Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reduce the Order Flow Sent to the Specialist Application Programmed Interface, 46122-46124 [E8-18153]
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46122
Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices
the Exchange Act. Comments may be
submitted by any of the following
methods:
SECURITIES AND EXCHANGE
COMMISSION
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–2008–60 on the
subject line.
[Release No. 34–58268; File No. SR–NYSE–
2008–67]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Reduce the
Order Flow Sent to the Specialist
Application Programmed Interface
July 30, 2008.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549.
All submissions should refer to File
Number SR-NYSE–2008–60. 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 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–2008–60 and should
be submitted on or before August 28,
2008.
sroberts on PROD1PC70 with NOTICES
Paper Comments
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 July 29,
2008, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by NYSE. NYSE 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 it effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–18146 Filed 8–6–08; 8:45 am]
BILLING CODE 8010–01–P
20 17CFR
16:49 Aug 06, 2008
NYSE proposes to reduce the order
flow sent to the Specialist Application
Programmed Interface (‘‘Specialist
APISM’’ or ‘‘SAPI’’). 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. NYSE
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
200.30–3(a)(12)
VerDate Aug<31>2005
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1.Purpose
NYSE proposes to reduce the
information that is made available to
specialists with respect to orders as they
enter Exchange systems. The reduction
of order information provided to the
specialist is the Exchange’s way of
gradually transitioning the specialists
into their new role as Designated Market
Makers (‘‘DMMs’’).5 The DMM on the
Exchange will ultimately not be
provided any order by order information
as of the complete implementation of
the Exchange’s enhancements to its
trading model.6
Background
Pursuant to NYSE Rule 104, Exchange
specialists in their capacity as dealers
for their assigned securities, maintain
systems that use proprietary algorithms,
based on predetermined parameters, to
electronically participate in the
Exchange market (‘‘Specialist
Algorithm’’). The Specialist Algorithm
communicates with the NYSE Display
Book system 7 via an Exchange-owned
external application program interface
(the ‘‘API’’). The Specialist Algorithm is
intended to replicate electronically
some of the activities specialists are
permitted to engage in on the Floor in
the auction market and to facilitate the
specialists’ ability to fulfill their
obligation to maintain a fair and orderly
market.
Specialist Algorithms may generate
quoting and trading messages as
prescribed by Exchange Rule 104(b)(i).
To that end, the Specialist Algorithm
receives information via the API,8
5 See generally Securities Exchange Act Release
No. 58184 (July 17, 2008), 73 FR 42853 (July 23,
2008) (SR–NYSE–2008–46).
6 Id.
7 The Display Book system is an order
management and execution facility. The Display
Book system receives and displays orders to the
specialists, contains the Book, and provides a
mechanism to execute and report transactions and
publish the results to the Consolidated Tape. The
Display Book system is connected to a number of
other Exchange systems for the purposes of
comparison, surveillance, and reporting
information to customers and other market data and
national market systems.
8 Exchange systems provide specialist algorithms
with the following information: (1) Specialist dealer
position; (2) quotes; (3) information about orders in
the Display Book system such as limit orders,
percentage orders (‘‘state of the book’’); (4)
incoming orders as they are entering NYSE systems;
and (5) information with respect to odd-lot
executions to which the specialist was the contraside. In addition, a specialist firm may supply its
algorithm with any publicly available information
the specialist firm chooses. The Specialist
Algorithm does not have access to: (1) Information
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Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices
including information about orders
entering Exchange systems before that
information is available to other market
participants. Specialist Algorithms are
only provided a copy of one order at a
time and must process and respond to
each order prior to Exchange systems
providing any subsequent order
information. Exchange systems enforce
the proper sequencing of incoming
orders and messages generated by the
Specialist Algorithm in response to this
information. Once an algorithmic
message is generated, it cannot be
stopped, changed, or cancelled on its
way to the Display Book system.
Proposal To Reduce Order Information
Provided to the Specialist Algorithm
sroberts on PROD1PC70 with NOTICES
As discussed above, the evolution of
the Exchange’s market model will phase
out the specialist’s role and create a
DMM. The DMM will be a market maker
with the ability to trade competitively
for its dealer account. As such, the
Exchange has proposed that the DMM
be on parity with other market
participants in the execution of market
interest in most automatic trading
situations. Recognizing, that in order for
the DMM to compete on a more equal
footing with other market participants,
the DMM should not have access to
order information not available to the
other market participants; the Exchange
will no longer provide the DMM
Algorithm with a copy of order by order
information traditionally provided to
the specialist.
In order to gradually transition
specialists into their new DMM role, the
Exchange proposes to modify its
systems so that the current Specialist
Algorithm will no longer receive a copy
of all orders prior to display. Instead,
Exchange systems will provide in
certain securities, as explained further
below, copies of the following types of
orders to the Specialist Algorithm: (i)
Market orders; (ii) buy limit orders
priced at the NYSE bid price or sell
limit orders priced at the NYSE offer
price; (iii) limit orders priced in
between the NYSE bid price and the
NYSE offer price; and (iv) limit orders
that are priced at or through the
opposite side quote (i.e., below the bid
in the case of an order to sell or at or
above the offer in the case of an order
to buy).
For example, if the NYSE is quoted at
$10.05 bid and $10.10 offer, Exchange
identifying the firms entering orders, customer
information, or an order’s clearing broker; (2) Floor
broker agency interest files or aggregate Floor broker
agency interest available at each price; or (3) order
cancellations, except for cancel and replace orders.
See NYSE Rule 104(c)(ii).
VerDate Aug<31>2005
16:49 Aug 06, 2008
Jkt 214001
systems will provide the Specialist
Algorithm with copies of the following:
i. All market orders;
ii. Buy orders priced at $10.05;
iii. Sell orders priced at $10.10;
iv. All buy and sell Limit orders
priced at $10.06, $10.07, $10.08 and
$10.09;
v. Buy orders priced at $10.10 or
greater; and
vi. Sell orders priced at $10.05 or
lower.
The Exchange will commence the
reduction of the order information
provided to the Specialist Algorithm in
two securities. After a period of
monitoring Exchange system operation,
the Exchange will progressively
implement the reduction in additional
securities.9 It is anticipated that this will
result in a reduction of approximately
75% of orders provided to the Specialist
Algorithm in those securities where the
order reduction is operational.
Specialist Algorithms will still be
restricted to responding to one order at
a time, and the sequencing of order
information and responses will continue
to be enforced by Exchange systems.
When the new market model is fully
implemented,10 DMMs will not receive
a copy of orders prior to the order being
published to Exchange systems.
The Exchange believes that the
reduction of order flow information to
the current Specialist Algorithm will
not adversely affect the quality of
Exchange markets. Specialists will still
be required to meet their affirmative
obligations to maintain fair and orderly
markets in their assigned securities.
2. Statutory Basis
The basis under the Act 11 for this
proposed rule change is the requirement
under sections 6(b)(5) of the Act 12 that
an Exchange have rules that are
designed 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. The
proposed rule change is designed to
support the principles of section
11A(a)(1) 13 in that it seeks to assure
economically efficient execution of
securities transactions and fair
competition among Exchange market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NYSE 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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to section
19(b)(3)(A) of the Act 14 and Rule 19b–
4(f)(6) thereunder.15
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.16 However, Rule 19b–
4(f)(6)(iii) 17 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay so that the proposal may become
operative immediately upon filing. The
Exchange believes the waiver of this
period will allow it to immediately
foster competition by continuing the
ability of all market participants to
compete on a more equal basis. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. The Commission hereby
13 15
9 Ultimately,
the Exchange anticipates that the
reduction of order information will operate in all
securities traded on the Floor.
10 Subject to Securities and Exchange
Commission approval, the Exchange anticipates
that DMMs will begin to trade on parity in the third
quarter of 2008, and that the complete removal of
order by order information to the DMM will
commence in the fourth quarter of 2008.
11 15 U.S.C. 78(a).
12 15 U.S.C. 78f(b)(5).
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46123
U.S.C. 78k–1(a)(1).
U.S.C. 78s(b)(3)(A).
15 17 CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change at least five business
days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. NYSE has complied with this
requirement.
17 Id.
14 15
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46124
Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices
grants the Exchange’s request and
designates the proposal as operative
upon filing.18
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
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:
sroberts on PROD1PC70 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
No. SRVNYSE–2008–67 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street,
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2008–67. 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, 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 NYSE. All comments received
18 For purposes only of waiving the 30-day
operative delay of this proposal, the Commission
has considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
VerDate Aug<31>2005
16:49 Aug 06, 2008
Jkt 214001
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–
2008–67 and should be submitted on or
before August 28, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–18153 Filed 8–6–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58278; File No. SR–NYSE–
2008–61]
Self-Regulatory Organizations; Notice
of Filing of a Proposed Rule Change by
New York Stock Exchange LLC
Amending NYSE Rule 104(e) (Dealings
by Specialists) To Modify the
Conditions Governing the Specialists’
Use of the Price Improvement Trading
Message Pursuant to NYSE Rule
104(b)(i)(H)
July 31, 2008.
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 July 25,
2008, 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, II and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Exchange Rule 104(e) (Dealings by
Specialists) to modify the conditions
governing the specialists’ use of the
price improvement trading message
pursuant to Rule 104(b)(i)(H). The text
of the proposed rule change is available
at NYSE, www.nyse.com, and the
Commission’s Public Reference Room.
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Sfmt 4703
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
self-regulatory organization 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 those 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 parts 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 modify the
conditions that govern the ability of
specialists to provide price
improvement pursuant to Rule 104
(Dealings by Specialists). Specifically,
the Exchange proposes to amend
Exchange Rule 104(e) to remove the
requirement that specialists be
represented in the quote in a
‘‘meaningful amount’’ before they can
send a trading message that will provide
price improvement to arriving
marketable orders (i.e., those orders
capable of trading in the current market
upon arrival).
Pursuant to Exchange Rule 104(b)(i), a
specialist’s algorithm may generate and
transmit quoting and trading messages
in a number of specific situations
detailed in the rule. Under Rule
104(b)(i)(H), one of the permitted
algorithmic trading messages allows the
specialist to provide price improvement
to an order subject to the provisions of
Rule 104(e). Rule 104(e)(i) calls for the
specialist to be represented in the quote
for a ‘‘meaningful amount’’ in order to
provide price improvement to an
arriving order.3 A ‘‘meaningful amount’’
is defined in Rule 104(e)(ii) as at least
ten round lots (usually 1,000 shares) for
the 100 most active securities (based on
average daily volume) on the Exchange,
and at least five round lots (usually 500
shares) for all other securities on the
Exchange.
The price improvement message
capability was designed to provide
trading opportunities for which the
specialist’s algorithm could interact
with orders electronically, supplying
3 Under Rule 104(e)(i), for an incoming buy order,
the specialist must be represented in the offer, and
for an incoming sell order, the specialist must be
represented in the bid. The price improvement
offered must be at least one cent.
E:\FR\FM\07AUN1.SGM
07AUN1
]]>Agencies
[Federal Register Volume 73, Number 153 (Thursday, August 7, 2008)]
[Notices]
[Pages 46122-46124]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-18153]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58268; File No. SR-NYSE-2008-67]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Reduce the Order Flow Sent to the Specialist Application Programmed
Interface
July 30, 2008.
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 July 29, 2008, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by NYSE. NYSE 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 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
NYSE proposes to reduce the order flow sent to the Specialist
Application Programmed Interface (``Specialist APISM'' or ``SAPI'').
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. NYSE 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
NYSE proposes to reduce the information that is made available to
specialists with respect to orders as they enter Exchange systems. The
reduction of order information provided to the specialist is the
Exchange's way of gradually transitioning the specialists into their
new role as Designated Market Makers (``DMMs'').\5\ The DMM on the
Exchange will ultimately not be provided any order by order information
as of the complete implementation of the Exchange's enhancements to its
trading model.\6\
---------------------------------------------------------------------------
\5\ See generally Securities Exchange Act Release No. 58184
(July 17, 2008), 73 FR 42853 (July 23, 2008) (SR-NYSE-2008-46).
\6\ Id.
---------------------------------------------------------------------------
Background
Pursuant to NYSE Rule 104, Exchange specialists in their capacity
as dealers for their assigned securities, maintain systems that use
proprietary algorithms, based on predetermined parameters, to
electronically participate in the Exchange market (``Specialist
Algorithm''). The Specialist Algorithm communicates with the NYSE
Display Book[supreg] system \7\ via an Exchange-owned external
application program interface (the ``API''). The Specialist Algorithm
is intended to replicate electronically some of the activities
specialists are permitted to engage in on the Floor in the auction
market and to facilitate the specialists' ability to fulfill their
obligation to maintain a fair and orderly market.
---------------------------------------------------------------------------
\7\ The Display Book[supreg] system is an order management and
execution facility. The Display Book system receives and displays
orders to the specialists, contains the Book, and provides a
mechanism to execute and report transactions and publish the results
to the Consolidated Tape. The Display Book system is connected to a
number of other Exchange systems for the purposes of comparison,
surveillance, and reporting information to customers and other
market data and national market systems.
---------------------------------------------------------------------------
Specialist Algorithms may generate quoting and trading messages as
prescribed by Exchange Rule 104(b)(i). To that end, the Specialist
Algorithm receives information via the API,\8\
[[Page 46123]]
including information about orders entering Exchange systems before
that information is available to other market participants. Specialist
Algorithms are only provided a copy of one order at a time and must
process and respond to each order prior to Exchange systems providing
any subsequent order information. Exchange systems enforce the proper
sequencing of incoming orders and messages generated by the Specialist
Algorithm in response to this information. Once an algorithmic message
is generated, it cannot be stopped, changed, or cancelled on its way to
the Display Book system.
---------------------------------------------------------------------------
\8\ Exchange systems provide specialist algorithms with the
following information: (1) Specialist dealer position; (2) quotes;
(3) information about orders in the Display Book system such as
limit orders, percentage orders (``state of the book''); (4)
incoming orders as they are entering NYSE systems; and (5)
information with respect to odd-lot executions to which the
specialist was the contra-side. In addition, a specialist firm may
supply its algorithm with any publicly available information the
specialist firm chooses. The Specialist Algorithm does not have
access to: (1) Information identifying the firms entering orders,
customer information, or an order's clearing broker; (2) Floor
broker agency interest files or aggregate Floor broker agency
interest available at each price; or (3) order cancellations, except
for cancel and replace orders. See NYSE Rule 104(c)(ii).
---------------------------------------------------------------------------
Proposal To Reduce Order Information Provided to the Specialist
Algorithm
As discussed above, the evolution of the Exchange's market model
will phase out the specialist's role and create a DMM. The DMM will be
a market maker with the ability to trade competitively for its dealer
account. As such, the Exchange has proposed that the DMM be on parity
with other market participants in the execution of market interest in
most automatic trading situations. Recognizing, that in order for the
DMM to compete on a more equal footing with other market participants,
the DMM should not have access to order information not available to
the other market participants; the Exchange will no longer provide the
DMM Algorithm with a copy of order by order information traditionally
provided to the specialist.
In order to gradually transition specialists into their new DMM
role, the Exchange proposes to modify its systems so that the current
Specialist Algorithm will no longer receive a copy of all orders prior
to display. Instead, Exchange systems will provide in certain
securities, as explained further below, copies of the following types
of orders to the Specialist Algorithm: (i) Market orders; (ii) buy
limit orders priced at the NYSE bid price or sell limit orders priced
at the NYSE offer price; (iii) limit orders priced in between the NYSE
bid price and the NYSE offer price; and (iv) limit orders that are
priced at or through the opposite side quote (i.e., below the bid in
the case of an order to sell or at or above the offer in the case of an
order to buy).
For example, if the NYSE is quoted at $10.05 bid and $10.10 offer,
Exchange systems will provide the Specialist Algorithm with copies of
the following:
i. All market orders;
ii. Buy orders priced at $10.05;
iii. Sell orders priced at $10.10;
iv. All buy and sell Limit orders priced at $10.06, $10.07, $10.08
and $10.09;
v. Buy orders priced at $10.10 or greater; and
vi. Sell orders priced at $10.05 or lower.
The Exchange will commence the reduction of the order information
provided to the Specialist Algorithm in two securities. After a period
of monitoring Exchange system operation, the Exchange will
progressively implement the reduction in additional securities.\9\ It
is anticipated that this will result in a reduction of approximately
75% of orders provided to the Specialist Algorithm in those securities
where the order reduction is operational. Specialist Algorithms will
still be restricted to responding to one order at a time, and the
sequencing of order information and responses will continue to be
enforced by Exchange systems. When the new market model is fully
implemented,\10\ DMMs will not receive a copy of orders prior to the
order being published to Exchange systems.
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\9\ Ultimately, the Exchange anticipates that the reduction of
order information will operate in all securities traded on the
Floor.
\10\ Subject to Securities and Exchange Commission approval, the
Exchange anticipates that DMMs will begin to trade on parity in the
third quarter of 2008, and that the complete removal of order by
order information to the DMM will commence in the fourth quarter of
2008.
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The Exchange believes that the reduction of order flow information
to the current Specialist Algorithm will not adversely affect the
quality of Exchange markets. Specialists will still be required to meet
their affirmative obligations to maintain fair and orderly markets in
their assigned securities.
2. Statutory Basis
The basis under the Act \11\ for this proposed rule change is the
requirement under sections 6(b)(5) of the Act \12\ that an Exchange
have rules that are designed 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. The proposed rule change is designed to support the
principles of section 11A(a)(1) \13\ in that it seeks to assure
economically efficient execution of securities transactions and fair
competition among Exchange market participants.
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\11\ 15 U.S.C. 78(a).
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78k-1(a)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NYSE 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to section 19(b)(3)(A) of the Act \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\16\
However, Rule 19b-4(f)(6)(iii) \17\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay so that the proposal may
become operative immediately upon filing. The Exchange believes the
waiver of this period will allow it to immediately foster competition
by continuing the ability of all market participants to compete on a
more equal basis. The Commission believes that waiving the 30-day
operative delay is consistent with the protection of investors and the
public interest. The Commission hereby
[[Page 46124]]
grants the Exchange's request and designates the proposal as operative
upon filing.\18\
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\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
NYSE has complied with this requirement.
\17\ Id.
\18\ For purposes only of waiving the 30-day operative delay of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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 No. SRVNYSE-2008-67 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2008-67. 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, 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
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-2008-67 and should be submitted on or before August 28, 2008.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-18153 Filed 8-6-08; 8:45 am]
BILLING CODE 8010-01-P
