Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change to Rescind Rule 97 (Limitation on Member's Trading Because of Block Positioning), 7022-7024 [E8-2075]
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7022
Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
reduce from six months to three months
the period for which the average global
market capitalization of companies
seeking to list on the Exchange must
exceed the levels established by the
Exchange’s ‘‘pure valuation/revenue’’
test contained in Section 102.01C of the
Exchange’s Listed Company Manual
(the ‘‘Manual’’). On December 14, 2007,
the Exchange filed Amendment No. 1 to
the proposed rule change. The proposed
rule change, as modified by Amendment
No. 1, was published for comment in
the Federal Registeron December 26,
2007.3 The Commission received no
comments on the proposal. This order
approves the proposed rule change, as
amended.
pwalker on PROD1PC71 with NOTICES
II. Description of the Proposal
Section 102.01C of the Exchange’s
Manual requires companies listing
under the Exchange’s ‘‘pure valuation/
revenue’’ test to have a global market
capitalization of $750 million. In the
case of companies listing other than in
connection with an initial public
offering or a spin-off or upon emergence
from bankruptcy, Section 102.01C
provides that the market capitalization
valuation will be determined on the
basis of a six-month average.
The Exchange now proposes to reduce
from six months to three months the
period over which prospective
companies seeking to list on the
Exchange must have had an average
global market capitalization that meets
the required level of $750 million. In
addition, the Exchange proposes to
amend the rule to specify that in
considering the suitability for listing of
a company pursuant to this standard,
the Exchange will consider whether the
company’s business prospects and
operating results indicate that the
company’s market capitalization value
is likely to be sustained or increase over
time.
III. Discussion
After careful review, the Commission
finds that the proposed rule change, as
amended, is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange and, in
particular, with Section 6(b)(5) of the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 56976
(December 17, 2007), 72 FR 73055.
2 17
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18:21 Feb 05, 2008
Jkt 214001
Act,4 which requires, among other
things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, 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.5
The Commission notes that the
proposed rule change does not change
the quantitative global market
capitalization requirement under the
Exchange’s ‘‘pure valuation/revenue’’
test. This requirement will remain at
$750 million global market
capitalization. Rather, the Exchange is
shortening the time period over which
the average global market capitalization
of a prospective listed company must
meet this level. The Commission notes
that the proposed rule change requires
the Exchange to look not only at the
average three month market
capitalization of the company but to
also consider whether the company’s
market capitalization is likely to be
sustained or increase over time based on
the company’s business prospects and
operation results. The Commission
therefore believes that the proposed rule
change may allow the earlier listing of
companies, but at the same time, it is
designed to ensure that the Exchange
does not list companies on the basis of
a market capitalization valuation that is
unlikely to be sustained. In this regard,
the Commission expects that the
Exchange will scrutinize companies to
ensure that it will only list companies
that should be able to continue to meet
the market capitalization standard.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,6 that the
proposed rule change (SR–NYSE–2007–
98), as modified by Amendment No. 1,
be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2073 Filed 2–5–08; 8:45 am]
BILLING CODE 8011–01–P
4 15
U.S.C. 78f(b)(5).
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).
6 15 U.S.C. 78s(b)(2).
7 17 CFR 200.30–3(a)(12).
5 In
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57236; File No. SR–NYSE–
2008–03]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change to
Rescind Rule 97 (Limitation on
Member’s Trading Because of Block
Positioning)
January 30, 2008.
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 January
11, 2008, 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 the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NYSE proposes to rescind NYSE Rule
97 (Limitation on Member’s Trading
Because of Block Positioning). The text
of the proposed rule change is available
at 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,
NYSE 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
Through this filing, the Exchange
seeks to rescind Exchange Rule 97.
Exchange Rule 97 prevents a member
organization that holds a long position
in a security that resulted from a block
transaction with a customer from
1 15
2 17
E:\FR\FM\06FEN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
06FEN1
Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices
effecting, within twenty minutes of the
close of trading on the Exchange, a
purchase on a ‘‘plus’’ tick in that
security at a price higher than the
lowest price at which any block was
acquired in a previous transaction on
that day, if the person responsible for
the entry of such order to purchase the
security had knowledge of the block
position.
The Exchange has from time to time
reviewed the applicability of the rule
and made amendments in an attempt to
maintain the rule’s relevance as the
nature of trading has significantly
evolved over the years. Notwithstanding
those efforts, the Exchange believes that
the practical application of the rule in
today’s market no longer addresses the
concerns that prompted its
implementation. The Exchange
therefore proposes to rescind Exchange
Rule 97 in its entirety.
pwalker on PROD1PC71 with NOTICES
Background
Exchange Rule 97 focuses on the
trading of member organizations while
they hold positions in a security as a
result of a block transaction with
customer(s). The rule was originally
adopted to address concerns that a
member organization might engage in
manipulative practices by attempting to
‘‘mark-up’’ the price of a stock to enable
the position acquired in the course of
block positioning to be liquidated at a
profit, or to maintain the market at the
price at which the position was
acquired.
In 2002, the rule was amended to
narrow the scope of the prohibitions
solely to transactions executed within
the last twenty minutes of the trading
day, and to provide exceptions to the
rule for member organizations that
establish information barriers and for
certain hedging transactions.3 The
rationale behind the rule change was to
limit the rule’s ‘‘tick’’ restriction to the
most sensitive part of the trading day
(where it was thought that manipulation
was most likely to occur so that the
member firm could unwind its position
at the opening of trading the next day).
The implementation of Regulation
NMS in March 2007 necessitated an
additional amendment to the rule in
July 2007 to create an exemption to
resolve a conflict between compliance
with Rule 97 and Regulation NMS.4
Specifically, if during the last 20
minutes of trading a member
organization facilitates a customer order
3 See Securities Exchange Act Release No. 46566
(September 27, 2002), 67 FR 62278 (October 4,
2002) (SR–NYSE–2001–24).
4 See Securities Exchange Act Release No. 56024
(July 6, 2007), 72 FR 38643 (July 13, 2007) (SR–
NYSE–2007–61).
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18:21 Feb 05, 2008
Jkt 214001
that trades through protected bids or
offers, and in compliance with Rules
600(b)(30)(ii) and 611(b)(6) of
Regulation NMS,5 the member
organization simultaneously routes
proprietary intermarket sweep orders to
execute against the full displayed size of
any protected quotation in that security
(‘‘ISO facilitation’’), the ISO facilitation
could violate Rule 97 if the ISO orders
would trade on a plus tick, at a price
above the lowest facilitation price. In
essence, the implementation of
Regulation NMS required firms to
choose between violating Regulation
NMS or violating Rule 97. The
exemption to Rule 97 was added so that
when facilitating a customer order that
would otherwise require a member
organization to either violate Rule 97 or
trade through protected quotations,
member organizations can comply with
their Regulation NMS obligations
without also violating Rule 97.6
Rescision of Rule 97
NYSE states that this proposed
rescision of the rule highlights the
extent to which trading has changed and
how the operation of Rule 97 hinders
the ability of member organizations to
legitimately conduct their business and
facilitate their customers’ orders. Today,
compliance with Regulation NMS
means that the liquidation of a block
position typically occurs on many
different market centers. Additionally,
the Exchange believes that, in active and
volatile market conditions, incremental
movements of a penny or more occur
almost instantaneously, lessening the
ability to influence the closing price of
a security.
Rule 97 was established at a time
when the majority of block transactions
were executed on the Exchange.
However, in the present competitive
trading environment, there are now
many other venues available for market
participants to effect block position
transactions without the strictures of
such a rule. The Exchange believes that,
in order to encourage consistency
throughout the industry with respect to
the execution of block positions and to
5 17 CFR 242.600(b)(30)(ii) and 17 CFR
242.611(b)(6).
6 This exemption would be available only when:
(1) The firm has acquired a proprietary position as
a result of a previous block facilitation for a
customer; (2) the facilitation trade during the last
20 minutes of trading would cause the firm to trade
through a better priced offer on another market,
such that the firm is obligated by Regulation NMS
Rule 611 to send proprietary ISOs when it
facilitates the customer’s order; (3) the customer has
declined better-priced ISO executions; and (4) the
better-priced offers in away markets are such that
NYSE Rule 97 would prohibit the firm from sending
a proprietary buy order. See NYSE Information
Memo 07–67 (July 6, 2007).
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7023
encourage market participants to
continue to effect their block
transactions on the Exchange, Rule 97
should be rescinded. NYSE represents
that NYSE Regulation, Inc. will
continue to surveil in NYSE-listed
securities for possible manipulative
activity, including marking the close,
which could be in violation of federal
securities laws or Exchange Rules,
including Rule 10b–5 under the Act,7
section 9(a) of the Act,8 and Exchange
Rules 476(a) and 435.9
2. Statutory Basis
NYSE believes that the proposed rule
change is consistent with Section 6(b) of
the Act,10 in general, and the
requirement in Section 6(b)(5) of the
Act,11 in particular, that the rules of an
exchange are, among other things,
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. NYSE asserts that the
proposed rule change also is designed to
support the principles of section
11A(a)(1)12 in that it seeks to assure
economically efficient execution of
securities transactions, and make it
practicable for brokers to execute
investors’ orders in the best market.
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
7 17
CFR 240.10b–5.
U.S.C. 78i(a).
9 See e-mail from Gillian Rowe, Senior Counsel,
NYSE, to Jennifer Dodd, Special Counsel, Division
of Trading and Markets, Commission, dated January
29, 2008.
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
12 15 U.S.C. 78k–1(a)(1).
8 15.
E:\FR\FM\06FEN1.SGM
06FEN1
7024
Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices
longer period to be appropriate and
publishes its reasons for so finding, or
(ii) as to which NYSE 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.
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:
submissions should refer to File
Number SR–NYSE–2008–03 and should
be submitted on or before February 27,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2075 Filed 2–5–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57249; File No. SR–NYSE–
2008–10]
pwalker on PROD1PC71 with NOTICES
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–NYSE–2008–03 on the
subject line.
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Rule 36 (Communication Between
Exchange and Exchange Members’
Offices)
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–2008–03. 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 offices of the Exchange.
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
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 January
30, 2008, the New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by the
Exchange. The Exchange filed the
proposed rule change 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.
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18:21 Feb 05, 2008
Jkt 214001
January 31, 2008.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange seeks to extend its
current portable phone pilot (the
‘‘Pilot’’) operating pursuant to Exchange
Rule 36 from its scheduled January 31,
2008 expiration date to April 30, 2008.
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
13 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
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
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 seeks to extend the
Pilot operating pursuant to Exchange
Rule 36 from the Pilot’s scheduled
January 31, 2008 expiration date to
April 30, 2008. Pursuant to the Pilot,
Floor brokers and Registered
Competitive Market Makers (‘‘RCMM’’)
are permitted to use an Exchange
authorized and provided portable
telephone on the Exchange Floor
provided certain conditions are met.
Background
The Commission originally approved
the Pilot to be implemented for a sixmonth period 5 beginning no later than
June 23, 2003.6 Since the inception of
the Pilot, the Exchange has extended the
Pilot eight times, with the current Pilot
expiring on January 31, 2008.7 Exchange
5 See Securities Exchange Act Release No. 47671
(April 11, 2003), 68 FR 19048 (April 17, 2003) (SR–
NYSE–2002–11) (‘‘Original Order’’).
6 See Securities Exchange Act Release No. 47992
(June 5, 2003), 68 FR 35047 (June 11, 2003) (SR–
NYSE–2003–19) (delaying the implementation date
for portable phones from on or about May 1, 2003
to no later than June 23, 2003).
7 See Securities Exchange Act Release Nos. 48919
(December 12, 2003), 68 FR 70853 (December 19,
2003) (SR–NYSE–2003–38) (extending the Pilot for
an additional six months ending on June 16, 2004);
49954 (July 1, 2004), 69 FR 41323 (July 8, 2004)
(SR–NYSE–2004–30) (extending the Pilot for an
additional five months ending on November 30,
2004); 50777 (December 1, 2004), 69 FR 71090
(December 8, 2004) (SR–NYSE–2004–67) (extending
the Pilot for an additional four months ending
March 31, 2005); 51464 (March 31, 2005), 70 FR
17746 (April 7, 2005) (SR–NYSE–2005–20)
(extending the Pilot for additional four months
ending July 31, 2005); 52188 (August 1, 2005), 70
FR 46252 (August 9, 2005) (SR–NYSE–2005–53)
(extending the Pilot for an additional four months
ending January 31, 2006); 53277 (February 13,
2006), 71 FR 8877 (February 21, 2006) (SR–NYSE–
2006–03) (extending the Pilot for an additional six
months ending July 31, 2006); 54276 (August 4,
2006), 71 FR 45885 (August 10, 2006) (SR–NYSE–
2006–55) (extending the Pilot for an additional six
months ending January 31, 2007); and 55218
(January 31, 2007), 72 FR 6025 (February 8, 2007)
(SR–NYSE–2007–05) (extending the Pilot for an
additional twelve months ending January 31, 2008).
Also, the Exchange has incorporated RCMMs into
the Pilot and subsequently amended the Pilot to
allow RCMMs to use an Exchange authorized and
provided portable telephone on the Exchange Floor
to call to and receive calls from their upstairs
offices, the upstairs offices of their clearing firm,
and their booth locations on the Exchange Floor.
E:\FR\FM\06FEN1.SGM
06FEN1
]]>Agencies
[Federal Register Volume 73, Number 25 (Wednesday, February 6, 2008)]
[Notices]
[Pages 7022-7024]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2075]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57236; File No. SR-NYSE-2008-03]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change to Rescind Rule 97 (Limitation
on Member's Trading Because of Block Positioning)
January 30, 2008.
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 January 11, 2008, 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 the
Exchange. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE proposes to rescind NYSE Rule 97 (Limitation on Member's
Trading Because of Block Positioning). The text of the proposed rule
change is available at 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, NYSE 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
Through this filing, the Exchange seeks to rescind Exchange Rule
97. Exchange Rule 97 prevents a member organization that holds a long
position in a security that resulted from a block transaction with a
customer from
[[Page 7023]]
effecting, within twenty minutes of the close of trading on the
Exchange, a purchase on a ``plus'' tick in that security at a price
higher than the lowest price at which any block was acquired in a
previous transaction on that day, if the person responsible for the
entry of such order to purchase the security had knowledge of the block
position.
The Exchange has from time to time reviewed the applicability of
the rule and made amendments in an attempt to maintain the rule's
relevance as the nature of trading has significantly evolved over the
years. Notwithstanding those efforts, the Exchange believes that the
practical application of the rule in today's market no longer addresses
the concerns that prompted its implementation. The Exchange therefore
proposes to rescind Exchange Rule 97 in its entirety.
Background
Exchange Rule 97 focuses on the trading of member organizations
while they hold positions in a security as a result of a block
transaction with customer(s). The rule was originally adopted to
address concerns that a member organization might engage in
manipulative practices by attempting to ``mark-up'' the price of a
stock to enable the position acquired in the course of block
positioning to be liquidated at a profit, or to maintain the market at
the price at which the position was acquired.
In 2002, the rule was amended to narrow the scope of the
prohibitions solely to transactions executed within the last twenty
minutes of the trading day, and to provide exceptions to the rule for
member organizations that establish information barriers and for
certain hedging transactions.\3\ The rationale behind the rule change
was to limit the rule's ``tick'' restriction to the most sensitive part
of the trading day (where it was thought that manipulation was most
likely to occur so that the member firm could unwind its position at
the opening of trading the next day).
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 46566 (September 27,
2002), 67 FR 62278 (October 4, 2002) (SR-NYSE-2001-24).
---------------------------------------------------------------------------
The implementation of Regulation NMS in March 2007 necessitated an
additional amendment to the rule in July 2007 to create an exemption to
resolve a conflict between compliance with Rule 97 and Regulation
NMS.\4\ Specifically, if during the last 20 minutes of trading a member
organization facilitates a customer order that trades through protected
bids or offers, and in compliance with Rules 600(b)(30)(ii) and
611(b)(6) of Regulation NMS,\5\ the member organization simultaneously
routes proprietary intermarket sweep orders to execute against the full
displayed size of any protected quotation in that security (``ISO
facilitation''), the ISO facilitation could violate Rule 97 if the ISO
orders would trade on a plus tick, at a price above the lowest
facilitation price. In essence, the implementation of Regulation NMS
required firms to choose between violating Regulation NMS or violating
Rule 97. The exemption to Rule 97 was added so that when facilitating a
customer order that would otherwise require a member organization to
either violate Rule 97 or trade through protected quotations, member
organizations can comply with their Regulation NMS obligations without
also violating Rule 97.\6\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 56024 (July 6,
2007), 72 FR 38643 (July 13, 2007) (SR-NYSE-2007-61).
\5\ 17 CFR 242.600(b)(30)(ii) and 17 CFR 242.611(b)(6).
\6\ This exemption would be available only when: (1) The firm
has acquired a proprietary position as a result of a previous block
facilitation for a customer; (2) the facilitation trade during the
last 20 minutes of trading would cause the firm to trade through a
better priced offer on another market, such that the firm is
obligated by Regulation NMS Rule 611 to send proprietary ISOs when
it facilitates the customer's order; (3) the customer has declined
better-priced ISO executions; and (4) the better-priced offers in
away markets are such that NYSE Rule 97 would prohibit the firm from
sending a proprietary buy order. See NYSE Information Memo 07-67
(July 6, 2007).
---------------------------------------------------------------------------
Rescision of Rule 97
NYSE states that this proposed rescision of the rule highlights the
extent to which trading has changed and how the operation of Rule 97
hinders the ability of member organizations to legitimately conduct
their business and facilitate their customers' orders. Today,
compliance with Regulation NMS means that the liquidation of a block
position typically occurs on many different market centers.
Additionally, the Exchange believes that, in active and volatile market
conditions, incremental movements of a penny or more occur almost
instantaneously, lessening the ability to influence the closing price
of a security.
Rule 97 was established at a time when the majority of block
transactions were executed on the Exchange. However, in the present
competitive trading environment, there are now many other venues
available for market participants to effect block position transactions
without the strictures of such a rule. The Exchange believes that, in
order to encourage consistency throughout the industry with respect to
the execution of block positions and to encourage market participants
to continue to effect their block transactions on the Exchange, Rule 97
should be rescinded. NYSE represents that NYSE Regulation, Inc. will
continue to surveil in NYSE-listed securities for possible manipulative
activity, including marking the close, which could be in violation of
federal securities laws or Exchange Rules, including Rule 10b-5 under
the Act,\7\ section 9(a) of the Act,\8\ and Exchange Rules 476(a) and
435.\9\
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\7\ 17 CFR 240.10b-5.
\8\ 15. U.S.C. 78i(a).
\9\ See e-mail from Gillian Rowe, Senior Counsel, NYSE, to
Jennifer Dodd, Special Counsel, Division of Trading and Markets,
Commission, dated January 29, 2008.
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2. Statutory Basis
NYSE believes that the proposed rule change is consistent with
Section 6(b) of the Act,\10\ in general, and the requirement in Section
6(b)(5) of the Act,\11\ in particular, that the rules of an exchange
are, among other things, 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. NYSE asserts that the
proposed rule change also is designed to support the principles of
section 11A(a)(1)\12\ in that it seeks to assure economically efficient
execution of securities transactions, and make it practicable for
brokers to execute investors' orders in the best market.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ 15 U.S.C. 78k-1(a)(1).
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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
[[Page 7024]]
longer period to be appropriate and publishes its reasons for so
finding, or (ii) as to which NYSE 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.
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-NYSE-2008-03 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-2008-03. 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 offices of the Exchange. 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-2008-03 and should be
submitted on or before February 27, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2075 Filed 2-5-08; 8:45 am]
BILLING CODE 8011-01-P
