Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add a Rule Regarding Third-Party Routing Services in Respect of Orders Entered Into NSX BLADE, 69163-69165 [E6-20218]
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Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54808; File No. SR–NSX–
2006–15]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Add a
Rule Regarding Third-Party Routing
Services in Respect of Orders Entered
Into NSX BLADE
November 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 November
21, 2006, the National Stock Exchange,
Inc. (‘‘NSX’’ 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. NSX
has filed the 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add a new
NSX Rule 2.12 describing the terms
under which the Exchange would
provide routing services procured from
a third party with respect to orders
entered into its new state of the art
trading system, NSX BLADE. The text of
the proposed rule change is below.
Proposed new language is in italics.
RULES OF NATIONAL STOCK
EXCHANGE, INC.
*
*
*
*
*
CHAPTER II—ETP Holders of the
Exchange
*
*
*
jlentini on PROD1PC65 with NOTICES
Rule 2.11
*
*
NSX Securities, LLC
(a)–(b) No change.
(c) This Rule 2.11 shall become
effective on March 1, 2007.
Rule 2.12 Order Routing Services
The Exchange will route orders to
other trading centers under certain
circumstances (‘‘Routing Services’’) as
described in Chapter XI of these Rules.
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
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15:37 Nov 28, 2006
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The Exchange will provide its Routing
Services pursuant to the terms of three
separate agreements: (1) an agreement
between the Exchange and each ETP
Holder on whose behalf orders will be
routed; (2) an agreement between the
Exchange and each third-party brokerdealer that will serve as a ‘‘give-up’’ on
an away trading center when the ETP
Holder on whose behalf an order is
routed is not also a member or
subscriber of the away trading center;
and (3) an agreement between the
Exchange and a third-party service
provider (‘‘Technology Provider’’)
pursuant to which the Exchange
licenses the routing technology used by
the Exchange for its Routing Services
(‘‘Exchange-Technology Provider
Agreement’’). This Rule 2.12 shall be
effective through February 28, 2007.
Interpretations and Policies
.01 (a) The Exchange will provide its
Routing Services in compliance with
these Rules, as well as other provisions
of the Exchange’s By-Laws and Rules
where applicable, and with the
provisions of the Act and the rules
thereunder, including, but not limited
to, the requirements in Section 6(b)(4)
and (5) of the Act that the rules of a
national securities exchange provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities, and not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
(b) As provider of the Routing
Services, the Exchange will license the
necessary routing technology for use
within its own systems and accordingly
will control the logic that determines
when, how, and where orders are routed
away to other trading centers.
(c) The Exchange will establish and
maintain procedures and internal
controls reasonably designed to
adequately restrict the flow of
confidential and proprietary
information between the Exchange
(including its facilities) and the
Technology Provider, and, to the extent
the Technology Provider reasonably
receives confidential and proprietary
information, that adequately restrict the
use of such information by the
Technology Provider to legitimate
business purposes necessary for the
licensing of routing technology.
(d) The Exchange-Technology
Provider Agreement will include terms
and conditions that enable the
Exchange to comply with this
Interpretation and Policy .01.
*
*
*
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69163
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NSX 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. NSX 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 add a new
NSX Rule 2.12 relating to the routing of
orders to other trading centers by the
Exchange. The proposed Rule would
apply to orders entered into the
Exchange’s new state of the art trading
system, NSX BLADE, and would be
effective through February 28, 2007.
NSX states that this Rule is proposed to
be effective for a finite period so that the
Exchange can offer routing services
through NSX BLADE while the
Exchange’s wholly-owned subsidiary,
NSX Securities, LLC (‘‘NSX Securities’’)
completes its registration process as a
broker-dealer with the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) (and thus becomes available
to provide routing services), and while
the Exchange evaluates its options for
providing routing services to ETP
Holders. The Exchange states that the
ability to route orders entered into NSX
BLADE to away markets for execution at
the best available prices is a key feature
of NSX’s new system.
Proposed NSX Rule 2.12 provides that
the Exchange’s routing services would
be provided under the terms of (i) an
agreement between the Exchange and
each ETP Holder on whose behalf the
orders would be routed, (ii) an
agreement between the Exchange and
each third party broker-dealer that
would serve as a ‘‘give-up’’ on any away
trading center when the ETP Holder on
whose behalf an order is routed is not
also a member or subscriber at the away
trading center, and (iii) an agreement
between the Exchange and a third-party
service provider pursuant to which the
Exchange licenses the routing
technology used by the Exchange for its
routing services, as well as in
compliance with the provisions of the
Act and the rules thereunder, and other
applicable provisions of the Exchange’s
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Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices
By-Laws and Rules. Proposed NSX Rule
2.12 also provides for (i) the equitable
allocation of dues, fees and other
charges, (ii) Exchange control of the
routing logic, and (iii) the establishment
and maintenance of procedures and
internal controls designed to protect
confidential and proprietary
information.
Proposed NSX Rule 2.12 provides that
the Rule would be effective through
February 28, 2007.5 The Exchange
intends to provide routing services in
accordance with proposed NSX Rule
2.12 until February 28, 2007, unless the
Exchange, with the Commission’s
approval, amends proposed NSX Rule
2.12 before such date. During such time
period, the Exchange intends to evaluate
its options for providing routing
services. At the conclusion of such time
period, the Exchange may decide to (i)
continue the approach provided for in
proposed NSX Rule 2.12 on a
permanent basis and not use NSX
Securities as the outbound router (by
filing a proposed rule change to delete
NSX Rule 2.11 and renumber proposed
NSX Rule 2.12), (ii) use the Exchange’s
original approach of NSX Securities as
an outbound router and discontinue the
approach provided for in proposed NSX
Rule 2.12 (by filing a proposed rule
change to delete proposed NSX Rule
2.12), or (iii) file a proposed rule change
to allow ETP Holders to use either NSX
Securities or the approach provided for
in proposed NSX Rule 2.12 for
outbound routing. The Exchange’s use
of NSX Securities as an outbound router
would be contingent on NSX Securities’
successful completion of its registration
process as a broker-dealer with NASD.
2. Statutory Basis
NSX believes that the proposed rule
change is consistent with the provisions
of Section 6 of the Act,6 in general, and
with Section 6(b)(5) of the Act,7 in
particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to a free
and open market and a national market
system, and, in general, to protect
investors and the public interest.
jlentini on PROD1PC65 with NOTICES
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
15:37 Nov 28, 2006
Jkt 211001
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange neither solicited nor
received 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 is
subject to Section 19(b)(3)(A)(iii) of the
Act 8 and Rule 19b–4(f)(6) thereunder 9
because the proposal: (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 prior to 30 days after the date
of filing or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest; provided that NSX has
given the Commission 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.
NSX has fulfilled the five-day prefiling requirement. NSX has requested
that the Commission waive the 30-day
operative delay requirement. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest because such waiver
would immediately provide NSX and its
market participants with the ability to
route orders to away markets for
execution at the best available prices, a
key feature of NSX BLADE, which is
now operational. The Commission notes
that this proposed rule change is
substantially similar to the rules of
another self-regulatory organization.10
For these reasons, the Commission
hereby waives the 30-day operative
delay requirement.11 The Commission
notes that NSX intends to offer
outbound routing to its ETP Holders
beginning on November 27, 2006.
8 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
10 Rule 126B-AEMI of the American Stock
Exchange LLC. See Securities Exchange Act Release
No. 54552 (September 29, 2006), 71 FR 59546
(October 10, 2006) (approving File No. SR–Amex2005–104).
11 For the 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).
9 17
5 With this rule filing the Exchange also proposes
to amend NSX Rule 2.11, relating to NSX Securities’
Outbound Router function, to provide that such
Rule would become effective on March 1, 2007,
immediately after proposed NSX Rule 2.12 ceases
to be effective.
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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necessary or appropriate in furtherance
of the purposes of the Act.
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At any time within 60 days of the
filing of such 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 rulecomments@sec.gov. Please include File
Number SR–NSX–2006–15 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–2006–15. 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 the filing also will be
available for inspection and copying at
the principal office of the NSX. 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–2006–15 and should
E:\FR\FM\29NON1.SGM
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Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices
be submitted on or before December 20,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Nancy M. Morris,
Secretary.
[FR Doc. E6–20218 Filed 11–28–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54810; File No. SR–NYSE–
2005–90]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Granting Approval of Proposed Rule
Change and Amendment No. 1 Thereto
and Notice of Filing and Order
Granting Accelerated Approval to
Amendment No. 2 Thereto To Allow
Certain Institutional Customers To
Elect Not To Receive Account
Statements
November 22, 2006.
On December 21, 2005, the New York
Stock Exchange, Inc. (now known as
New York Stock Exchange LLC)
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’), pursuant to
Section 19(b)(1) 1 of the Securities
Exchange Act of 1934 (‘‘Exchange Act’’
or ‘‘Act’’),2 and Rule 19b–4 thereunder,3
a proposed amendment to NYSE Rule
409 (Statements of Accounts to
Customers). On March 28, 2006, the
NYSE filed Amendment No. 1 to the
proposed rule change.4 The proposed
rule change, as amended by
Amendment No. 1, was published for
comment in the Federal Register on
May 25, 2006.5 The Commission
received two comments on the
proposal.6 On August 14, 2006, the
NYSE filed Amendment No. 2 to the
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a et seq.
3 17 CFR 240.19b–4.
4 In Amendment No. 1, the NYSE proposed to
partially amend the text of proposed amended Rule
409.
5 See Exchange Act Release No. 53826 (May 18,
2006), 71 FR 30211 (May 25, 2006).
6 See letter from Tom DiSpaldo, Compliance
Officer, BNP Paribas Securities Corporation, to
Nancy M. Morris, Secretary, Commission, dated
June 12, 2006 (‘‘BNP letter’’) (available for review
on the Commission’s Web site at https://
www.sec.gov/comments/sr-nyse-2005–90/
tdispaldo7238.htm); and letter from Noland Cheng,
Chairman, Operations Committee, Securities
Industry Association, to Nancy M. Morris,
Secretary, Commission, dated June 16, 2006 (‘‘SIA
letter’’) (available for review on the Commission’s
Web site at https://www.sec.gov/comments/sr-nyse2005–90/sia061606.pdf).
jlentini on PROD1PC65 with NOTICES
1 15
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15:37 Nov 28, 2006
Jkt 211001
proposed rule change.7 This order
approves the proposed rule change, as
amended by Amendment No. 1.
Simultaneously, the Commission is
providing notice of filing of Amendment
No. 2 and granting accelerated approval
of Amendment No. 2.
I. Description
The proposed amendment to NYSE
Rule 409 would allow institutional
customers conducting a Delivery versus
Payment and Receive versus Payment
(‘‘DVP/RVP’’) business to elect not to
receive quarterly account statements.
Rule 409, in pertinent part, specifies the
obligations of member organizations
with respect to customer statements,
including frequency of delivery and
elements of content.
NYSE Rule 409(a) requires that,
except with the permission of the
Exchange, members and member
organizations shall send statements at
least quarterly to customers for accounts
showing security and money positions
and entries during the preceding
quarter. The proposed amendment
would provide relief from this
requirement for customer accounts that
are carried solely for the purpose of
DVP/RVP transactions. A DVP/RVP
account is an arrangement whereby
delivery of securities sold is made to the
buying customer’s bank in exchange for
payment, usually in cash, at settlement.
Such accounts must comply with the
requirements outlined in NYSE Rule
387 (COD Orders).8
Due to the nature of DVP/RVP
accounts, their statements do not
generally reflect any cash balance or
security position at the end of a quarter.
Consequently, according to NYSE, DVP/
RVP customers (chiefly institutional
customers) generally rely on
confirmations (issued pursuant to Rule
10b–10 under the Exchange Act) or
trade runs for transaction-related
information. Such records provide
critical transactional information (such
as security name and price, commission
or markup, if applicable, trade date,
settlement date, etc.) in a timely fashion.
7 In Amendment No. 2, the NYSE proposed to
partially amend the text of proposed amended Rule
409 as discussed in Section III below.
8 NYSE Rule 387 sets out specific prerequisites
for the acceptance of such orders:
(1) The member or member organization must
have previously received the name and address of
the agent, together with its customer number;
(2) The order must note the payment on delivery
or collect on delivery nature of the trade;
(3) The member or member organization must
deliver to the customer a confirmation in the
specified form; and
(4) The member organization must have obtained
an agreement from the customer regarding the
furnishing of appropriate instructions for the
settlement of the trade.
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69165
According to NYSE, institutional
investors prefer transaction confirms or
trade run information to quarterly
account statements.
The proposed amendment to NYSE
Rule 409 would relieve member
organizations of the obligation to send
quarterly statements to customers if: (1)
The customer’s account is carried solely
for the purpose of execution on a DVP/
RVP basis; (2) all transactions effected
for the account are done on a DVP/RVP
basis in conformity with Rule 387; (3)
the account does not show security or
money positions at the end of the
quarter; (4) the customer consents to the
suspension of such statements in
writing and such consents are
maintained by the member organization
in a manner consistent with Exchange
Rule 440 and Rule 17a–4 under the
Exchange Act; 9 (5) the member
organization undertakes to provide any
particular statement or statements to the
customer promptly upon request; and
(6) the member organization undertakes
to promptly reinstate the delivery of
such statements to the customer upon
request. The proposed rule change
specifies that Rule 409 does not qualify
or condition the obligations of a member
organization under Rule 15c3–2 under
the Exchange Act concerning quarterly
notices of free credit balances on
statements.10
II. Summary of Comments
The Commission received two
comments on the proposal, both of
which generally were supportive.11 BNP
opposed condition number (3) of the
proposal (i.e., that the account not show
security or money positions at the end
of the quarter). BNP believed that
proposed condition (3) could, among
other things, require members to
monitor qualifying accounts to ensure
that they had no money or positions at
the end of the quarter. BNP also
contended that the condition could be
triggered as a result of a failed receipt
9 Under NYSE Rule 440, NYSE member
organizations are, among other things, required to
make and preserve books and records as prescribed
by Rule 17a–3 under the Exchange Act. Rule 440
also states that the recordkeeping format, medium,
and retention period must comply with Rule 17a–
4 under the Exchange Act. Rule 17a–4 specifies the
manner in which broker-dealers must maintain the
records created in accordance with Rule 17a–3, and
certain other records produced by broker-dealers,
and the required retention periods for these records.
10 Rule 15c3–2 under the Exchange Act requires
broker-dealers to provide each of their customers
for whom a free credit balance is carried, not less
frequently than once every three months, a written
statement informing the customer of the amount
due to the customer, and written notice that the
funds are not segregated and may be used in the
broker-dealer’s business operations, and that the
funds are payable on the customer’s demand.
11 See footnote 6, supra.
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]]>Agencies
[Federal Register Volume 71, Number 229 (Wednesday, November 29, 2006)]
[Notices]
[Pages 69163-69165]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20218]
[[Page 69163]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54808; File No. SR-NSX-2006-15]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Add a Rule Regarding Third-Party Routing Services in Respect of Orders
Entered Into NSX BLADE
November 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 November 21, 2006, the National Stock Exchange, Inc. (``NSX'' 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. NSX has filed
the 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.
---------------------------------------------------------------------------
\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
The Exchange proposes to add a new NSX Rule 2.12 describing the
terms under which the Exchange would provide routing services procured
from a third party with respect to orders entered into its new state of
the art trading system, NSX BLADE. The text of the proposed rule change
is below. Proposed new language is in italics.
RULES OF NATIONAL STOCK EXCHANGE, INC.
* * * * *
CHAPTER II--ETP Holders of the Exchange
* * * * *
Rule 2.11 NSX Securities, LLC
(a)-(b) No change.
(c) This Rule 2.11 shall become effective on March 1, 2007.
Rule 2.12 Order Routing Services
The Exchange will route orders to other trading centers under
certain circumstances (``Routing Services'') as described in Chapter XI
of these Rules. The Exchange will provide its Routing Services pursuant
to the terms of three separate agreements: (1) an agreement between the
Exchange and each ETP Holder on whose behalf orders will be routed; (2)
an agreement between the Exchange and each third-party broker-dealer
that will serve as a ``give-up'' on an away trading center when the ETP
Holder on whose behalf an order is routed is not also a member or
subscriber of the away trading center; and (3) an agreement between the
Exchange and a third-party service provider (``Technology Provider'')
pursuant to which the Exchange licenses the routing technology used by
the Exchange for its Routing Services (``Exchange-Technology Provider
Agreement''). This Rule 2.12 shall be effective through February 28,
2007.
Interpretations and Policies
.01 (a) The Exchange will provide its Routing Services in
compliance with these Rules, as well as other provisions of the
Exchange's By-Laws and Rules where applicable, and with the provisions
of the Act and the rules thereunder, including, but not limited to, the
requirements in Section 6(b)(4) and (5) of the Act that the rules of a
national securities exchange provide for the equitable allocation of
reasonable dues, fees, and other charges among its members and issuers
and other persons using its facilities, and not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
(b) As provider of the Routing Services, the Exchange will license
the necessary routing technology for use within its own systems and
accordingly will control the logic that determines when, how, and where
orders are routed away to other trading centers.
(c) The Exchange will establish and maintain procedures and
internal controls reasonably designed to adequately restrict the flow
of confidential and proprietary information between the Exchange
(including its facilities) and the Technology Provider, and, to the
extent the Technology Provider reasonably receives confidential and
proprietary information, that adequately restrict the use of such
information by the Technology Provider to legitimate business purposes
necessary for the licensing of routing technology.
(d) The Exchange-Technology Provider Agreement will include terms
and conditions that enable the Exchange to comply with this
Interpretation and Policy .01.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NSX 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. NSX 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 add a new NSX Rule 2.12 relating to the
routing of orders to other trading centers by the Exchange. The
proposed Rule would apply to orders entered into the Exchange's new
state of the art trading system, NSX BLADE, and would be effective
through February 28, 2007. NSX states that this Rule is proposed to be
effective for a finite period so that the Exchange can offer routing
services through NSX BLADE while the Exchange's wholly-owned
subsidiary, NSX Securities, LLC (``NSX Securities'') completes its
registration process as a broker-dealer with the National Association
of Securities Dealers, Inc. (``NASD'') (and thus becomes available to
provide routing services), and while the Exchange evaluates its options
for providing routing services to ETP Holders. The Exchange states that
the ability to route orders entered into NSX BLADE to away markets for
execution at the best available prices is a key feature of NSX's new
system.
Proposed NSX Rule 2.12 provides that the Exchange's routing
services would be provided under the terms of (i) an agreement between
the Exchange and each ETP Holder on whose behalf the orders would be
routed, (ii) an agreement between the Exchange and each third party
broker-dealer that would serve as a ``give-up'' on any away trading
center when the ETP Holder on whose behalf an order is routed is not
also a member or subscriber at the away trading center, and (iii) an
agreement between the Exchange and a third-party service provider
pursuant to which the Exchange licenses the routing technology used by
the Exchange for its routing services, as well as in compliance with
the provisions of the Act and the rules thereunder, and other
applicable provisions of the Exchange's
[[Page 69164]]
By-Laws and Rules. Proposed NSX Rule 2.12 also provides for (i) the
equitable allocation of dues, fees and other charges, (ii) Exchange
control of the routing logic, and (iii) the establishment and
maintenance of procedures and internal controls designed to protect
confidential and proprietary information.
Proposed NSX Rule 2.12 provides that the Rule would be effective
through February 28, 2007.\5\ The Exchange intends to provide routing
services in accordance with proposed NSX Rule 2.12 until February 28,
2007, unless the Exchange, with the Commission's approval, amends
proposed NSX Rule 2.12 before such date. During such time period, the
Exchange intends to evaluate its options for providing routing
services. At the conclusion of such time period, the Exchange may
decide to (i) continue the approach provided for in proposed NSX Rule
2.12 on a permanent basis and not use NSX Securities as the outbound
router (by filing a proposed rule change to delete NSX Rule 2.11 and
renumber proposed NSX Rule 2.12), (ii) use the Exchange's original
approach of NSX Securities as an outbound router and discontinue the
approach provided for in proposed NSX Rule 2.12 (by filing a proposed
rule change to delete proposed NSX Rule 2.12), or (iii) file a proposed
rule change to allow ETP Holders to use either NSX Securities or the
approach provided for in proposed NSX Rule 2.12 for outbound routing.
The Exchange's use of NSX Securities as an outbound router would be
contingent on NSX Securities' successful completion of its registration
process as a broker-dealer with NASD.
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\5\ With this rule filing the Exchange also proposes to amend
NSX Rule 2.11, relating to NSX Securities' Outbound Router function,
to provide that such Rule would become effective on March 1, 2007,
immediately after proposed NSX Rule 2.12 ceases to be effective.
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2. Statutory Basis
NSX believes that the proposed rule change is consistent with the
provisions of Section 6 of the Act,\6\ in general, and with Section
6(b)(5) of the Act,\7\ in particular, in that it is designed to promote
just and equitable principles of trade, to remove impediments to a free
and open market and a national market system, and, in general, to
protect investors and the public interest.
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\6\ 15 U.S.C. 78f(b).
\7\ 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 neither solicited nor received 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 is subject to Section
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder \9\
because the proposal: (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
prior to 30 days after the date of filing or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest; provided that NSX has given the Commission
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.
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\8\ 15 U.S.C. 78s(b)(3)(A)(iii).
\9\ 17 CFR 240.19b-4(f)(6).
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NSX has fulfilled the five-day pre-filing requirement. NSX has
requested that the Commission waive the 30-day operative delay
requirement. The Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest because such waiver would immediately provide NSX and its
market participants with the ability to route orders to away markets
for execution at the best available prices, a key feature of NSX BLADE,
which is now operational. The Commission notes that this proposed rule
change is substantially similar to the rules of another self-regulatory
organization.\10\ For these reasons, the Commission hereby waives the
30-day operative delay requirement.\11\ The Commission notes that NSX
intends to offer outbound routing to its ETP Holders beginning on
November 27, 2006.
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\10\ Rule 126B-AEMI of the American Stock Exchange LLC. See
Securities Exchange Act Release No. 54552 (September 29, 2006), 71
FR 59546 (October 10, 2006) (approving File No. SR-Amex-2005-104).
\11\ For the 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).
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At any time within 60 days of the filing of such 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-comments@sec.gov. Please include
File Number SR-NSX-2006-15 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-2006-15. 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 the
filing also will be available for inspection and copying at the
principal office of the NSX. 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-2006-15 and should
[[Page 69165]]
be submitted on or before December 20, 2006.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
Nancy M. Morris,
Secretary.
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\12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-20218 Filed 11-28-06; 8:45 am]
BILLING CODE 8011-01-P
