Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 80A (Index Arbitrage Trading Restrictions), 62719-62721 [E7-21773]
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Federal Register / Vol. 72, No. 214 / Tuesday, November 6, 2007 / Notices
FINRA policies, moreover, Nasdaq is
amending the rule to stipulate that the
identity of the executive representative
is non-public information. This
restriction ensures that personal contact
information for executive
representatives is not used for improper
purposes.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of section 6 of the Act,13 in
general, and with section 6(b)(5) of the
Act,14 in particular, in that the proposal
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
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will result in 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
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Nasdaq consents, the
Commission will:
(A) By order approve such proposed
rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
mstockstill on PROD1PC66 with NOTICES
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
14 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
VerDate Aug<31>2005
16:55 Nov 05, 2007
[Release No. 34–56726; File No. SR–NYSE–
2007–96]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Rule 80A (Index Arbitrage Trading
Restrictions)
Paper Comments
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
25, 2007, the New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘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 substantially prepared by the
Exchange. The NYSE filed the proposal
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6) thereunder,4
which renders it effective upon filing
with the Commission. The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
• 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–NASDAQ–2007–085. 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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of Nasdaq. 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–NASDAQ–2007–085 and
should be submitted on or before
November 27, 2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–21740 Filed 11–5–07; 8:45 am]
15 17
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SECURITIES AND EXCHANGE
COMMISSION
• 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–NASDAQ–2007–085 on the
subject line.
PO 00000
CFR 200.30–3(a)(12).
Frm 00097
Fmt 4703
October 31, 2007.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to rescind
NYSE Rule 80A (Index Arbitrage
Trading Restrictions) to eliminate order
entry restrictions on certain index
arbitrage orders entered on the
Exchange. The text of the proposed rule
change is available on the NYSE’s Web
site (https://www.nyse.com), at the
NYSE, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any 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.
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
BILLING CODE 8011–01–P
13 15
62719
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Federal Register / Vol. 72, No. 214 / Tuesday, November 6, 2007 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to rescind
NYSE Rule 80A (Index Arbitrage
Trading Restrictions) and thereby
eliminate the ‘‘collar’’ provisions of the
rule. Currently, NYSE Rule 80A(a) and
(b) require that, for any component
stock of the S&P 500 Stock Price
IndexSM, whenever the NYSE
Composite Index (‘‘NYA’’) 5 advances
or declines by a predetermined value
from its previous day’s closing value, all
index arbitrage orders to buy or sell
(depending on the direction of the move
in the NYA) must be entered as either
‘‘buy minus’’ or ‘‘sell plus.’’ 6 The tick
restrictions are imposed based upon a
‘‘two-percent value’’ change in the NYA
from its prior day’s closing value, where
the ‘‘two-percent change’’ is two percent
of the average closing value of the NYA
for the last month of the previous
calendar quarter, rounded down to the
nearest ten points. The order entry
conditions are lifted if the NYA recovers
to within one percent of the previous
day’s closing value, and can be
reimposed if the average moves away by
two percent again during a trading
session.
mstockstill on PROD1PC66 with NOTICES
NYSE Rule 80A
NYSE states that NYSE Rule 80A was
formulated as one of the responses to
the market break of October 1987 to
reduce market volatility and promote
investor confidence.7 In its initial form,
the rule used a measure of a 50 point
move in the Dow Jones Industrial
AverageSM to activate restrictions on
order entry in S&P 500 stocks into
Exchange systems.8 The restrictions
5 The trigger values were originally based on
movement in the value of the Dow Jones Industrial
Average, but were changed in 2005. See Securities
Exchange Act Release No. 52328 (August 24, 2005),
70 FR 51398 (August 30, 2005) (SR–NYSE–2005–
45).
6 NYSE Rule 13 defines a ‘‘buy minus’’ order as
an order to buy a stated amount of stock provided
that the price to be obtained is not higher than the
last sale if the last sale was a ‘‘minus’’ or ‘‘zero
minus’’ tick, and is not higher than the last sale
minus the minimum fractional change in the stock
if the last sale was a ‘‘plus’’ or ‘‘zero plus’’ tick. A
‘‘sell plus’’ order is defined as an order to sell a
stated amount of a stock provided that the price to
be obtained is not lower than the last sale if the last
sale was a ‘‘plus’’ or ‘‘zero plus’’ tick, and is not
lower than the last sale plus the minimum
fractional change in the stock if the last sale was
a ‘‘minus’’ or ‘‘zero minus’’ tick.
7 Rule 80A was originally approved by the
Commission in April 1988. See Securities Exchange
Act Release No. 25599 (April 19, 1988), 53 FR
13371 (April 22, 1988) (SR–NYSE–88–02).
8 ‘‘Dow Jones Industrial Average’’ is a service
mark of Dow Jones & Co., Inc.
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16:55 Nov 05, 2007
Jkt 214001
were triggered on relatively few
occasions throughout the early 1990s
(for example, only 9 times in 1993), but
were increasingly invoked as volatility
heightened later in the decade (366
times in 1998). The basis for the
restrictions calculation was changed in
1999 from 50 points to the two percent
value discussed above.9 This had the
effect of reining in the imposition of the
restrictions; in fact, they were imposed
only once during 2004–2005. They have
been imposed 15 times so far in 2007.
The Exchange is making this change
since it does not appear that the
approach to market volatility envisioned
by the use of these ‘‘collars’’ is as
meaningful today as when the rule was
formalized in the late 1980s. In the
Exchange’s view, volatility is neither
restrained nor enhanced by the
imposition of the collars. It is as likely
that markets will reverse trends whether
or not Rule 80A is invoked. In addition,
NYSE Rule 80A addresses only one type
of trading strategy, namely index
arbitrage, whereas the number and types
of strategies have increased markedly in
the last 20 years and may as well
contribute to the increase in or lack of
volatility. Indeed, in approving the
Exchange’s expansion of the collars to
the two percent level in 1999, the
Commission stated that ‘‘[i]t may make
little sense to single out index arbitrage,
which ensures that markets are aligned
economically, from all other types of
program trading.’’ 10
As markets have continually and
significantly evolved in the years since
the original rule was adopted, similar
regulatory constraints on trading have
been removed. For example, earlier this
year, the Commission ended price tick
restrictions on short sales by removing
Rule 10a–1,11 a regulation adopted
almost 70 years ago.12 In doing so, the
Commission discussed the practice of
applying different price tests to trading
in different securities and markets. This
is true in NYSE Rule 80A as well since
its tick restrictions apply only to index
arbitrage orders in S&P 500 component
stocks.
For these reasons, the Exchange
believes it is appropriate to remove the
order entry restrictions of NYSE Rule
80A.
Definitions in NYSE Rule 80A
Definitions in NYSE Rule 80A.40(a)
and (b) for the terms ‘‘index arbitrage’’
9 See Securities Exchange Act Release No. 41041
(February 11, 1999), 64 FR 8424 (February 19, 1999)
(SR–NYSE–98–45).
10 Id. at 8246.
11 17 CFR 240.10a–1.
12 See Securities Exchange Act Release No. 55970
(June 28, 2007), 72 FR 36348 (July 3, 2007).
PO 00000
Frm 00098
Fmt 4703
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and ‘‘program trading’’ are proposed to
be repositioned in NYSE Rule 132B
(Order Tracking Requirements) as they
continue to be part of the Exchange’s
regulatory agenda.13 The definition of
‘‘account of an individual investor’’ in
NYSE Rule 80A.40(c) is proposed to be
made part of NYSE Rule 92.40 as this
rule currently refers to this definition in
NYSE Rule 80A.
Other Rule Amendments
Conforming amendments to two other
Exchange rules are proposed as a
consequence of the proposed
amendments to NYSE Rule 80A.
NYSE Rule 123C—This rule details
the procedures for ‘‘market on close’’
(MOC) and ‘‘limit on close’’ (LOC) order
entry, publication of imbalances and
closing prints. Generally, MOC or LOC
orders are not cancelable after 3:40 p.m.,
except to correct certain errors or to
comply with the order entry
requirements of NYSE Rule 80A, if the
two percent collars are in effect.
References to the NYSE Rule 80A
provisions are proposed to be removed
in Rule 123C (1) and (2).
NYSE Rule 123C(7)—This rule
establishes procedures for exceptions to
NYSE Rule 80A’s entry restrictions for
MOC index arbitrage orders on so-called
‘‘expiration days’’, i.e., the day when
expiring stock and index option and
futures products’ pricing is established,
usually the third Friday of the month.
It is proposed that this section be
rescinded entirely.
NYSE Rule 476A—This rule
establishes procedures to enable the
Exchange to impose appropriate
sanctions for less serious violations of
Exchange rules. References to violations
of NYSE Rule 80A contained in the list
of rules subject to these procedures are
proposed to be deleted.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) of the Act 14 that
an exchange have rules that are
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
13 Earlier this year, the Exchange advised its
member organizations of new reporting
requirements for program trading activities,
including index arbitrage activities. See NYSE
Regulation Information Memo No. 07–52 (June 11,
2007). If the proposed relocation of the definitions
of ‘‘index arbitrage’’ and ‘‘program trading’’ is
approved, the Exchange will inform member
organizations of these reporting obligations.
14 15 U.S.C. 78f(b)(5).
E:\FR\FM\06NON1.SGM
06NON1
Federal Register / Vol. 72, No. 214 / Tuesday, November 6, 2007 / Notices
general, to protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
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 rule change
does not: (1) Significantly affect the
protection of investors or the public
interest; (2) impose any significant
burden on competition; and (3) become
operative for 30 days after the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 15 and Rule 19b–
4(f)(6) thereunder.16
NYSE has requested that the
Commission waive the 30-day operative
delay.17 The Commission believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest
because rescission of NYSE Rule 80A
would remove restrictions on index
arbitrage, the appropriateness of which
the Commission has previously
questioned.18 For this reason, the
Commission designates the proposed
rule change to be effective and operative
upon filing with the Commission.19
At any time within 60 days of the
filing of such proposed rule change the
15 U.S.C.
78s(b)(3)(A).
CFR 240.19b–4(f)(6).
17 17 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. The Exchange has
satisfied the five-day pre-filing requirement.
18 See Securities Exchange Act Release No. 41041,
supra note 18, at 8426. There, the Commission also
noted that it ‘‘may make little sense to single out
index arbitrage, which ensures that markets are
aligned economically, from all other types of
program trading. Indeed, the restrictions on index
arbitrage may tend to disconnect the securities and
futures markets and impose unnecessary costs on
market participants.’’ Id.
19 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).
mstockstill on PROD1PC66 with NOTICES
16 17
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16:55 Nov 05, 2007
Jkt 214001
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–YSE–2007–96 on the
subject line.
62721
be submitted on or before November 27,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–21773 Filed 11–5–07; 8:45 am]
BILLING CODE 8011–01–P
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ACTION: Notice.
AGENCY:
SUMMARY: This is a notice of an
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Incident: Severe Storms and Flooding.
Incident Period: 10/11/2007.
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Effective Date: 10/25/2007.
• Send paper comments in triplicate
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to Nancy M. Morris, Secretary,
Date: 12/24/2007.
Securities and Exchange Commission,
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100 F Street, NE., Washington, DC
Application Deadline Date: 07/25/2008.
20549–1090.
ADDRESSES: Submit completed loan
All submissions should refer to File
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Commission process and review your
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rules/sro.shtml). Copies of the
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The Interest Rates are:
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between the hours of 10 a.m. and 3 p.m.
Percent
Copies of such filing also will be
Homeowners With Credit Availavailable for inspection and copying at
able Elsewhere .........................
6.250
the principal office of the NYSE. All
Homeowners
Without
Credit
comments received will be posted
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3.125
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8.000
information from submissions. You
Businesses and Small Agricultural
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Cooperatives Without Credit
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Number SR–NYSE–2007–96 and should
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]]>Agencies
[Federal Register Volume 72, Number 214 (Tuesday, November 6, 2007)]
[Notices]
[Pages 62719-62721]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21773]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56726; File No. SR-NYSE-2007-96]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Rule 80A (Index Arbitrage Trading Restrictions)
October 31, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 25, 2007, the New York Stock Exchange LLC (``NYSE'' or the
``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 substantially prepared by the Exchange.
The NYSE filed the proposal pursuant to Section 19(b)(3)(A) of the Act
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it 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 is proposing to rescind NYSE Rule 80A (Index Arbitrage
Trading Restrictions) to eliminate order entry restrictions on certain
index arbitrage orders entered on the Exchange. The text of the
proposed rule change is available on the NYSE's Web site (https://
www.nyse.com), at the NYSE, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any 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.
[[Page 62720]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to rescind NYSE Rule 80A (Index Arbitrage
Trading Restrictions) and thereby eliminate the ``collar'' provisions
of the rule. Currently, NYSE Rule 80A(a) and (b) require that, for any
component stock of the S&P 500 Stock Price Index\SM\, whenever the NYSE
Composite Index[supreg] (``NYA'') \5\ advances or declines by a
predetermined value from its previous day's closing value, all index
arbitrage orders to buy or sell (depending on the direction of the move
in the NYA) must be entered as either ``buy minus'' or ``sell plus.''
\6\ The tick restrictions are imposed based upon a ``two-percent
value'' change in the NYA from its prior day's closing value, where the
``two-percent change'' is two percent of the average closing value of
the NYA for the last month of the previous calendar quarter, rounded
down to the nearest ten points. The order entry conditions are lifted
if the NYA recovers to within one percent of the previous day's closing
value, and can be reimposed if the average moves away by two percent
again during a trading session.
---------------------------------------------------------------------------
\5\ The trigger values were originally based on movement in the
value of the Dow Jones Industrial Average, but were changed in 2005.
See Securities Exchange Act Release No. 52328 (August 24, 2005), 70
FR 51398 (August 30, 2005) (SR-NYSE-2005-45).
\6\ NYSE Rule 13 defines a ``buy minus'' order as an order to
buy a stated amount of stock provided that the price to be obtained
is not higher than the last sale if the last sale was a ``minus'' or
``zero minus'' tick, and is not higher than the last sale minus the
minimum fractional change in the stock if the last sale was a
``plus'' or ``zero plus'' tick. A ``sell plus'' order is defined as
an order to sell a stated amount of a stock provided that the price
to be obtained is not lower than the last sale if the last sale was
a ``plus'' or ``zero plus'' tick, and is not lower than the last
sale plus the minimum fractional change in the stock if the last
sale was a ``minus'' or ``zero minus'' tick.
---------------------------------------------------------------------------
NYSE Rule 80A
NYSE states that NYSE Rule 80A was formulated as one of the
responses to the market break of October 1987 to reduce market
volatility and promote investor confidence.\7\ In its initial form, the
rule used a measure of a 50 point move in the Dow Jones Industrial
AverageSM to activate restrictions on order entry in S&P 500
stocks into Exchange systems.\8\ The restrictions were triggered on
relatively few occasions throughout the early 1990s (for example, only
9 times in 1993), but were increasingly invoked as volatility
heightened later in the decade (366 times in 1998). The basis for the
restrictions calculation was changed in 1999 from 50 points to the two
percent value discussed above.\9\ This had the effect of reining in the
imposition of the restrictions; in fact, they were imposed only once
during 2004-2005. They have been imposed 15 times so far in 2007.
---------------------------------------------------------------------------
\7\ Rule 80A was originally approved by the Commission in April
1988. See Securities Exchange Act Release No. 25599 (April 19,
1988), 53 FR 13371 (April 22, 1988) (SR-NYSE-88-02).
\8\ ``Dow Jones Industrial Average'' is a service mark of Dow
Jones & Co., Inc.
\9\ See Securities Exchange Act Release No. 41041 (February 11,
1999), 64 FR 8424 (February 19, 1999) (SR-NYSE-98-45).
---------------------------------------------------------------------------
The Exchange is making this change since it does not appear that
the approach to market volatility envisioned by the use of these
``collars'' is as meaningful today as when the rule was formalized in
the late 1980s. In the Exchange's view, volatility is neither
restrained nor enhanced by the imposition of the collars. It is as
likely that markets will reverse trends whether or not Rule 80A is
invoked. In addition, NYSE Rule 80A addresses only one type of trading
strategy, namely index arbitrage, whereas the number and types of
strategies have increased markedly in the last 20 years and may as well
contribute to the increase in or lack of volatility. Indeed, in
approving the Exchange's expansion of the collars to the two percent
level in 1999, the Commission stated that ``[i]t may make little sense
to single out index arbitrage, which ensures that markets are aligned
economically, from all other types of program trading.'' \10\
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\10\ Id. at 8246.
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As markets have continually and significantly evolved in the years
since the original rule was adopted, similar regulatory constraints on
trading have been removed. For example, earlier this year, the
Commission ended price tick restrictions on short sales by removing
Rule 10a-1,\11\ a regulation adopted almost 70 years ago.\12\ In doing
so, the Commission discussed the practice of applying different price
tests to trading in different securities and markets. This is true in
NYSE Rule 80A as well since its tick restrictions apply only to index
arbitrage orders in S&P 500 component stocks.
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\11\ 17 CFR 240.10a-1.
\12\ See Securities Exchange Act Release No. 55970 (June 28,
2007), 72 FR 36348 (July 3, 2007).
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For these reasons, the Exchange believes it is appropriate to
remove the order entry restrictions of NYSE Rule 80A.
Definitions in NYSE Rule 80A
Definitions in NYSE Rule 80A.40(a) and (b) for the terms ``index
arbitrage'' and ``program trading'' are proposed to be repositioned in
NYSE Rule 132B (Order Tracking Requirements) as they continue to be
part of the Exchange's regulatory agenda.\13\ The definition of
``account of an individual investor'' in NYSE Rule 80A.40(c) is
proposed to be made part of NYSE Rule 92.40 as this rule currently
refers to this definition in NYSE Rule 80A.
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\13\ Earlier this year, the Exchange advised its member
organizations of new reporting requirements for program trading
activities, including index arbitrage activities. See NYSE
Regulation Information Memo No. 07-52 (June 11, 2007). If the
proposed relocation of the definitions of ``index arbitrage'' and
``program trading'' is approved, the Exchange will inform member
organizations of these reporting obligations.
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Other Rule Amendments
Conforming amendments to two other Exchange rules are proposed as a
consequence of the proposed amendments to NYSE Rule 80A.
NYSE Rule 123C--This rule details the procedures for ``market on
close'' (MOC) and ``limit on close'' (LOC) order entry, publication of
imbalances and closing prints. Generally, MOC or LOC orders are not
cancelable after 3:40 p.m., except to correct certain errors or to
comply with the order entry requirements of NYSE Rule 80A, if the two
percent collars are in effect. References to the NYSE Rule 80A
provisions are proposed to be removed in Rule 123C (1) and (2).
NYSE Rule 123C(7)--This rule establishes procedures for exceptions
to NYSE Rule 80A's entry restrictions for MOC index arbitrage orders on
so-called ``expiration days'', i.e., the day when expiring stock and
index option and futures products' pricing is established, usually the
third Friday of the month. It is proposed that this section be
rescinded entirely.
NYSE Rule 476A--This rule establishes procedures to enable the
Exchange to impose appropriate sanctions for less serious violations of
Exchange rules. References to violations of NYSE Rule 80A contained in
the list of rules subject to these procedures are proposed to be
deleted.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) of the Act \14\ that an exchange have
rules that are designed to promote just and equitable principles of
trade, to remove impediments to and perfect the mechanism of a free and
open market and a national market system and, in
[[Page 62721]]
general, to protect investors and the public interest.
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\14\ 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 rule change does not: (1) Significantly
affect the protection of investors or the public interest; (2) impose
any significant burden on competition; and (3) become operative for 30
days after the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
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\15\ U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6).
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NYSE has requested that the Commission waive the 30-day operative
delay.\17\ The Commission believes that waiver of the 30-day operative
delay is consistent with the protection of investors and the public
interest because rescission of NYSE Rule 80A would remove restrictions
on index arbitrage, the appropriateness of which the Commission has
previously questioned.\18\ For this reason, the Commission designates
the proposed rule change to be effective and operative upon filing with
the Commission.\19\
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\17\ 17 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. The
Exchange has satisfied the five-day pre-filing requirement.
\18\ See Securities Exchange Act Release No. 41041, supra note
18, at 8426. There, the Commission also noted that it ``may make
little sense to single out index arbitrage, which ensures that
markets are aligned economically, from all other types of program
trading. Indeed, the restrictions on index arbitrage may tend to
disconnect the securities and futures markets and impose unnecessary
costs on market participants.'' Id.
\19\ 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-YSE-2007-96 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-2007-96. 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. 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-2007-96 and should be
submitted on or before November 27, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-21773 Filed 11-5-07; 8:45 am]
BILLING CODE 8011-01-P
