Self-Regulatory Organizations; New York Stock Exchange LLC.; Order Approving Proposed Rule Change and Notice of filing and Order Granting Accelerated Approval to Amendment No. 1 Thereto, Regarding the Amendment of NYSE Rule 300 Relating to Trading Licenses and the Deletion of NYSE Rule 300T, 78496-78497 [E6-22397]

Download as PDF 78496 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices SECURITIES AND EXCHANGE COMMISSION accelerated approval of Amendment No. 1. [Release No. 34–54998; File No. SR–NYSE– 2006–98] II. Summary of Comments and NYSE’s Response The Commission received three letters from two commenters on the proposed rule change.5 Both commenters objected to the proposed fixed fee and favored retaining the Dutch auction process for pricing trading licenses. The Lipari Letter asserted that the 2006 trading license fee should be the reference point for an auction to establish the price of the trading licenses for 2007. The Lipari Letter noted that, because price discovery is a feature of trading on the floor of NYSE, it should also be employed in the pricing of trading licenses. The First Peake Letter argued that, in the commenter’s view, the value of a NYSE floor trading license has diminished as a result of the Exchange’s merger with Archipelago Holdings, Inc. (‘‘Archipelago’’). The commenter further argued that a reduced presence of firms on the NYSE floor might further reduce the demand for trading licenses, particularly as Regulation NMS is implemented. The First Peake Letter also contended that the NYSE is in a quasi-monopolistic position on account of its market share and that the proposal is anticompetitive. The Second Peake Letter commented on the Commission’s approval process with respect to the proposed rule change. In response to the Lipari Letter and the First Peake Letter, the Exchange noted that the proposal to eliminate the Dutch auction process was made in response to comments it received from many of its member organizations about the undesirability of using this auction process to price trading licenses. The Exchange noted that the price for trading licenses for 2006 was $49,290 (not $42,290, as was stated in the Lipari Letter). The Exchange asserted that the proposed fixed trading license price of $50,000 for 2007 represents a minimal, incremental increase over the trading license price for 2006. The Exchange also argued that, when the effects of inflation are taken into account, the $50,000 trading license price for 2007 is actually lower than the 2006 trading license price. The Exchange disagreed with the Liparti Letter’s assertion that the Exchange is incapable of setting a fair price because of profit motives. The Exchange pointed out that it has other valuable sources of revenue from activity on the Exchange and that imposing an unreasonably high trading Self-Regulatory Organizations; New York Stock Exchange LLC.; Order Approving Proposed Rule Change and Notice of filing and Order Granting Accelerated Approval to Amendment No. 1 Thereto, Regarding the Amendment of NYSE Rule 300 Relating to Trading Licenses and the Deletion of NYSE Rule 300T December 21, 2006. I. Introduction On November 3, 2006, the New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend NYSE Rule 300 to eliminate the modified Dutch auction process for the pricing and issuance of annual trading licenses and to impose a fixed, annual price of $50,000 for trading licenses issued for calendar year 2007. The Exchange also proposed to increase the fee relating to the approval of any new member or pre-qualified substitute, as well as to delete NYSE Rule 300T that pertained only to the initial issuance of trading licenses for calendar year 2006. The proposed rule change was published for comment in the Federal Register on November 14, 2006.3 The Commission received three comments on the proposed rule change.4 On November 28, 2006, NYSE submitted Amendment No. 1 to the proposed rule change. In Amendment No. 1, the Exchange proposed to remove the deposit and termination fee requirements associated with the issuance of trading licenses. On December 18, 2006, NYSE filed a response to two of the comment letters (‘‘NYSE Response’’). This order approves the proposed rule change. Simultaneously, the Commission provides notice of filing of Amendment No. 1 and grants 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 54713 (November 6, 2006), 71 FR 66359. 4 November 28, 2006 letter from Junius W. Peake, Professor, University of Northern Colorado (‘‘First Peake Letter’’); December 5, 2006 letter from Frank Lipari, President, and Andrew W. Strobel, Chief Compliance Officer, Lipari Partners, Inc. (‘‘Lipari Letter’’); and December 18, 2006 letter from Junius W. Peake, Professor, University of Northern Colorado (‘‘Second Peake Letter’’). pwalker on PROD1PC69 with NOTICES 2 17 VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 5 See PO 00000 id. Frm 00102 Fmt 4703 Sfmt 4703 license price would likely reduce access to, and activity on, its trading facilities, thus diminishing the overall profitability of the Exchange. In response to the First Peake Letter, the Exchange noted that the trading license application process for the 2007 trading licenses, which is already in progress, has demonstrated a robust demand for trading licenses at the proposed fixed price of $50,000. The Exchange noted that the reduction in physical presence on its floor is attributable to the roll-out of its HybridMarket initiative, which enables electronic execution on the Exchange. The Exchange asserted that, in the event that the price of access to its market (in this case $50,000 for a trading license) is too high or unfair, market participants have demonstrated their ability to use other venues for order execution. III. Discussion and Commission Findings The Commission has reviewed carefully the proposed rule change, the comment letters, and the NYSE’s response to the comments, and finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 6 and, in particular, the requirements of Section 6(b)(4) of the Act.7 Section 6(b)(4) requires, among other things, that the rules of an exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and users and other persons using its facilities. The Commission believes that the Exchange’s proposal to eliminate the annual Dutch auction process to determine the price of trading licenses and to establish a fixed fee of $50,000 per trading license is reasonable. In the Commission’s view, the fixed fee removes uncertainty in the process for establishing the price of trading licenses and helps to simplify the process for the issuance of trading licenses. While both commenters on the proposal believe that the Dutch auction process is a fairer means of establishing the price for trading licenses for members, the Commission notes that the Exchange has stated that the proposed rule change was based on comments it received from many of its member organizations about the undesirability of the Dutch auction process. The Exchange also stated that moving to a fixed price would simplify the process 6 In approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(4). E:\FR\FM\29DEN1.SGM 29DEN1 Federal Register / Vol. 71, No. 250 / Friday, December 29, 2006 / Notices for member organizations to obtain trading licenses. The Commission also believes that the increased fee for the approval of any new member or pre-qualified substitute is reasonable. The Exchange has represented that the new fee is necessary to defray the administrative expenses associated with this process and that it is equivalent to the fee for transfers of memberships charged by the Exchange prior to its merger with Archipelago. The Commission also believes that the proposals to eliminate the deposit fee and termination fee requirements associated with the issuance of trading licenses and to remove NYSE Rule 300T are appropriate. The Commission finds good cause for approving Amendment No. 1 before the 30th day after the date of publication of notice of filing thereof in the Federal Register. Amendment No. 1 would eliminate the deposit and termination fee requirements associated with the purchase of trading licenses. Because the changes set forth in Amendment No. 1 involve a reduction in fees and do not appear to raise any issues of regulatory concern, the Commission finds good cause for accelerating approval of Amendment No. 1. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the Amendment No. 1 is consistent with the Act. Comments may be submitted by any of the following methods: pwalker on PROD1PC69 with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2006–98 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–2006–98. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent VerDate Aug<31>2005 18:15 Dec 28, 2006 Jkt 211001 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 NYSE. 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–2006–98 and should be submitted on or before January 19, 2007. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (SR–NYSE–2006– 98) be, and it hereby is, approved, and that Amendment No. 1 to the proposed rule change be, and hereby is, approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.9 Florence E. Harmon, Deputy Secretary. [FR Doc. E6–22397 Filed 12–28–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 55003; File No. SR–NYSE– 2006–109] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change Relating to NYSE Regulation, Inc. Policies Regarding Exercise of Power to Fine NYSE Member Organizations and Use of Money Collected as Fines December 22, 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 December 6, 2006, the New York Stock Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’) filed with the Securities and Exchange 8 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12); 17 CFR 200.30–3(a)(44). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 9 17 PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 78497 Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared substantially by the Exchange. 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 Regulation, Inc. (‘‘NYSE Regulation’’) proposed to adopt internal procedures to assure the proper exercise by NYSE Regulation of its power to fine member organizations of the Exchange and the proper use by NYSE Regulation of the funds so collected. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http:// www.nyse.com. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose In conversation with the staff of the Commission, prior to Commission approval of rule changes related to the merger of the New York Stock Exchange, Inc. with Archipelago Holdings, Inc., the Exchange undertook to subsequently file with the Commission a proposed rule change regarding NYSE Regulation’s use of fines collected from member organizations following disciplinary action by NYSE Regulation against such member organizations.3 The purpose of this proposed rule change is to provide increased transparency regarding the processes which NYSE Regulation has in place to insure that the power of the Exchange, 3 See Securities Exchange Act Release No. 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR–NYSE–2005–77), at note 231 (‘‘Approval Order’’). E:\FR\FM\29DEN1.SGM 29DEN1

Agencies

[Federal Register Volume 71, Number 250 (Friday, December 29, 2006)]
[Notices]
[Pages 78496-78497]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-22397]



[[Page 78496]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54998; File No. SR-NYSE-2006-98]


Self-Regulatory Organizations; New York Stock Exchange LLC.; 
Order Approving Proposed Rule Change and Notice of filing and Order 
Granting Accelerated Approval to Amendment No. 1 Thereto, Regarding the 
Amendment of NYSE Rule 300 Relating to Trading Licenses and the 
Deletion of NYSE Rule 300T

December 21, 2006.

I. Introduction

    On November 3, 2006, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Rule 300 to eliminate the modified 
Dutch auction process for the pricing and issuance of annual trading 
licenses and to impose a fixed, annual price of $50,000 for trading 
licenses issued for calendar year 2007. The Exchange also proposed to 
increase the fee relating to the approval of any new member or pre-
qualified substitute, as well as to delete NYSE Rule 300T that 
pertained only to the initial issuance of trading licenses for calendar 
year 2006. The proposed rule change was published for comment in the 
Federal Register on November 14, 2006.\3\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 54713 (November 6, 
2006), 71 FR 66359.
---------------------------------------------------------------------------

    The Commission received three comments on the proposed rule 
change.\4\ On November 28, 2006, NYSE submitted Amendment No. 1 to the 
proposed rule change. In Amendment No. 1, the Exchange proposed to 
remove the deposit and termination fee requirements associated with the 
issuance of trading licenses. On December 18, 2006, NYSE filed a 
response to two of the comment letters (``NYSE Response'').
---------------------------------------------------------------------------

    \4\ November 28, 2006 letter from Junius W. Peake, Professor, 
University of Northern Colorado (``First Peake Letter''); December 
5, 2006 letter from Frank Lipari, President, and Andrew W. Strobel, 
Chief Compliance Officer, Lipari Partners, Inc. (``Lipari Letter''); 
and December 18, 2006 letter from Junius W. Peake, Professor, 
University of Northern Colorado (``Second Peake Letter'').
---------------------------------------------------------------------------

    This order approves the proposed rule change. Simultaneously, the 
Commission provides notice of filing of Amendment No. 1 and grants 
accelerated approval of Amendment No. 1.

II. Summary of Comments and NYSE's Response

    The Commission received three letters from two commenters on the 
proposed rule change.\5\ Both commenters objected to the proposed fixed 
fee and favored retaining the Dutch auction process for pricing trading 
licenses. The Lipari Letter asserted that the 2006 trading license fee 
should be the reference point for an auction to establish the price of 
the trading licenses for 2007. The Lipari Letter noted that, because 
price discovery is a feature of trading on the floor of NYSE, it should 
also be employed in the pricing of trading licenses.
---------------------------------------------------------------------------

    \5\ See id.
---------------------------------------------------------------------------

    The First Peake Letter argued that, in the commenter's view, the 
value of a NYSE floor trading license has diminished as a result of the 
Exchange's merger with Archipelago Holdings, Inc. (``Archipelago''). 
The commenter further argued that a reduced presence of firms on the 
NYSE floor might further reduce the demand for trading licenses, 
particularly as Regulation NMS is implemented. The First Peake Letter 
also contended that the NYSE is in a quasi-monopolistic position on 
account of its market share and that the proposal is anticompetitive. 
The Second Peake Letter commented on the Commission's approval process 
with respect to the proposed rule change.
    In response to the Lipari Letter and the First Peake Letter, the 
Exchange noted that the proposal to eliminate the Dutch auction process 
was made in response to comments it received from many of its member 
organizations about the undesirability of using this auction process to 
price trading licenses. The Exchange noted that the price for trading 
licenses for 2006 was $49,290 (not $42,290, as was stated in the Lipari 
Letter). The Exchange asserted that the proposed fixed trading license 
price of $50,000 for 2007 represents a minimal, incremental increase 
over the trading license price for 2006. The Exchange also argued that, 
when the effects of inflation are taken into account, the $50,000 
trading license price for 2007 is actually lower than the 2006 trading 
license price.
    The Exchange disagreed with the Liparti Letter's assertion that the 
Exchange is incapable of setting a fair price because of profit 
motives. The Exchange pointed out that it has other valuable sources of 
revenue from activity on the Exchange and that imposing an unreasonably 
high trading license price would likely reduce access to, and activity 
on, its trading facilities, thus diminishing the overall profitability 
of the Exchange.
    In response to the First Peake Letter, the Exchange noted that the 
trading license application process for the 2007 trading licenses, 
which is already in progress, has demonstrated a robust demand for 
trading licenses at the proposed fixed price of $50,000. The Exchange 
noted that the reduction in physical presence on its floor is 
attributable to the roll-out of its Hybrid-Market initiative, which 
enables electronic execution on the Exchange. The Exchange asserted 
that, in the event that the price of access to its market (in this case 
$50,000 for a trading license) is too high or unfair, market 
participants have demonstrated their ability to use other venues for 
order execution.

III. Discussion and Commission Findings

    The Commission has reviewed carefully the proposed rule change, the 
comment letters, and the NYSE's response to the comments, and finds 
that the proposed rule change, as amended, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange \6\ and, in particular, 
the requirements of Section 6(b)(4) of the Act.\7\ Section 6(b)(4) 
requires, among other things, that the rules of an exchange provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members and users and other persons using its facilities. The 
Commission believes that the Exchange's proposal to eliminate the 
annual Dutch auction process to determine the price of trading licenses 
and to establish a fixed fee of $50,000 per trading license is 
reasonable. In the Commission's view, the fixed fee removes uncertainty 
in the process for establishing the price of trading licenses and helps 
to simplify the process for the issuance of trading licenses. While 
both commenters on the proposal believe that the Dutch auction process 
is a fairer means of establishing the price for trading licenses for 
members, the Commission notes that the Exchange has stated that the 
proposed rule change was based on comments it received from many of its 
member organizations about the undesirability of the Dutch auction 
process. The Exchange also stated that moving to a fixed price would 
simplify the process

[[Page 78497]]

for member organizations to obtain trading licenses.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Commission also believes that the increased fee for the 
approval of any new member or pre-qualified substitute is reasonable. 
The Exchange has represented that the new fee is necessary to defray 
the administrative expenses associated with this process and that it is 
equivalent to the fee for transfers of memberships charged by the 
Exchange prior to its merger with Archipelago. The Commission also 
believes that the proposals to eliminate the deposit fee and 
termination fee requirements associated with the issuance of trading 
licenses and to remove NYSE Rule 300T are appropriate.
    The Commission finds good cause for approving Amendment No. 1 
before the 30th day after the date of publication of notice of filing 
thereof in the Federal Register. Amendment No. 1 would eliminate the 
deposit and termination fee requirements associated with the purchase 
of trading licenses. Because the changes set forth in Amendment No. 1 
involve a reduction in fees and do not appear to raise any issues of 
regulatory concern, the Commission finds good cause for accelerating 
approval of Amendment No. 1.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the Amendment No. 
1 is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2006-98 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-2006-98. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NYSE. 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-2006-98 and should be submitted on or before January 19, 2007.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NYSE-2006-98) be, and it 
hereby is, approved, and that Amendment No. 1 to the proposed rule 
change be, and hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12); 17 CFR 200.30-3(a)(44).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-22397 Filed 12-28-06; 8:45 am]
BILLING CODE 8011-01-P