies
[Federal Register Volume 71, Number 41 (Thursday, March 2, 2006)]
[Notices]
[Pages 10736-10738]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-1962]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53359; File No. SR-NYSE-2006-09]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Automatic Conversion of CAP-DI Orders
February 24, 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 February 21, 2006, 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. NYSE
filed the proposed rule change as effecting a change in an existing
order-entry or trading system pursuant to section 19(b)(3)(A) of the
Act \3\ and Rule 19b-4(f)(5) 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.
---------------------------------------------------------------------------
\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)(5).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE is proposing to amend Exchange Rule 123A.30(a)(iv)(P), which
was part of the pilot (``Pilot'') \5\ which put into operation Phase 1
of the NYSE HYBRID MARKET SM (``Hybrid Market'') initiative,
as proposed in SR-NYSE-2004-05 \6\ and amendments thereto (``Hybrid
Market filings'') and certain system changes discussed in SR-NYSE-2005-
57.\7\ The text of the proposed rule change is available on the
Exchange's Web site (https://www.nyse.com), at the principal office of
the Exchange, and at the Commission's Public Reference Room.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 52954 (December 14,
2005), 70 FR 75519 (December 20, 2005).
\6\ 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) See also Amendment No. 6, filed on September 16,
2005, and Amendment No. 7, filed on October 11, 2005.
\7\ See Securities Exchange Act Release No. 52362 (August 30,
2005), 70 FR 53701 (September 9, 2005). While submitted as effective
upon filing, the Exchange intended to implement these changes upon
approval of the Hybrid Market filings by the Commission, if such
approval is granted.
---------------------------------------------------------------------------
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
I. Purpose
The Exchange proposed a Pilot to put into operation Phase 1 of the
Hybrid Market initiative with respect to a group of securities, known
as Phase 1 \8\ Pilot securities (``Pilot securities''). Following
Commission approval, the Pilot commenced during the week of December
12, 2005 and will terminate the earlier of: (1) March 14, 2006, or (2)
Commission approval of the Exchange's Hybrid Market proposal, if
granted.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 51906 (June 22,
2005), 70 FR 37463 (June 29, 2005).
---------------------------------------------------------------------------
Commencing with the Pilot; the Exchange systemically ensures that
the specialist's participation when trading along with CAP-DI orders is
in accordance with the parity requirements of Exchange Rule 123A.30.
The system assigns the proper number of shares to the specialist and
CAP-DI orders. The Exchange filed SR-NYSE-2005-57 \9\ for immediate
effectiveness pursuant to section 19(b)(3)(A) of the Act \10\ and Rule
19b-4(f)(5) thereunder \11\ to effect this change.
---------------------------------------------------------------------------
\9\ See supra note 7.
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(5).
---------------------------------------------------------------------------
Automatic Conversions of CAP-DI Orders. Current Exchange Rule
123A.30 provides that specialists have the ability, subject to certain
restrictions noted in the rule, to convert CAP-DI orders to participate
in transactions or to bid or offer, without an electing trade.
Exchange Rule 123A.30(a)(P) \12\ provides in part that the elected
or converted portion of a ``percentage order that is convertible on a
destabilizing tick and designated immediate execution cancel election''
(``CAP-DI order'') may be automatically executed. An elected or
converted CAP-DI order on the same side of the market as an
automatically executed electing order may participate in a transaction
at the bid (offer) price if there is volume associated with the bid
(offer) remaining after the electing order is filled in its entirety.
An elected or converted CAP-DI order on the contra-side of the market
as an automatically executed electing order may participate in a
transaction at the bid (offer) price if there is volume remaining in
the electing order.
---------------------------------------------------------------------------
\12\ This rule is parallel to amendments made to Rule 123A.30.
See Securities Exchange Act Release No. 51906 (June 22, 2005), 70 FR
37463 (June 29, 2005).
---------------------------------------------------------------------------
In addition, the Exchange added new section (iv)(P) to proposed
Exchange Rule 123A.30(a)(P) to provide that when a specialist is
bidding or offering and an automatic execution occurs with such bid/
offer, marketable CAP-DI orders on the Display Book[reg] on the same
side as the specialist's interest will be automatically converted to
participate in this execution, with the system assigning the proper
number of shares to the specialist and auto-converted CAP-DI orders, as
discussed above. This will allow CAP-DI orders to better participate in
executions.
However, in certain instances, an automatic conversion of
marketable CAP-DI orders will not occur even though the specialist is
trading for its own account. This will occur where the execution that
included automatically converted CAP-DI orders elects a contra-side
stop or stop limit order. In this situation, pursuant to current
Exchange Rule 123A.40, the specialist, as party to the election of the
stop order, owes such elected stop order an execution at the same price
as the specialist traded. The execution of such stop orders, in which
the specialist is the contra-party, may be manual \13\ or
automatic,\14\ depending upon whether
[[Page 10737]]
any specialist interest remains at the execution price. In either
situation, marketable CAP-DI interest at that price will not be
automatically converted to participate along with the specialist in the
execution of such elected stop order. The specialist is, however,
alerted to the fact that there are CAP-DI orders on the Display
Book[reg] capable of trading so that is can take appropriate action and
manually trade such CAP-DI interest.
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\13\ If there is no specialist interest remaining in the bid/
offer, and the specialist must guarantee an execution to the stop
order at the electing price pursuant to Exchange Rule 123A.40, the
specialist must do a manual transaction to guarantee that the stop
order receives the same price as the specialist.
\14\ If there is specialist interest remaining in the bid/offer
and the specialist must guarantee an execution to the stop order at
the electing price pursuant to Exchange Rule 123A.40, the Display
Book system will automatically execute the remaining specialist
interest against the elected stop order at the same price the
specialist traded.
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Modification to the Pilot. The Exchange is proposing to modify
Exchange Rule 123A.30(a)(iv)(P) to clarify that when a specialist is
bidding, offering, or trading and an automatic execution occurs with
the specialist's proprietary interest, which elects contra-side stop or
stop limit orders, marketable CAP-DI orders on the Display Book[supreg]
on the same side as the specialist will be automatically converted to
participate in the execution of such contra-side stop or stop limit
orders with the system assigning the proper number of shares to the
specialist and CAP-DI orders. In other words, in all circumstances
where the specialist is trading for its own account and the specialist,
as party to the election of a stop order, owes an elected stop order an
execution at the same price as the specialist traded pursuant to
current Exchange Rule 123A.40, an automatic conversion of marketable
CAP-DI orders will occur. This modification, however, will not effect
the proper allocation of shares to CAP-DI orders.
The Exchange believes that this modification is beneficial for the
market in that it reduces the chances for error by removing the
responsibility from the specialist to manually ensure the CAP-DI
interest trading is allocated correctly. This will allow CAP-DI orders
to better participate in executions. This modification is part of a
package of software corrections to the Pilot which the Exchange would
like to implement as quickly as possible. This modification will expire
upon the termination of the Pilot.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act,\15\ in general, and furthers the
objectives of section 6(b)(5) of the Act,\16\ in particular, in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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 exchange believes that the proposed rule change is also designed to
support the principles of section 11A(a)(1) of the act \17\ 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.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ 15 U.S.C. 78K-1(a)(1).
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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.\18\
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\18\ See telephone conversation between Jeffrey Rosenstrock,
Principal Rule Counsel, Market Surveillance, NYSE, and Kelly Riley,
Assistant Director, Division of Market Regulation, Commission, dated
February 23, 2006.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission action
Because the proposed rule change effects a change in an existing
order-entry or trading system of a self-regulatory organization that
does not:
(i) significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; or
(iii) have the effect of limiting access to or availability of the
system, it has become effective pursuant to section 19(b)(3)(A) of the
Act \19\ and paragraph (f)(5) of Rule 19b-4 thereunder.\20\ The
Exchange believes that this modification to the Pilot would allow the
Pilot to continue in effect and reduce the chance of error by the
specialist by allowing the system to automatically convert CAP-DI
orders and execute with the proper allocation.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 20 CFR 240.19b-4(f)(5).
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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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comment@sec.gov. Please include
File Number SR-NYSE-2006-09 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-NYSE-2006-09. 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 (https://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 Commissiona 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 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-2006-09 and should be submitted on or before March
23, 2006.
[[Page 10738]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. 06-1962 Filed 3-1-06; 8:45 am]
BILLING CODE 8010-01-M
