Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 123D (Openings and Halts In Trading), 11072-11075 [E7-4327]

Download as PDF 11072 Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Notices positions are significant indicators of investor sentiment.11 As such, the commenter stated that timelier reporting of short interest data provides additional relevant information and more accurate indications of changes in investor outlook.12 In response to these comments and in recognition of technological and systems changes that may be required to implement the proposed rule change, the Commission finds that the 180 day implementation period proposed by the SROs will provide members adequate time to make any necessary changes. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule changes (SR–NASD– 2006–131; SR–NYSE–2006–111; SR– Amex–2007–05) be, and it hereby are,approved. B. Related Issues SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55398; File No. SR–NYSE– 2007–25] Discussion and Commission Findings Short positions required to be reported under the SROs’ rules are those resulting from ‘‘short sales’’ as the term is defined in Rule 200 of Regulation SHO,13 with certain exceptions related to Exchange Act Rule 10a–1.14 Commission staff has instructed the SROs to review these exceptions to short interest reporting to determine whether further rulemaking is appropriate. A. Comments C. Commission Findings The Commission specifically asked whether the proposed 180 day implementation period should be shortened. The Commission received one comment letter.7 The commenter supported the NYSE and NASD proposals 8 because she favored regulation of short sales generally. However, the commenter believed that the implementation period should be shortened. Prior to filing with the Commission, NASD solicited comments on its proposed rule change in NASD Notice to Members 05–63 (September 2005) and received two comments.9 Of the two comment letters received, both were in favor of the proposed rule change. One commenter noted that minimal programming and costs would be required to implement this proposal, but recommended six months for implementation of the proposal.10 The other commenter indicated that increases or decreases in short interest After a review of the rule proposals and the comments, the Commission finds that the proposed rule changes are consistent with the requirements of the Act and the rules and regulations thereunder applicable to national securities exchanges and national securities associations, and in particular Sections 6(b)(5) 15 and 15A(b)(6) 16 of the Act, which require, among other things, that NASD, NYSE, and Amex rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule changes will provide additional and more timely information related to short selling.17 structure and to reflect the adoption of the Commission’s Regulation SHO.5 Æ Amex proposed to increase the frequency of the short interest reporting requirements from monthly to twice a month, and to codify the short interest reporting requirement authorized by Amex Rule 30. The proposed amendment would incorporate the short interest reporting requirements into new Amex Rule 30A. The SROs proposed an implementation date of 180 days (six months) following Commission approval of the filing in order to allow firms sufficient time to make any systems changes necessary to comply with the new requirements. The proposed rule changes were published in the Federal Register on February 1, 2007.6 The Commission received one comment, which was submitted in support of this proposal. Prior to the proposal, NASD had received two comments that also supported the proposal. This order approves the rule change. 5 17 CFR 242.200 through 242.203. Exchange Act Release No. 55170 (January 26, 2007), 72 FR 4756 (February 1, 2007). 7 Letter from Carol McCrory, Visitiing Assistant Professor of Legal Skils, Stetson University College of Law (Jan. 30, 2007) (commenting on SR–NASD– 2006–131 and SR–NYSE–2006–111). 8 See id. The letter did not comment on the Amex proposal. 9 Comments were received from the following: Lisa Morel-Misener of Cognos Incorporated, dated October 27, 2005 and Christopher Charles of Wulff Hansen & Co., dated November 15, 2005. 10 See supra note 9, Wulff Hansen & Co. letter. pwalker on PROD1PC71 with NOTICES 6 Securities VerDate Aug<31>2005 18:04 Mar 09, 2007 Jkt 211001 11 See supra note 9, Cognos Incorporated letter. 12 Id. 13 17 CFR 242.200. CFR 240.10a–1. NASD Rule 3360(b)(1) excludes positions that meet the requirements of subsections (e)(1), (6), (7), (8), and (10) of Rule 10a– 1 and NYSE Rule 421.10 currently excludes positions resulting from sales specified in subsections (1), (6), (7), (8), (9) and (10) of paragraph (e) of Rule 10a–1. NYSE’s proposal removes subsection (9). To conform with the NASD and NYSE rules, Amex Rule 30A as proposed excludes positions resulting from sales specified in Rule 10a–1(e) (1), (6), (7), (8) or (10). 15 15 U.S.C. 78f(b)(5). 16 15 U.S.C. 78o–3(b)(6). 17 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). 14 17 PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.18 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–4293 Filed 3–9–07; 8:45 am] BILLING CODE 8010–01–P Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 123D (Openings and Halts In Trading) March 5, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 2, 2007, the New York Stock Exchange LLC (‘‘NYSE’’ 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 substantially by the Exchange. The Exchange 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 is proposing to amend Exchange Rule 123D to add new section (3) to enable the Exchange to halt trading in a security whose price may be about to fall below $1.00 per share, without delisting the security, so that the security may continue to trade on other markets that deal in bids, offers, orders, or indications of interest in subpenny prices, until the price of the security has recovered sufficiently to 18 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 E:\FR\FM\12MRN1.SGM 12MRN1 Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Notices permit the Exchange to resume trading in minimum increments of no less than one penny or the issuer is delisted for failing to correct the price condition within the time provided under NYSE rules. The text of the proposed rule change is available at http:// www.nyse.com, NYSE and 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. 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 pwalker on PROD1PC71 with NOTICES 1. Purpose Regulation NMS, adopted by the Commission in April 2005,5 provides that each trading center intending to qualify for trade-through protection under Regulation NMS Rule 611 (‘‘Rule 611’’) 6 is required to have a Regulation NMS-compliant trading system fully operational by March 5, 2007 (the ‘‘Trading Phase Date’’).7 Regulation NMS Rule 612 (‘‘Rule 612’’),8 permits markets to accept bids, offers, orders, and indications of interest in increments smaller than a $0.01 per share, but not less than $0.0001 per share, for stocks priced below $1.00 per share and to quote and trade such stocks in sub-pennies. Markets may choose not to accept such bids, offers, orders or indications of interest and the NYSE has done so, maintaining a minimum trading and quoting variation of $0.01 per share for all securities trading below $100,000 per share.9 However, the Commission has said that Rule 611’s proscription against trade-throughs extends to quotes which include a sub-penny component in stocks priced below $1.00 per share, provided they are better priced by a minimum of $0.01 per share.10 Rule 612 5 Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 6 17 CFR 242.611. 7 See Securities Exchange Act Release No. 55160 (January 24, 2007), 72 FR 4202 (January 30, 2007). 8 17 CFR 242.612. 9 See NYSE Rule 62. 10 Order Exempting Certain Sub-Penny TradeThroughs From Rule 611 of Regulation NMS Under VerDate Aug<31>2005 18:04 Mar 09, 2007 Jkt 211001 requires a market that routes an order to another market in compliance with Rule 611 and receives a sub-penny execution to accept the sub-penny execution, report that execution to the customer, and compare, clear and settle that trade. The Exchange states that, currently, there are no markets quoting or trading NYSE-listed securities that are priced under $1.00 per share in sub-penny increments. The Exchange’s trading system does not currently accommodate sub-penny trading, nor can it recognize a quote disseminated by another market center if such quote has a sub-penny component. The Exchange had previously determined that it would not be cost effective to make the changes that would allow its trading system to fully accommodate sub-penny trading. In making this determination, the Exchange weighed the resource allocation choices that would be necessary against the fact that only a very small number of securities listed on the Exchange have fallen below $1.00 in the last three years. The Exchange has been investigating whether there are systemic or other approaches that would allow it to deal with sub-penny executions made on markets to which we have routed an order, while not necessitating all the changes that would be required to fully trade in sub-pennies. No acceptable approach has yet been discovered. The Exchange is proposing an approach which will allow it to avoid trading a security on NYSE when its price falls below $1.00 per share, while permitting it to remain listed on the Exchange so that it could continue to be traded by other markets on an unlisted trading privileges (‘‘UTP’’) basis, including NYSE Arca. This would involve ‘‘halting’’ trading on NYSE, not for a ‘‘regulatory’’ reason (as that would require other markets to stop reporting trades as well), but rather for an ‘‘operational’’ (i.e., non-regulatory) reason. NYSE Rule 123D(2) contemplates such a non-regulatory halt for systems, equipment or communication facility problems or for other technical reasons and, in the Exchange’s view, this is a related situation, since it relates to the Exchange’s systemic inability to properly accommodate these sub-penny prices. Existing Rule 123D(2) contemplates halts which are relatively brief in duration, whereas a halt for the purposes described herein could potentially endure for a number of the Securities Exchange Act of 1934. See Securities and Exchange Commission Release No. 54678 (October 31, 2006), 71 FR 65018 (November 6, 2006). PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 11073 months.11 More significantly, Rule 123D currently requires Floor Official approval to implement a trading halt of any kind, whether regulatory or operational. However, the proposed halt will have to occur automatically, so it must be specified to occur without Floor Official approval. For this reason the Exchange is proposing to codify this new non-regulatory halt in a new subsection (3) or Rule 123D. The Exchange is seeking to expand the use of the operational halt in order to prevent a problem that the Exchange knows would occur if the price of the stock fell below a $1.00 per share.12 Because the Exchange must halt trading before a security in fact trades below $1.00 per share, the new rule will trigger the halt whenever a security trading on the Exchange is reported on the consolidated tape during normal trading hours as having traded at a price of $1.05 per share or less, or if a security would open on the Exchange at a price of $1.05 per share or less. In any such event, trading in the security on the Exchange shall be immediately halted. Once halted for such reason, trading shall not be resumed on the Exchange until the security has traded on another automated trading center as defined in Rule 600(b)(4) under the Act 13 for at least one entire trading day at a price or prices that are at all times at or above $1.10 per share. Any such resumption of trading shall occur at the beginning of a trading day, so that normal opening procedures can apply. As noted above, in contrast to other trading halts, a subpenny trading halt is automatic as it does not require the approval of any Floor Officials.14 However, if a 11 Section 802.01C of the NYSE Listed Company Manual sets out a minimum price criteria for capital or common stock. Currently, that section provides that a company will be considered to be below compliance standards if the average closing price of a security is less than $1.00 over a consecutive 30 trading-day period. Once notified, the company must bring its share price and average share price back above $1.00 within six months. Alternatively, if a company determines that it will cure the price condition by taking an action that will require approval of its shareholders, it must obtain the necessary shareholder approval by a date no later than its next annual meeting, and must implement the action promptly thereafter. The price condition will be deemed cured if the price promptly exceeds $1.00 per share, and the price remains above the level for at least the following 30 trading days. 12 The Exchange will notify its members that the description of ‘‘Equipment Changeover’’ will now include a halt for this new non-regulatory halt. 13 See 17 CFR 242.600(b)(4). 14 Specifically, designated Exchange staff will actively monitor the conditions of the securities and immediately implement the trading halt when the conditions of the securities require such halt without any Floor Official approval. The Exchange will investigate the possibility of creating a systemic modification to automate this process. E:\FR\FM\12MRN1.SGM Continued 12MRN1 11074 Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Notices determination is made by a Floor Official that a trade that triggered a halt because of a ‘‘Sub-penny trading’’ condition was made in error or otherwise was an anomaly, trading of the security on the Exchange will resume immediately. When a halt is called under NYSE Rule 123D, a condition indication is disseminated over the consolidated tape. The condition under new Rule 123D(3) will be denominated as a ‘‘Subpenny trading’’ condition. However, steps will be taken to undertake the system development necessary to enable the dissemination of such a condition description but the changes will not be completed by March 5, 2007, the date when this change must be in place. Accordingly, through September 7, 2007, or the date the systems are able to disseminate such condition, if earlier, should a Sub-penny trading halt be required prior to the system being ready to disseminate such condition notification, the Exchange will in lieu thereof disseminate the ‘‘Equipment Changeover’’ condition (used when a halt is called pursuant to NYSE Rule 123D(2)), and will clarify as soon as practicable that the halt is due to a ‘‘Sub-penny trading’’ condition on the NYSE’s Web site.15 2. Statutory Basis The proposed rule change is consistent with Section 6(b) 16 of the Act, in general, and furthers the objectives of Section 6(b)(5) 17 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. B. Self-Regulatory Organization’s Statement on Burden on Competition pwalker on PROD1PC71 with NOTICES 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. Telephone conversation on March 5, 2007 between Deanna Logan, Director, NYSE and David Liu, Senior Special Counsel, Division of Market Regulation, Commission. 15 See also supra note 12. 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(5). VerDate Aug<31>2005 18:04 Mar 09, 2007 Jkt 211001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 18 and Rule 19b–4(f)(6) thereunder.19 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. NYSE has asked that the Commission waive the 30-day operative delay and five-day pre-filing requirement contained in Rule 19b–4(f)(6)(iii) under the Act.20 The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest because it expands the Exchange’s current use of trading halts for operational reasons to preemptively prevent operational problems on the Exchange and enable the Exchange to comply with Rule 612. The proposal is also consistent with the public interest and the protection of investors because it will permit Exchange-listed securities whose price falls below $1.05 per share to continue to quote and trade on an UTP basis, including in sub-penny increments, while recognizing the current limitations of the Exchange’s systemic capacities in that regard. 18 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 20 CFR 240.19b–4(f)(6)(iii). Rule 19b–4(f)(6) also requires the self-regulatory organization to give 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. NYSE gave the Commission written notice of its intention to file the proposed rule change on February 26, 2007, four business days prior to filing. The Commission is granting the Exchange’s request for a waiver of the five-day prefiling requirement. 19 17 PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 Accordingly, the Commission designates the proposal to be effective and operative upon filing with the Commission.21 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2007–25 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2007–25. 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 the 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–2007–25 and should be submitted on or before April 2, 2007. 21 For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). E:\FR\FM\12MRN1.SGM 12MRN1 Federal Register / Vol. 72, No. 47 / Monday, March 12, 2007 / Notices For the Commission, by the Division of Market Regulation, pursuant to delegated authority.22 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–4327 Filed 3–9–07; 8:45 am] Percent BILLING CODE 8010–01–P SMALL BUSINESS ADMINISTRATION Other (Including Non-Profit Organizations) With Credit Available Elsewhere ........................ Businesses and Non-Profit Organizations Without Credit Available Elsewhere ........................ For Economic Injury: Businesses and Small Agricultural Cooperatives Without Credit Available Elsewhere ..... 5.250 [Disaster Declaration #10821 and #10822] Alabama Disaster #AL–00007 U.S. Small Business Administration. ACTION: Notice. The number assigned to this disaster for physical damage is 10821B and for economic injury is 108220. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008.) AGENCY: This is a Notice of the Presidential declaration of a major disaster for the State of Alabama (FEMA–1687–DR), dated 03/03/2007. Incident: Severe Storms and Tornadoes. Incident Period: 03/01/2007. Effective Date: 03/03/2007. Physical Loan Application Deadline Date: 05/02/2007. Economic Injury (EIDL) Loan Application Deadline Date: 12/03/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing And Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 03/03/2007, applications for disaster loans may be filed at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties (Physical Damage and Economic Injury Loans): Coffee. Contiguous Counties (Economic Injury Loans Only): Alabama: Covington, Crenshaw, Dale, Geneva, and Pike. The Interest Rates are: pwalker on PROD1PC71 with NOTICES SUMMARY: For Physical Damage: Homeowners With Credit Available Elsewhere ........................ Homeowners Without Credit Available Elsewhere ................ Businesses With Credit Available Elsewhere ................................ 22 17 CFR 200.30–3(a)(12). VerDate Aug<31>2005 18:04 Mar 09, 2007 Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E7–4364 Filed 3–9–07; 8:45 am] BILLING CODE 8025–01–P The Interest Rates are: Percent For Physical Damage: Homeowners With Credit Available Elsewhere ........................ Homeowners Without Credit Available Elsewhere ................ Businesses With Credit Available Elsewhere ................................ Other (Including Non-Profit Organizations) With Credit Available Elsewhere ........................ Businesses and Non-Profit Organizations Without Credit Available Elsewhere ........................ For Economic Injury Businesses and Small Agricultural Cooperatives Without Credit Available Elsewhere ..... 5.750 2.875 8.000 5.250 4.000 4.000 SMALL BUSINESS ADMINISTRATION [Disaster Declaration #10819 and #10820] Georgia Disaster #GA–00008 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 The number assigned to this disaster for physical damage is 10819B and for economic injury is 108200. (Catalog of Federal Domestic Assistance Numbers 59002 and 59008.) U.S. Small Business Administration. ACTION: Notice. AGENCY: SUMMARY: This is a Notice of the Presidential declaration of a major disaster for the State of Georgia (FEMA– 1686–DR), dated 03/03/2007. Incident: Severe Storms and Tornadoes. Incident Period: 03/01/2007 through 03/02/2007. Effective Date: 03/03/2007. Physical Loan Application Deadline Date: 05/02/2007. Economic Injury (EIDL) Loan Application Deadline Date: 12/03/2007. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing And Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the Percent President’s major disaster declaration on 03/03/2007, applications for disaster loans may be filed at the address listed above or other locally announced 5.750 locations. The following areas have been 2.875 determined to be adversely affected by 8.000 the disaster: Primary Counties (Physical Damage and Economic Injury Loans): Sumter. Jkt 211001 Contiguous Counties (Economic Injury Loans Only): Georgia: Crisp, Dooly, Lee, Macon, Marion, Schley, Terrell, and Webster. 4.000 4.000 11075 Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E7–4363 Filed 3–9–07; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION Maine District Advisory Council; Public Meeting The U.S. Small Business Administration Maine District Advisory Council, located in the geographical area of Augusta, Maine will hold a public meeting on Tuesday, March 27, 2007, starting at 10 a.m. The meeting will be held at Husson College, Center for Family Business, One College Circle, Bangor, ME 04401. The purpose of the meeting is to discuss the following topics: (1) SBA Small Business Week; (2) Lender update (centralized processing, participating and lender forms); (3) Updates by SCORE; Maine Small Business Development Center and Women’s Business Center; (4) An overview of SBA’s Alternate Work Site in Bangor, Maine presented by Herb Thomas, Senior Area Manager. For further information, write or call Mary McAleney, District Director, U.S. Small Business Administration, Maine District Office, 68 Sewall Street, Room E:\FR\FM\12MRN1.SGM 12MRN1

Agencies

[Federal Register Volume 72, Number 47 (Monday, March 12, 2007)]
[Notices]
[Pages 11072-11075]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-4327]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55398; File No. SR-NYSE-2007-25]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Rule 123D (Openings and Halts In Trading)

March 5, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 2, 2007, the New York Stock Exchange LLC (``NYSE'' 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 substantially by the Exchange. 
The Exchange 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Exchange Rule 123D to add new 
section (3) to enable the Exchange to halt trading in a security whose 
price may be about to fall below $1.00 per share, without delisting the 
security, so that the security may continue to trade on other markets 
that deal in bids, offers, orders, or indications of interest in sub-
penny prices, until the price of the security has recovered 
sufficiently to

[[Page 11073]]

permit the Exchange to resume trading in minimum increments of no less 
than one penny or the issuer is delisted for failing to correct the 
price condition within the time provided under NYSE rules. The text of 
the proposed rule change is available at http://www.nyse.com, NYSE and 
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. 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
    Regulation NMS, adopted by the Commission in April 2005,\5\ 
provides that each trading center intending to qualify for trade-
through protection under Regulation NMS Rule 611 (``Rule 611'') \6\ is 
required to have a Regulation NMS-compliant trading system fully 
operational by March 5, 2007 (the ``Trading Phase Date'').\7\
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 
FR 37496 (June 29, 2005).
    \6\ 17 CFR 242.611.
    \7\ See Securities Exchange Act Release No. 55160 (January 24, 
2007), 72 FR 4202 (January 30, 2007).
---------------------------------------------------------------------------

    Regulation NMS Rule 612 (``Rule 612''),\8\ permits markets to 
accept bids, offers, orders, and indications of interest in increments 
smaller than a $0.01 per share, but not less than $0.0001 per share, 
for stocks priced below $1.00 per share and to quote and trade such 
stocks in sub-pennies. Markets may choose not to accept such bids, 
offers, orders or indications of interest and the NYSE has done so, 
maintaining a minimum trading and quoting variation of $0.01 per share 
for all securities trading below $100,000 per share.\9\
---------------------------------------------------------------------------

    \8\ 17 CFR 242.612.
    \9\ See NYSE Rule 62.
---------------------------------------------------------------------------

    However, the Commission has said that Rule 611's proscription 
against trade-throughs extends to quotes which include a sub-penny 
component in stocks priced below $1.00 per share, provided they are 
better priced by a minimum of $0.01 per share.\10\ Rule 612 requires a 
market that routes an order to another market in compliance with Rule 
611 and receives a sub-penny execution to accept the sub-penny 
execution, report that execution to the customer, and compare, clear 
and settle that trade.
---------------------------------------------------------------------------

    \10\ Order Exempting Certain Sub-Penny Trade-Throughs From Rule 
611 of Regulation NMS Under the Securities Exchange Act of 1934. See 
Securities and Exchange Commission Release No. 54678 (October 31, 
2006), 71 FR 65018 (November 6, 2006).
---------------------------------------------------------------------------

    The Exchange states that, currently, there are no markets quoting 
or trading NYSE-listed securities that are priced under $1.00 per share 
in sub-penny increments. The Exchange's trading system does not 
currently accommodate sub-penny trading, nor can it recognize a quote 
disseminated by another market center if such quote has a sub-penny 
component. The Exchange had previously determined that it would not be 
cost effective to make the changes that would allow its trading system 
to fully accommodate sub-penny trading. In making this determination, 
the Exchange weighed the resource allocation choices that would be 
necessary against the fact that only a very small number of securities 
listed on the Exchange have fallen below $1.00 in the last three years.
    The Exchange has been investigating whether there are systemic or 
other approaches that would allow it to deal with sub-penny executions 
made on markets to which we have routed an order, while not 
necessitating all the changes that would be required to fully trade in 
sub-pennies. No acceptable approach has yet been discovered.
    The Exchange is proposing an approach which will allow it to avoid 
trading a security on NYSE when its price falls below $1.00 per share, 
while permitting it to remain listed on the Exchange so that it could 
continue to be traded by other markets on an unlisted trading 
privileges (``UTP'') basis, including NYSE Arca. This would involve 
``halting'' trading on NYSE, not for a ``regulatory'' reason (as that 
would require other markets to stop reporting trades as well), but 
rather for an ``operational'' (i.e., non-regulatory) reason. NYSE Rule 
123D(2) contemplates such a non-regulatory halt for systems, equipment 
or communication facility problems or for other technical reasons and, 
in the Exchange's view, this is a related situation, since it relates 
to the Exchange's systemic inability to properly accommodate these sub-
penny prices. Existing Rule 123D(2) contemplates halts which are 
relatively brief in duration, whereas a halt for the purposes described 
herein could potentially endure for a number of months.\11\ More 
significantly, Rule 123D currently requires Floor Official approval to 
implement a trading halt of any kind, whether regulatory or 
operational. However, the proposed halt will have to occur 
automatically, so it must be specified to occur without Floor Official 
approval. For this reason the Exchange is proposing to codify this new 
non-regulatory halt in a new subsection (3) or Rule 123D. The Exchange 
is seeking to expand the use of the operational halt in order to 
prevent a problem that the Exchange knows would occur if the price of 
the stock fell below a $1.00 per share.\12\
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    \11\ Section 802.01C of the NYSE Listed Company Manual sets out 
a minimum price criteria for capital or common stock. Currently, 
that section provides that a company will be considered to be below 
compliance standards if the average closing price of a security is 
less than $1.00 over a consecutive 30 trading-day period. Once 
notified, the company must bring its share price and average share 
price back above $1.00 within six months. Alternatively, if a 
company determines that it will cure the price condition by taking 
an action that will require approval of its shareholders, it must 
obtain the necessary shareholder approval by a date no later than 
its next annual meeting, and must implement the action promptly 
thereafter. The price condition will be deemed cured if the price 
promptly exceeds $1.00 per share, and the price remains above the 
level for at least the following 30 trading days.
    \12\ The Exchange will notify its members that the description 
of ``Equipment Changeover'' will now include a halt for this new 
non-regulatory halt.
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    Because the Exchange must halt trading before a security in fact 
trades below $1.00 per share, the new rule will trigger the halt 
whenever a security trading on the Exchange is reported on the 
consolidated tape during normal trading hours as having traded at a 
price of $1.05 per share or less, or if a security would open on the 
Exchange at a price of $1.05 per share or less. In any such event, 
trading in the security on the Exchange shall be immediately halted. 
Once halted for such reason, trading shall not be resumed on the 
Exchange until the security has traded on another automated trading 
center as defined in Rule 600(b)(4) under the Act \13\ for at least one 
entire trading day at a price or prices that are at all times at or 
above $1.10 per share. Any such resumption of trading shall occur at 
the beginning of a trading day, so that normal opening procedures can 
apply. As noted above, in contrast to other trading halts, a sub-penny 
trading halt is automatic as it does not require the approval of any 
Floor Officials.\14\ However, if a

[[Page 11074]]

determination is made by a Floor Official that a trade that triggered a 
halt because of a ``Sub-penny trading'' condition was made in error or 
otherwise was an anomaly, trading of the security on the Exchange will 
resume immediately.
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    \13\ See 17 CFR 242.600(b)(4).
    \14\ Specifically, designated Exchange staff will actively 
monitor the conditions of the securities and immediately implement 
the trading halt when the conditions of the securities require such 
halt without any Floor Official approval. The Exchange will 
investigate the possibility of creating a systemic modification to 
automate this process. Telephone conversation on March 5, 2007 
between Deanna Logan, Director, NYSE and David Liu, Senior Special 
Counsel, Division of Market Regulation, Commission.
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    When a halt is called under NYSE Rule 123D, a condition indication 
is disseminated over the consolidated tape. The condition under new 
Rule 123D(3) will be denominated as a ``Sub-penny trading'' condition. 
However, steps will be taken to undertake the system development 
necessary to enable the dissemination of such a condition description 
but the changes will not be completed by March 5, 2007, the date when 
this change must be in place. Accordingly, through September 7, 2007, 
or the date the systems are able to disseminate such condition, if 
earlier, should a Sub-penny trading halt be required prior to the 
system being ready to disseminate such condition notification, the 
Exchange will in lieu thereof disseminate the ``Equipment Changeover'' 
condition (used when a halt is called pursuant to NYSE Rule 123D(2)), 
and will clarify as soon as practicable that the halt is due to a 
``Sub-penny trading'' condition on the NYSE's Web site.\15\
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    \15\ See also supra note 12.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \16\ of 
the Act, in general, and furthers the objectives of Section 6(b)(5) 
\17\ in particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\18\ and Rule 19b-4(f)(6) thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
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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.
    NYSE has asked that the Commission waive the 30-day operative delay 
and five-day pre-filing requirement contained in Rule 19b-4(f)(6)(iii) 
under the Act.\20\ The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because it expands the Exchange's current use of 
trading halts for operational reasons to preemptively prevent 
operational problems on the Exchange and enable the Exchange to comply 
with Rule 612. The proposal is also consistent with the public interest 
and the protection of investors because it will permit Exchange-listed 
securities whose price falls below $1.05 per share to continue to quote 
and trade on an UTP basis, including in sub-penny increments, while 
recognizing the current limitations of the Exchange's systemic 
capacities in that regard. Accordingly, the Commission designates the 
proposal to be effective and operative upon filing with the 
Commission.\21\
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    \20\ CFR 240.19b-4(f)(6)(iii). Rule 19b-4(f)(6) also requires 
the self-regulatory organization to give 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. NYSE 
gave the Commission written notice of its intention to file the 
proposed rule change on February 26, 2007, four business days prior 
to filing. The Commission is granting the Exchange's request for a 
waiver of the five-day pre-filing requirement.
    \21\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2007-25 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2007-25. 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 the 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-2007-25 and should be submitted on or before April 
2, 2007.


[[Page 11075]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-4327 Filed 3-9-07; 8:45 am]
BILLING CODE 8010-01-P