Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Specialist Algorithmic Quoting Messages Permitted Pursuant to Exchange Rule 104, 36849-36850 [06-5754]
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Federal Register / Vol. 71, No. 124 / Wednesday, June 28, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54024; File No. SR–NYSE–
2006–44]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Specialist Algorithmic Quoting
Messages Permitted Pursuant to
Exchange Rule 104
June 21, 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 June 20,
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
Item I and II below, which Items have
been prepared by the Exchange. NYSE
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 proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
jlentini on PROD1PC65 with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NYSE proposes to amend Exchange
Rule 104 (Dealings by Specialists) with
respect to the specialists’ ability to
establish systems employing algorithms
to send messages via a connection to the
Display Book system for the purpose of
updating quotations systematically. The
text of the proposed rule change 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.
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 concerns it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
2 17
VerDate Aug<31>2005
16:52 Jun 27, 2006
Jkt 208001
Exchange has prepared summaries, set
forth in Section 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
Under the NYSE HYBRID MARKETSM
initiative 5, the Exchange proposed
several changes to the manner in which
specialists on the Exchange would be
able to establish electronic connections
to the Display Book 6 system (‘‘Display
Book’’) to provide them with access to
certain information and permit them to
make a range of specified quoting and
trading decisions based on that
information. The Exchange proposed
amendments to Exchange Rule 104
(Dealings by Specialists) to provide
specialists with the ability to implement
systems that use proprietary algorithms
based on predetermined parameters to
electronically participate in the Hybrid
Market (‘‘Specialist Algorithm’’). The
Specialist Algorithm is designed to
communicate with the Display Book
system via an Exchange-owned external
application program interface (‘‘API’’).
As approved in the Hybrid Market
initiative, the Specialist Algorithm is
permitted to send messages to the
Display Book via the API to quote or
trade on behalf of the specialist’s
proprietary interest. The Specialist
Algorithm will generate these quoting or
trading messages in reaction to specific
types of information it will have access
to. This information includes specialist
dealer position, existing quotes,
publicly available information the
specialist chooses to supply to the
algorithm, incoming orders as they are
entering Exchange systems, and
information about orders on the display
Book such as limit orders, percentage
orders, stop orders, and auction limit
and auction market orders. This latter
information stream is known as ‘‘state of
the book’’ information.
Since the approval of the Hybrid
Market, the Exchange has continued to
discuss Hybrid Market features with its
members and advisory committees.
Based on these discussions, the
Exchange has decided to make changes
to certain aspects of the Hybrid Market,
to produce a trading venue that best
5 See Securities Exchange Act Release No. 53539
(March 22, 2006), 71 FR 16353 (March 31, 2006).
6 The Display Book system is an order
management and execution facility. It receives and
displays orders to the specialist, contains the orders
received by the specialist (the ‘‘Book’’), and
provides a mechanism to execute and report
transactions to the Consolidated Tape.
PO 00000
Frm 00097
Fmt 4703
Sfmt 4703
36849
addresses the various needs of its
members and customers.
As part of the implementation of
Phase II of the Hybrid Market, the
Exchange is proposing that it have the
ability to permit specialists to send
quoting messages via the API in all
securities without the specialists having
access to information about incoming
orders as they are entering Exchange
systems. This is similar to the manner
in which specialists are allowed to send
quoting messages in exchange traded
funds (‘‘ETFs’’) and Trust Issued
Receipts today,7 before the effectiveness
of the full Hybrid amendments, except
that the specialist systems would have
access to state of the book information.
Exchange Rule 104 currently allows
specialists to send quoting messages via
the API in ETFs and Trust Issued
Receipts. These specialists’ algorithms
do not have access to the state of the
book information stream. The provision
discussed in this filing will be
superseded with the Exchange rule 104
amendments noted above when Phase II
of the Hybrid Market is fully
implemented.
The Exchange believes that use of the
API to quote in this fashion will enable
specialists and the Exchange to obtain
valuable real time experience with
respect to the use of specialist
proprietary algorithms.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
section 6(b) of the Act 8 in general, and
furthers the objectives of section 6(b)(5)
of the Act 9 in particular, in that it is
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.
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.
7 Exchange Rule 104 was amended for this
purpose in 2004. See Securities Exchange Act
Release No. 50412 (September 20, 2004), 69 FR
57741 (September 27, 2004).
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
E:\FR\FM\28JNN1.SGM
28JNN1
36850
Federal Register / Vol. 71, No. 124 / Wednesday, June 28, 2006 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchanges 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 foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) by its
terms, become operative for 30 days
from the date on which it was filed, or
such shorter time as the Commission
may designate if consistent with the
protection of investors and the public
interest, it has become effective
pursuant to section 19(b)(3)(A) of the
Act 10 and Rule 19b–4(f)(6)
thereunder.11
A proposed rule change filed under
Rule 19b–4(f)(6) normally may not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 12 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay and designate the proposed rule
change immediately operative upon
filing. The Commission believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest
because it would allow specialists to
quote more efficiently. Accordingly, the
Commission designates the proposal to
be effective and operative upon filing
with the Commission.13
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 witht he Act.
Comments may be submitted by any of
the following methods:
Number SR–NYSE–2006–44 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–54026; File No. SR–PCX–
2005–115]
• 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–2006–44. 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
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 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–2006–44 and should
be submitted on or before July 19, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06–5754 Filed 6–27–06; 8:45 am]
BILLING CODE 8010–01–M
jlentini on PROD1PC65 with NOTICES
10 15
11 17
VerDate Aug<31>2005
16:52 Jun 27, 2006
Jkt 208001
14 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00098
Fmt 4703
June 21, 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 October
11, 2005, the Pacific Exchange, Inc. (n/
k/a NYSE Arca, Inc.) (the ‘‘Exchange’’),
through its wholly owned subsidiary
PCX Equities, Inc. (n/k/a/ NYSE Arca
Equities, Inc.) (‘‘NYSE Arca Equities’’ or
the ‘‘Corporation’’), 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.3 The Exchange filed
Amendment No. 1 to the proposed rule
change on November 21, 2005.4 The
Exchange filed Amendment No. 2 to the
proposed rule change on May 5, 2006.5
The Commission is publishing this
notice to solicit comments on the
proposed rule change, as amended, from
interested persons and is partially
approving the proposal, as amended, on
an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange, through its wholly
owned subsidiary NYSE Arca Equities,
proposes to trade shares (‘‘Shares’’) of
the following twelve funds of the
ProShares Trust (f/k/a xtraShares Trust)
(the ‘‘Trust’’): Ultra 500 Fund, Ultra 100
Fund, Ultra 30 Fund, Ultra Mid-Cap 400
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On March 6, 2006, the Pacific Exchange, Inc.
(‘‘PXC’’), filed with the Commission a proposed rule
change, which was effective upon filing, to change
the name of the Exchange, as well as several other
related entities, to reflect Archipelago’s recent
acquisition of PCX and the merger of the NYSE with
Archipelago. See File No. SR–PCX–2006–24. All
references herein have been changed to reflect these
transactions. Telephone Conference between Lisa
Dallmer, Direct, NYSE Arca Equities, Inc., and
Florence E. Harmon, Senior Special Counsel,
Division of Market Regulation (‘‘Division’’),
Commission, on June 21, 2006.
4 Amendment No. 1 replaced and superseded the
original filing in its entirety.
5 Amendment No. 2 replaced and superseded
Amendment No. 1 in its entirety.
2 17
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
12 17 CFR 240.19b–4(f)(6)(iii).
13 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).
Self-Regulatory Organizations; Pacific
Exchange, Inc. (n/k/a NYSE Arca, Inc.);
Notice of Filing of a Proposed Rule
Change and Amendment Nos. 1 and 2
Thereto Relating and Order Granting
Partial Accelerated Approval To
Trading Shares of the Funds of the
ProShares Trust Pursuant to Unlisted
Trading Privileges
Sfmt 4703
E:\FR\FM\28JNN1.SGM
28JNN1
]]>Agencies
[Federal Register Volume 71, Number 124 (Wednesday, June 28, 2006)]
[Notices]
[Pages 36849-36850]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-5754]
[[Page 36849]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54024; File No. SR-NYSE-2006-44]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Specialist Algorithmic Quoting Messages Permitted Pursuant
to Exchange Rule 104
June 21, 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 June 20, 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 Item I and II
below, which Items have been prepared by the Exchange. NYSE 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 proposed rule change
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)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE proposes to amend Exchange Rule 104 (Dealings by Specialists)
with respect to the specialists' ability to establish systems employing
algorithms to send messages via a connection to the Display
Book[supreg] system for the purpose of updating quotations
systematically. The text of the proposed rule change 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.
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 concerns 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
Section 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
Under the NYSE HYBRID MARKET\SM\ initiative \5\, the Exchange
proposed several changes to the manner in which specialists on the
Exchange would be able to establish electronic connections to the
Display Book[supreg] \6\ system (``Display Book'') to provide them with
access to certain information and permit them to make a range of
specified quoting and trading decisions based on that information. The
Exchange proposed amendments to Exchange Rule 104 (Dealings by
Specialists) to provide specialists with the ability to implement
systems that use proprietary algorithms based on predetermined
parameters to electronically participate in the Hybrid Market
(``Specialist Algorithm''). The Specialist Algorithm is designed to
communicate with the Display Book system via an Exchange-owned external
application program interface (``API'').
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 53539 (March 22,
2006), 71 FR 16353 (March 31, 2006).
\6\ The Display Book system is an order management and execution
facility. It receives and displays orders to the specialist,
contains the orders received by the specialist (the ``Book''), and
provides a mechanism to execute and report transactions to the
Consolidated Tape.
---------------------------------------------------------------------------
As approved in the Hybrid Market initiative, the Specialist
Algorithm is permitted to send messages to the Display Book via the API
to quote or trade on behalf of the specialist's proprietary interest.
The Specialist Algorithm will generate these quoting or trading
messages in reaction to specific types of information it will have
access to. This information includes specialist dealer position,
existing quotes, publicly available information the specialist chooses
to supply to the algorithm, incoming orders as they are entering
Exchange systems, and information about orders on the display Book such
as limit orders, percentage orders, stop orders, and auction limit and
auction market orders. This latter information stream is known as
``state of the book'' information.
Since the approval of the Hybrid Market, the Exchange has continued
to discuss Hybrid Market features with its members and advisory
committees. Based on these discussions, the Exchange has decided to
make changes to certain aspects of the Hybrid Market, to produce a
trading venue that best addresses the various needs of its members and
customers.
As part of the implementation of Phase II of the Hybrid Market, the
Exchange is proposing that it have the ability to permit specialists to
send quoting messages via the API in all securities without the
specialists having access to information about incoming orders as they
are entering Exchange systems. This is similar to the manner in which
specialists are allowed to send quoting messages in exchange traded
funds (``ETFs'') and Trust Issued Receipts today,\7\ before the
effectiveness of the full Hybrid amendments, except that the specialist
systems would have access to state of the book information.
---------------------------------------------------------------------------
\7\ Exchange Rule 104 was amended for this purpose in 2004. See
Securities Exchange Act Release No. 50412 (September 20, 2004), 69
FR 57741 (September 27, 2004).
---------------------------------------------------------------------------
Exchange Rule 104 currently allows specialists to send quoting
messages via the API in ETFs and Trust Issued Receipts. These
specialists' algorithms do not have access to the state of the book
information stream. The provision discussed in this filing will be
superseded with the Exchange rule 104 amendments noted above when Phase
II of the Hybrid Market is fully implemented.
The Exchange believes that use of the API to quote in this fashion
will enable specialists and the Exchange to obtain valuable real time
experience with respect to the use of specialist proprietary
algorithms.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \8\ in general, and furthers the
objectives of section 6(b)(5) of the Act \9\ in particular, in that it
is 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
[[Page 36850]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchanges 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 foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
by its terms, become operative for 30 days from the date on which it
was filed, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest, it
has become effective pursuant to section 19(b)(3)(A) of the Act \10\
and Rule 19b-4(f)(6) thereunder.\11\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.
However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay and designate the proposed
rule change immediately operative upon filing. The Commission believes
that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest because it would allow
specialists to quote more efficiently. Accordingly, the Commission
designates the proposal to be effective and operative upon filing with
the Commission.\13\
---------------------------------------------------------------------------
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ 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).
---------------------------------------------------------------------------
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 witht he 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-comments@sec.gov. Please include
File Number SR-NYSE-2006-44 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-2006-44. 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 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 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-2006-44 and should be submitted on or before July
19, 2006.
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 06-5754 Filed 6-27-06; 8:45 am]
BILLING CODE 8010-01-M
