Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendment Nos. 2 and 3 Thereto Relating to Rule 104 (Dealings by Specialists), 63946-63948 [E7-22066]
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63946
Federal Register / Vol. 72, No. 218 / Tuesday, November 13, 2007 / Notices
FINRA to deem such locations to be
‘‘non-sales locations.’’
SECURITIES AND EXCHANGE
COMMISSION
III. Discussion and Commission
Findings
[Release No. 34–56747; File No. SR–NYSE–
2006–99]
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities association.8 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 15A(b)(6) of the Act,9
which requires, among other things, that
FINRA rules 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 change will resolve the
conflicting provisions in NASD and
NYSE rules over the classification of
locations that solely conduct final
approval of research reports, and
promote greater consistency in the
application of the Uniform Branch
Office Definition. The Commission also
believes that providing an exemption
from the definition of OSJs to such
locations will reduce regulatory
inefficiencies and eliminate
unnecessary costs to member firms.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–FINRA–
2007–008), be, and hereby is, approved.
FINRA will announce the effective date
of the proposed rule change in a
Regulatory Notice to be published no
later than 60 days following
Commission approval. The effective
date will be the date of publication of
the Regulatory Notice announcing
Commission approval.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–22064 Filed 11–9–07; 8:45 am]
rfrederick on PROD1PC67 with NOTICES
BILLING CODE 8011–01–P
8 In
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
9 15 U.S.C. 78o–3(b)(6).
10 15 U.S.C. 78s(b)(2).
11 17 CFR 200.30–3(a)(12).
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Jkt 214001
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change and
Amendment Nos. 2 and 3 Thereto
Relating to Rule 104 (Dealings by
Specialists)
November 5, 2007.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on November
9, 2006, the New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission the proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Exchange filed and
withdrew Amendment No. 1 to the
proposal on October 24, 2007 and
October 29, 2007, respectively. The
Exchange filed Amendment Nos. 2 and
3 on October 29, 2007 and November 5,
2007, respectively. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NYSE is proposing an
amendment to Exchange Rule 104
(Dealings by Specialists) to allow the
specialist’s algorithm systems to
generate trading messages that provide
supplemental specialist volume to
partially or completely fill an order at a
sweep price. The text of the proposed
rule change is available at the NYSE, the
Commission’s Public Reference Room,
and https://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. 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).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
PO 00000
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Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to allow the
specialist proprietary algorithm
(‘‘Specialist Algorithm’’) to generate
trading messages that provide
supplemental specialist volume to
partially or completely fill an order at a
sweep price. Through the NYSE
HYBRID MARKETSM (‘‘Hybrid
Market’’) 4 the Exchange permitted
specialists to establish electronic
connections to the Display Book 5
(‘‘Display Book’’). Specifically, the
Specialist Algorithm generates quote
and trade messages based on
predetermined parameters to
electronically participate in the Hybrid
Market. The Specialist Algorithm is
designed to communicate with the
Display Book system via an Exchangeowned external Application Program
Interface (‘‘API’’).
In the Hybrid Market, the Specialist
Algorithm is permitted to send messages
to the Display Book via the API to quote
or trade on behalf of the specialist’s
proprietary interest. The Specialist
Algorithm may generate these quoting
or trading messages in reaction to
specific types of information. This
information includes specialist dealer
position, existing quotes, publicly
available information the specialist
chooses to supply to the algorithm,
incoming orders as they are entering
Exchange systems, and information
about orders on the Display Book,
which include limit orders, and
percentage orders. This latter
information stream is known as ‘‘state of
the book’’ information.
Based on discussions of Hybrid
Market features with members and
advisory committees the Exchange has
effected selective changes to certain
aspects of the Hybrid Market to produce
a trading venue that best addresses the
various needs of our members and
customers.
The Exchange seeks to amend Rule
104(b)(i)(F) to allow the Specialist
Algorithm to provide supplemental
specialist volume to partially or
completely fill an order at a sweep price
4 See Securities Exchange Act Release No. 53539
(March 22, 2006), 71 FR 16353 (March 31, 2006)
(SR–NYSE–2004–05).
5 The Display Book is an order management and
execution facility. It receives and displays orders to
the specialist, contains the orders received by the
specialist (the ‘‘Book’’), and provides a mechanism
to execute and report transactions to the
Consolidated Tape.
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Federal Register / Vol. 72, No. 218 / Tuesday, November 13, 2007 / Notices
as described further below.6 Currently,
Rule 104(b)(i)(F) permits the Specialist
Algorithm to generate a trading message
to provide supplemental specialist
volume at the Exchange published best
bid or offer (‘‘BBO’’). This supplemental
specialist volume is not displayed and
is not part of the specialist reserve
interest. With respect to priority and
parity, supplemental specialist volume
yields to displayed and reserve interest
(i.e., supplemental specialist volume
will not trade before customer limit
orders, Floor broker agency interest and
specialist interest). However,
supplemental specialist volume are on
parity with member organizations’ offFloor proprietary orders entered by
Floor brokers pursuant to Section
11(a)(1)(G) of the Act,7 and Rule 11a1–
1(T) 8 thereunder (‘‘G’’ orders).
Additionally, Exchange systems do not
permit a trading message to provide
supplemental specialist volume that
would trade-through a protected
quotation in violation of the Regulation
National Market System’s Order
Protection Rule.9
This trading message enables
specialists, through the use of their
algorithms, to provide more volume
where, technically, there is no other
interest available to trade with the
customer order. For example, if 5,000
shares of an automatically executing
market order to sell remain unfilled
after trading with the displayed volume
at the Exchange best bid and any reserve
interest at that price, the Specialist
Algorithm can send a trading message to
buy all or some of the remaining 5,000
shares at the same price (i.e., the
Exchange best bid). If the specialist buys
less than the full size remaining, the
order will sweep the orders on the
Display Book including customer limit
orders, Floor broker agency and
specialist interest files to the extent
permitted, until filled, its limit, if any,
is reached or a Liquidity Replenishment
Point (‘‘LRP’’) is triggered, whichever
comes first.
The Exchange seeks to further provide
its customers with additional
opportunities for a better priced
execution by allowing the specialist to
also partially or completely fill an order
beyond the Exchange published best bid
or offer at a sweep price. The Specialist
Algorithm will generate this trading
message in reaction to one order at a
time and only as that order is entering
Exchange systems. Additionally, this
trading message will only be able to
interact with the targeted order to add
volume at one place, either at the
Reserve
interest
Buy LMT
........................
........................
........................
2,000
1,000
2,000
1,000
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1,000 ....................................................................................
1. An automatically executing market order
to sell for 9,000 shares is received by
Exchange systems.
2. Based on the state of the book, the
Specialist Algorithm has determined based
on the state of the book, not to provide
supplemental specialist volume at the bid
(i.e., buy all or some of the 5,000 shares at
the same price, $5.05). However, the
Specialist Algorithm determines to provide
supplemental volume at the price of $5.03
and accordingly sends a trading message to
provide 1,000 shares of supplemental
specialist volume to interact with the sell
order at $5.03.
3. 4,000 shares of the automatically
executing sell order will execute against the
Exchange best bid at a price of $5.05 leaving
5,000 shares of the sell order unfilled after
trading with the 2,000 shares of displayed
volume at the Exchange best bid and the
2,000 shares of reserve interest at that price.
4. In the absence of any other available
interest at the Exchange bid, the order will
start to sweep the orders on the Display Book
and Floor broker agency and specialist
interest files at each price point beyond the
Exchange best bid.
5. At the price point of $5.04, there is
another 1,000 shares of displayed and 1,000
shares of reserve buy interest. The sell order
executes first against the displayed buy
interest and then against the reserve buy
interest. Therefore, 2,000 shares are executed,
leaving 3,000 shares of the sell order unfilled.
6. At the price point of $5.03, there is
another 2,000 shares of reserve buy interest.
The sell order executes against that buy
interest. Therefore, 2,000 shares of the sell
order are filled leaving a balance of 1,000
6 The instant filing was initially filed with the
Commission on November 9, 2006. The Exchange
states that the proposed functionality inadvertently
became operational in Exchange systems without
Commission approval on or about January 24, 2007.
The proposed rule change, as amended, is intended
to codify the current Exchange system functionality.
7 15 U.S.C. 78k(a)(1)(G).
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15:30 Nov 09, 2007
Jkt 214001
PO 00000
Exchange best bid or offer or at a
particular sweep price. In other words,
the specialist will not have two
opportunities to provide supplemental
specialist volume to the incoming order
at the Exchange best bid or offer and
also at a particular price point should
the order sweep the Display Book. There
will be no change with respect to
priority and parity. The supplemental
specialist volume will continue to yield
to displayed and reserve interest at each
price point and will be on parity with
G orders. The specialist’s algorithm will
make a determination about where and
how much supplemental specialist
volume to provide based on the state of
the book information when the order is
received by Exchange systems. An
example of the proposed amendment to
permit a trading message to provide
supplemental specialist volume to
partially or completely fill an order at a
sweep price is set forth below:
The Exchange best bid is $5.05 and 4,000
shares (2,000 shares displayed and 2,000
shares of non-displayed reserved interest) are
available. The Exchange best offer is $5.10
and 2,000 shares (1,000 shares displayed and
1,000 shares of non-displayed reserve
interest) are available.
........................
........................
........................
2,000
1,000
........................
........................
Supplemental specialist volume
Frm 00075
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63947
Sell LMT
Reserve
interest
........................
........................
1,000
........................
........................
........................
........................
........................
........................
1,000
........................
........................
........................
........................
100ths
5.12
5.11
5.10
5.05
5.04
5.03
5.02
shares unfilled. No other customer interest
exists at this price point.
7. At the price point of $5.03, the Specialist
Algorithm has previously determined to
provide supplemental volume and sent a
trading message to provide 1,000 shares of
supplemental specialist volume to interact
with the sell order at the same price point.
8. Having exhausted all the available
displayed and reserve buy interest at the
price point of $5.03; the sell order now
interacts with the specialist’s trading message
to buy the remaining 1,000 shares of the sell
order completing the execution.
In this example, the supplemental
specialist volume provided the sell
order with an opportunity for a better
priced execution and also aided in
dampening volatility by limiting how
far the order swept down to lower price
8 17
CFR 240.11a–1(T).
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005), 17 CFR
242.611.
9 See
E:\FR\FM\13NON1.SGM
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63948
Federal Register / Vol. 72, No. 218 / Tuesday, November 13, 2007 / Notices
points before it was fully executed.
Thus, if the Specialist Algorithm had
not determined to provide supplemental
specialist volume at the price point of
$5.03, the sell order would have
continued its sweep down the Display
Book and interacted with the available
interest at the next price point of $5.02
completing the execution. If the
specialist trading message did not
provide enough supplemental volume to
complete the order it would have
continued to sweep the orders on the
Display Book to the extent permitted
until: (a) Filled; (b) its limit, if any was
reached; or (c) an LRP was triggered,
whichever occurred first.
It should be noted that the specialist
is not required to buy the full size
remaining of the sell order at the
particular sweep price. The Exchange
states that there is no disadvantage to
the customer in allowing the specialists
to partially fill an order at a particular
sweep price especially when applicable
rules only allow the supplemental
specialist volume to interact with the
order when no other interest exists.
Under these circumstances, the order is
afforded a better priced execution that it
otherwise would not have.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 10 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 general, to protect
investors and the public interest. The
proposed rule change is consistent with
these objectives in that it provides
additional trading messages to the
Specialist Algorithm, which will further
enable the specialist to meet its
obligation of maintaining a fair and
orderly market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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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.
10 15
U.S.C. 78f(b)(5).
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15:30 Nov 09, 2007
Jkt 214001
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 Exchange consents,
the Commission will:
(A) by order approve the proposed
rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Exchange 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 e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2006–99 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.
All submissions should refer to File
Number SR–NYSE–2006–99. 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.
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
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–2006–99 and should
be submitted on or before December 4,
2007.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–22066 Filed 11–9–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56753; File No. SR–NYSE–
2007–97]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Clarify That
a Member Organization May Still Use
the Express Consent Procedure for
Obtaining Consent From a Customer
To Trade Along on an Order-By-Order
Basis Under Rule 92(b)
November 6, 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
31, 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, II, and III below, which Items
have been substantially prepared by
NYSE. The Exchange has designated
this proposal as one constituting a
stated policy, practice, or interpretation
with respect to the meaning,
administration, or enforcement of an
existing rule under Section
19(b)(3)(A)(i) of the Act 3 and Rule 19b–
4(f)(1) 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.
11 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)(i).
4 17 CFR 240.19b–4(f)(1).
1 15
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]]>Agencies
[Federal Register Volume 72, Number 218 (Tuesday, November 13, 2007)]
[Notices]
[Pages 63946-63948]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22066]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56747; File No. SR-NYSE-2006-99]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change and Amendment Nos. 2 and 3
Thereto Relating to Rule 104 (Dealings by Specialists)
November 5, 2007.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on November 9, 2006, the New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Exchange filed and
withdrew Amendment No. 1 to the proposal on October 24, 2007 and
October 29, 2007, respectively. The Exchange filed Amendment Nos. 2 and
3 on October 29, 2007 and November 5, 2007, respectively. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NYSE is proposing an amendment to Exchange Rule 104 (Dealings
by Specialists) to allow the specialist's algorithm systems to generate
trading messages that provide supplemental specialist volume to
partially or completely fill an order at a sweep price. The text of the
proposed rule change is available at the NYSE, the Commission's Public
Reference Room, and https://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. 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
The Exchange proposes to allow the specialist proprietary algorithm
(``Specialist Algorithm'') to generate trading messages that provide
supplemental specialist volume to partially or completely fill an order
at a sweep price. Through the NYSE HYBRID MARKETSM (``Hybrid
Market'') \4\ the Exchange permitted specialists to establish
electronic connections to the Display Book[supreg] \5\ (``Display
Book''). Specifically, the Specialist Algorithm generates quote and
trade messages based on predetermined parameters to electronically
participate in the Hybrid Market. The Specialist Algorithm is designed
to communicate with the Display Book system via an Exchange-owned
external Application Program Interface (``API'').
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 53539 (March 22,
2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05).
\5\ The Display Book is an order management and execution
facility. It receives and displays orders to the specialist,
contains the orders received by the specialist (the ``Book''), and
provides a mechanism to execute and report transactions to the
Consolidated Tape.
---------------------------------------------------------------------------
In the Hybrid Market, the Specialist Algorithm is permitted to send
messages to the Display Book via the API to quote or trade on behalf of
the specialist's proprietary interest. The Specialist Algorithm may
generate these quoting or trading messages in reaction to specific
types of information. This information includes specialist dealer
position, existing quotes, publicly available information the
specialist chooses to supply to the algorithm, incoming orders as they
are entering Exchange systems, and information about orders on the
Display Book, which include limit orders, and percentage orders. This
latter information stream is known as ``state of the book''
information.
Based on discussions of Hybrid Market features with members and
advisory committees the Exchange has effected selective changes to
certain aspects of the Hybrid Market to produce a trading venue that
best addresses the various needs of our members and customers.
The Exchange seeks to amend Rule 104(b)(i)(F) to allow the
Specialist Algorithm to provide supplemental specialist volume to
partially or completely fill an order at a sweep price
[[Page 63947]]
as described further below.\6\ Currently, Rule 104(b)(i)(F) permits the
Specialist Algorithm to generate a trading message to provide
supplemental specialist volume at the Exchange published best bid or
offer (``BBO''). This supplemental specialist volume is not displayed
and is not part of the specialist reserve interest. With respect to
priority and parity, supplemental specialist volume yields to displayed
and reserve interest (i.e., supplemental specialist volume will not
trade before customer limit orders, Floor broker agency interest and
specialist interest). However, supplemental specialist volume are on
parity with member organizations' off-Floor proprietary orders entered
by Floor brokers pursuant to Section 11(a)(1)(G) of the Act,\7\ and
Rule 11a1-1(T) \8\ thereunder (``G'' orders). Additionally, Exchange
systems do not permit a trading message to provide supplemental
specialist volume that would trade-through a protected quotation in
violation of the Regulation National Market System's Order Protection
Rule.\9\
---------------------------------------------------------------------------
\6\ The instant filing was initially filed with the Commission
on November 9, 2006. The Exchange states that the proposed
functionality inadvertently became operational in Exchange systems
without Commission approval on or about January 24, 2007. The
proposed rule change, as amended, is intended to codify the current
Exchange system functionality.
\7\ 15 U.S.C. 78k(a)(1)(G).
\8\ 17 CFR 240.11a-1(T).
\9\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005), 17 CFR 242.611.
---------------------------------------------------------------------------
This trading message enables specialists, through the use of their
algorithms, to provide more volume where, technically, there is no
other interest available to trade with the customer order. For example,
if 5,000 shares of an automatically executing market order to sell
remain unfilled after trading with the displayed volume at the Exchange
best bid and any reserve interest at that price, the Specialist
Algorithm can send a trading message to buy all or some of the
remaining 5,000 shares at the same price (i.e., the Exchange best bid).
If the specialist buys less than the full size remaining, the order
will sweep the orders on the Display Book including customer limit
orders, Floor broker agency and specialist interest files to the extent
permitted, until filled, its limit, if any, is reached or a Liquidity
Replenishment Point (``LRP'') is triggered, whichever comes first.
The Exchange seeks to further provide its customers with additional
opportunities for a better priced execution by allowing the specialist
to also partially or completely fill an order beyond the Exchange
published best bid or offer at a sweep price. The Specialist Algorithm
will generate this trading message in reaction to one order at a time
and only as that order is entering Exchange systems. Additionally, this
trading message will only be able to interact with the targeted order
to add volume at one place, either at the Exchange best bid or offer or
at a particular sweep price. In other words, the specialist will not
have two opportunities to provide supplemental specialist volume to the
incoming order at the Exchange best bid or offer and also at a
particular price point should the order sweep the Display Book. There
will be no change with respect to priority and parity. The supplemental
specialist volume will continue to yield to displayed and reserve
interest at each price point and will be on parity with G orders. The
specialist's algorithm will make a determination about where and how
much supplemental specialist volume to provide based on the state of
the book information when the order is received by Exchange systems. An
example of the proposed amendment to permit a trading message to
provide supplemental specialist volume to partially or completely fill
an order at a sweep price is set forth below:
The Exchange best bid is $5.05 and 4,000 shares (2,000 shares
displayed and 2,000 shares of non-displayed reserved interest) are
available. The Exchange best offer is $5.10 and 2,000 shares (1,000
shares displayed and 1,000 shares of non-displayed reserve interest)
are available.
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Reserve Reserve
Supplemental specialist volume interest Buy LMT 100ths Sell LMT interest
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.............. .............. 5.12 .............. ..............
.............. .............. 5.11 .............. ..............
.............. .............. 5.10 1,000 1,000
2,000 2,000 5.05 .............. ..............
1,000 1,000 5.04 .............. ..............
1,000........................... 2,000 .............. 5.03 .............. ..............
1,000 .............. 5.02 .............. ..............
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1. An automatically executing market order to sell for 9,000
shares is received by Exchange systems.
2. Based on the state of the book, the Specialist Algorithm has
determined based on the state of the book, not to provide
supplemental specialist volume at the bid (i.e., buy all or some of
the 5,000 shares at the same price, $5.05). However, the Specialist
Algorithm determines to provide supplemental volume at the price of
$5.03 and accordingly sends a trading message to provide 1,000
shares of supplemental specialist volume to interact with the sell
order at $5.03.
3. 4,000 shares of the automatically executing sell order will
execute against the Exchange best bid at a price of $5.05 leaving
5,000 shares of the sell order unfilled after trading with the 2,000
shares of displayed volume at the Exchange best bid and the 2,000
shares of reserve interest at that price.
4. In the absence of any other available interest at the
Exchange bid, the order will start to sweep the orders on the
Display Book and Floor broker agency and specialist interest files
at each price point beyond the Exchange best bid.
5. At the price point of $5.04, there is another 1,000 shares of
displayed and 1,000 shares of reserve buy interest. The sell order
executes first against the displayed buy interest and then against
the reserve buy interest. Therefore, 2,000 shares are executed,
leaving 3,000 shares of the sell order unfilled.
6. At the price point of $5.03, there is another 2,000 shares of
reserve buy interest. The sell order executes against that buy
interest. Therefore, 2,000 shares of the sell order are filled
leaving a balance of 1,000 shares unfilled. No other customer
interest exists at this price point.
7. At the price point of $5.03, the Specialist Algorithm has
previously determined to provide supplemental volume and sent a
trading message to provide 1,000 shares of supplemental specialist
volume to interact with the sell order at the same price point.
8. Having exhausted all the available displayed and reserve buy
interest at the price point of $5.03; the sell order now interacts
with the specialist's trading message to buy the remaining 1,000
shares of the sell order completing the execution.
In this example, the supplemental specialist volume provided the
sell order with an opportunity for a better priced execution and also
aided in dampening volatility by limiting how far the order swept down
to lower price
[[Page 63948]]
points before it was fully executed. Thus, if the Specialist Algorithm
had not determined to provide supplemental specialist volume at the
price point of $5.03, the sell order would have continued its sweep
down the Display Book and interacted with the available interest at the
next price point of $5.02 completing the execution. If the specialist
trading message did not provide enough supplemental volume to complete
the order it would have continued to sweep the orders on the Display
Book to the extent permitted until: (a) Filled; (b) its limit, if any
was reached; or (c) an LRP was triggered, whichever occurred first.
It should be noted that the specialist is not required to buy the
full size remaining of the sell order at the particular sweep price.
The Exchange states that there is no disadvantage to the customer in
allowing the specialists to partially fill an order at a particular
sweep price especially when applicable rules only allow the
supplemental specialist volume to interact with the order when no other
interest exists. Under these circumstances, the order is afforded a
better priced execution that it otherwise would not have.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \10\ 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 general, to protect
investors and the public interest. The proposed rule change is
consistent with these objectives in that it provides additional trading
messages to the Specialist Algorithm, which will further enable the
specialist to meet its obligation of maintaining a fair and orderly
market.
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\10\ 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
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 Exchange consents, the Commission will:
(A) by order approve the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Exchange 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 e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSE-2006-99 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.
All submissions should refer to File Number SR-NYSE-2006-99. 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-2006-99 and should be
submitted on or before December 4, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22066 Filed 11-9-07; 8:45 am]
BILLING CODE 8011-01-P
