Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To Extend the Moratorium on the Administration of the Specialist Performance Evaluation Questionnaire (“SPEQ”) Pursuant to Exchange Rule 103A and the Use of the SPEQ Pursuant to Rule 103B (“Moratorium”) to the Earlier of December 31, 2008 or the Approval of SR-NYSE-2008-52, To Continue To Suspend the Use of SuperDot Turnaround for Orders Received and Responses to Administrative Messages as Objective Measures in the Assessment of Specialist Performance During the Moratorium and That the SPEQ and Order Reports/Administrative Responses Continue To Be Removed From the Criteria Used To Commence a Specialist Performance Improvement Action, 59021-59024 [E8-23837]
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Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
NYSE Alternext intends to adopt
membership rules that are nearly
identical to those of NYSE.12 Thus, if a
firm were to meet NYSE Alternext’s
membership rules, then it also will have
met NYSE’s rules. Moreover, the same
staff that administer NYSE membership
rules will also administer NYSE
Alternext membership rules. Therefore,
the Commission believes it is consistent
with the Act for NYSE to waive in NYSE
Alternext members that have been duly
admitted to NYSE Alternext
membership. Such action will eliminate
regulatory duplication without
undermining compliance with
applicable membership requirements.
Similarly, the Commission believes it is
consistent with the Act for NYSE to
waive the new member application fee
for NYSE Alternext members that waive
into NYSE.
Certain NYSE Alternext members that
will be waived in to NYSE do not
currently meet all of NYSE’s
membership requirements. In a separate
order, the Commission has approved
Amex’s proposal to give its existing
members a six-month grace period to
meet the new NYSE Alternext
membership requirements.13 In this
proposal, NYSE is offering such
members a similar six-month grace
period to meet the NYSE membership
requirements. The Commission believes
that this aspect of the proposal
reasonably balances the desire to allow
NYSE Alternext members to continue
their businesses and participate in the
Relocations with the need to ensure
compliance with applicable
membership requirements.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (SR–NYSE–2008–
70) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23767 Filed 10–7–08; 8:45 am]
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BILLING CODE 8011–01–P
12 See NYSE Alternext Equities filing, supra
note 6.
13 See Securities Exchange Act Release No. 58705
(October 1, 2008) (SR–Amex–2008–63).
14 15 U.S.C. 78s(b)(2).
15 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58699; File No. SR–NYSE–
2008–94]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by New York
Stock Exchange LLC To Extend the
Moratorium on the Administration of
the Specialist Performance Evaluation
Questionnaire (‘‘SPEQ’’) Pursuant to
Exchange Rule 103A and the Use of
the SPEQ Pursuant to Rule 103B
(‘‘Moratorium’’) to the Earlier of
December 31, 2008 or the Approval of
SR–NYSE–2008–52, To Continue To
Suspend the Use of SuperDot
Turnaround for Orders Received and
Responses to Administrative
Messages as Objective Measures in
the Assessment of Specialist
Performance During the Moratorium
and That the SPEQ and Order Reports/
Administrative Responses Continue To
Be Removed From the Criteria Used To
Commence a Specialist Performance
Improvement Action
59021
earlier of December 31, 2008 or the
approval of SR–NYSE–2008–52. In
addition, the Exchange proposes to
continue to suspend the use of SuperDot
turnaround for orders received and
responses to administrative messages as
objective measures in the assessment of
specialist performance during the
Moratorium. The Exchange further
proposes that the SPEQ and Order
Reports/Administrative Responses
continue to be removed from the criteria
used to commence a specialist
performance improvement action during
the Moratorium.
The text of the proposed rule changes
is available on the Exchange’s Web site
(https://www.nyse.com), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
October 1, 2008.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 30, 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 and II
below, which Items have been prepared
by the self-regulatory organization. The
Exchange has designated the proposed
rule change as ‘‘non-controversial’’
under Section 19(b)(3)(A)(iii) 4 of the
Act and Rule 19b–4(f)(6) thereunder,5
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.
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 the
Statutory Basis for, the Proposed Rule
Change
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
moratorium on the administration of the
Specialist Performance Evaluation
Questionnaire (‘‘SPEQ’’) pursuant to
Exchange Rule 103A and the use of the
SPEQ pursuant to Rule 103B
(‘‘Moratorium’’), which was
implemented on June 8, 2007 to the
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(3)(A)(iii).
5 17 CFR 240.19b–4(f)(6).
2 15
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
1. Purpose
The Exchange proposes to extend the
moratorium on the administration of the
Specialist Performance Evaluation
Questionnaire (‘‘SPEQ’’) pursuant to
Exchange Rule 103A and the use of the
SPEQ pursuant to Rule 103B
(‘‘Moratorium’’), which was
implemented on June 8, 2007,6 to the
earlier of December 31, 2008 or the
approval of SR–NYSE–2008–52.7
In addition, the Exchange proposes
that the use of SuperDot turnaround for
orders received and responses to
administrative messages continue to be
removed from the objective measures
6 See Securities Exchange Act Release Nos. 55852
(June 4, 2007), 72 FR 31868 (June 8, 2007) (NYSE–
2007–47) (‘‘Original Request’’); 57184 (January 22,
2008), 73 FR 5254 (January 29, 2008) (NYSE–2008–
02); 57591 (April 1, 2008), 73 FR 18838 (April 7,
2008) (NYSE–2008–21); and 58036 (June 26, 2008),
73 FR 38267 (July 3, 2008) (NYSE–2008–51).
7 See Securities Exchange Act Release No. 58363
(August 14, 2008), 73 FR 49514 (August 21, 2008)
(SR–NYSE–2008–52).
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Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
used in the assessment of specialist
performance pursuant to Exchange Rule
103B or as criteria used to commence
specialist performance improvement
action pursuant to Exchange Rule 103A
during the Moratorium.
jlentini on PROD1PC65 with NOTICES
SPEQ
Prior to June 2007, pursuant to
Exchange Rule 103A, on a quarterly
basis, the Exchange distributed a twenty
question survey known as the SPEQ to
eligible Floor brokers 8 to evaluate
specialist performance during the
quarter immediately prior to the
distribution of the SPEQ. Initially, this
subjective feedback provided critical
information to assist the Exchange in
maintaining the quality of the NYSE
market.
However, the Exchange believed that
the SPEQ no longer adequately allowed
a Floor broker to assess the electronic
interaction between the specialist and
the Floor broker. The Hybrid Market
provided Floor brokers and specialists
with electronic trading tools that have
resulted in less personal and verbal
contact between Floor brokers and
specialists. Currently, the majority of
transactions executed on the Exchange
are done through electronic executions.
In addition, the dramatic increase in
transparency with respect to the Display
Book through, among other things,
Exchange initiatives like NYSE
OPENBOOKTM 9 (‘‘OPENBOOK’’) has
decreased the need for the Floor broker
to obtain market information verbally
from the specialist. This increased
transparency gives all market
participants, both on and off the Floor,
a greater ability to see and react to
market changes.
The questions on the SPEQ did not
take into account the operation of the
electronic tools available in the Hybrid
Market. The SPEQ did not provide Floor
brokers with a means to evaluate
specialist performance under the
8 The Exchange believed that conscientious
participation in the SPEQ process was a critical
element in the Exchange’s program for evaluating
the overall performance of its specialists. All
eligible Floor brokers are required to participate in
the process and evaluate from one to three
specialist units each quarter. Floor brokers were
selected to participate in the SPEQ process based
on broker badge data submitted in accordance with
audit trail requirements. Brokers who intentionally
failed or refused to participate in the SPEQ process
were potentially subject to disciplinary action,
including the imposition of a summary fine
pursuant to Exchange Rule 476A.
9 OPENBOOK Online Database is an Exchange
online service that allows subscribers to view the
contents of the specialist book for any stock at any
given point in the day, or over a period of time.
Results are returned in an Excel spreadsheet.
OPENBOOK Online Database is a historical
database with data stored online for a 12-month
period.
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18:10 Oct 07, 2008
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current market model. As a result of the
more electronic interaction between
Floor brokers and specialists, Floor
brokers were unable to assess specialist
performance using the SPEQ.
The questions posed to the Floor
brokers on the SPEQ required Floor
brokers to opine on the specialists’
ability to offer single price executions
and specialists’ ability to provide
notification to Floor brokers of market
changes in particular stocks. In the
current more electronic market,
specialists are unable to offer single
price executions and the relative speed
of executions makes it virtually
impossible for specialists to notify
brokers of changes in a particular
security.
Given the above, the SPEQ no longer
served as a meaningful measure of
specialist performance.
Objective Measures
The Exchange further requests that
during the extension of the Moratorium,
allocations of newly listed securities on
the Exchange continue to be based on
the objective measures identified in
Exchange Rule 103B,10 with the
exception of SuperDot turnaround for
orders received and response to
administrative messages.
As explained in the Original Request
and previously requested extensions,
SuperDot turnaround for orders
received and response to administrative
messages no longer provide meaningful
objective standards to evaluate
specialist performance in today’s
electronic market. Specifically, in the
more electronic market, orders received
by Exchange systems that are
marketable upon entry are eligible to be
immediately and automatically
executed by Exchange systems. As such,
SuperDot turnaround no longer
provided a meaningful objective
measure of a specialist’s performance.
Furthermore, in the current more
electronic market, the Exchange systems
automatically respond to the majority of
the administrative messages. Today,
there are two administrative messages
10 Pursuant to Exchange Rule 103B, specialist
dealer performance is measured in terms of
participation (TTV); stabilization; capital
utilization, which is the degree to which the
specialist unit uses its own capital in relation to the
total dollar value of trading in the unit’s stocks; and
near neighbor analysis, which is a measure of
specialist performance and market quality
comparing performance in a stock to performance
of stocks that have similar market characteristics.
Additional objective measures pursuant to
Exchange Rule 103B are those measures included
in Exchange Rule 103A which are: (a) Timeliness
of regular openings; (b) promptness in seeking Floor
official approval of a non-regulatory delayed
opening; (c) timeliness of DOT turnaround; and (d)
response to administrative messages.
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Frm 00099
Fmt 4703
Sfmt 4703
that require a manual response from
specialists. These are messages that
require the specialist to provide status
information on market orders and stop
orders. With regard to requests for the
status of stop orders, the specialists are
no longer capable of providing this
information. In December 2006,
following Commission approval,11 the
Exchange changed its stop order
handling process. Stop orders are no
longer visible to the part of the NYSE
Display Book that the specialist
‘‘sees.’’ When a transaction on the
Exchange results in the election of a
stop order that had been received prior
to such transaction, the elected stop
order is sent as a market order 12 to the
Display Book and the specialist’s system
employing algorithms, where it is
handled in the same way as any other
market order. The specialist, therefore,
is unable to provide any information
regarding the status of stop orders.
Market orders are eligible to receive
immediate and automatic execution on
the Exchange. The immediate and
automatic execution of market orders
eliminates the need for the specialists to
respond to the administrative request
for the status of market orders. In
practice, a customer that submits a
market order will likely receive a report
of execution before the administrative
message requesting the status of the
market order has been printed and read
by the specialist.
This change has had a minimal
impact on Exchange customers. In the
past few years, the average number of
administrative messages received on a
daily basis has steadily declined. The
Exchange believes that immediate and
automatic execution of orders will
virtually eliminate administrative
messages that require a manual response
from a specialist. As a result, a
specialist’s ability to respond to
administrative messages no longer
provides a meaningful measure of
specialists’ performance during the
Moratorium.
Given the above, the Exchange seeks
to continue suspension of the use of
both measures as criteria used to assess
specialists’ performance during the
extension of the Moratorium.
Performance Improvement Actions
Similarly, during the extension of the
Moratorium, the Exchange seeks to
continue suspending the use of the
SPEQ and Order Reports/Administrative
11 See Securities Exchange Act Release No. 54820
(November 27, 2006), 71 FR 70824 (December 6,
2006) (SR–NYSE–2006–65).
12 As used herein, the term ‘‘market order’’ refers
to market orders that are not designated as ‘‘auction
market orders.’’
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Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
Reports as criteria for the
implementation of a performance
improvement action pursuant to
Exchange Rule 103A. Exchange Rule
103A(b) provides that:
The Market Performance Committee shall
initiate a Performance Improvement Action
(except in highly unusual or extenuating
circumstances, involving factors beyond the
control of a particular specialist unit, as
determined by formal vote of the Committee)
in any case where a specialist unit’s
performance falls below such standards as
are specified in the Supplementary Material
to this rule. The objective of a Performance
Improvement Action shall be to improve a
specialist unit’s performance where the unit
has exhibited one or more significant
weaknesses, or has exhibited an overall
pattern of weak performance that indicates
the need for general improvement.
Prior to June 2007, the SPEQ and
Order Reports/Administrative Reports
were two criteria included in the
standards specified in Exchange Rule
103A Supplementary Material. Given
that SPEQ and Order Reports/
Administrative Reports no longer
provided significant objective measures
of specialists’ performance in the
Hybrid Market, the Exchange sought to
suspend the use of both measures as
criteria for the implementation of a
performance improvement action during
the Moratorium. Through this filing, the
Exchange seeks to continue this
suspension for the duration of the
Moratorium.
jlentini on PROD1PC65 with NOTICES
Creation of a New Process
The Exchange has established a
quantifiable measure in order to
determine a specialist unit’s eligibility
to participate in the new Allocation
Process. The Exchange has formally
submitted a proposal to the Commission
to amend Exchange rules that govern the
allocation of securities to specialist
units and other related rules.13
The Exchange believes that the use of
a single objective measure to determine
specialist unit eligibility for allocation
will create a more efficient process that
is consistent with the Exchange’s
current more electronic trading
environment.
Conclusion
The Exchange therefore requests to
extend the Moratorium on the
administration of the Specialist
Performance Evaluation Questionnaire
(‘‘SPEQ’’) pursuant to Exchange Rule
103A and the use of the SPEQ pursuant
to Rule 103B until the earlier of
December 31, 2008 or the approval of
13 See Securities Exchange Act Release No. 58363
(August 14, 2008), 73 FR 49514 (August 21, 2008)
(NYSE–2008–52).
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18:10 Oct 07, 2008
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59023
SR–NYSE–2008–52. In addition, the
Exchange proposes to continue to
suspend the use of SuperDot turnaround
for orders received and responses to
administrative messages continue to not
be used as objective measures in the
assessment of specialist performance
during the Moratorium. The Exchange
further proposes that the SPEQ and
Order Reports/Administrative
Responses continue to be removed from
the criteria used to commence a
specialist performance improvement
action during the Moratorium.
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
2. Statutory Basis
The Exchange believes that the basis
under the Act for this proposed rule
change is the requirement under Section
6(b)(5) 14 that an Exchange have rules
that are designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The proposed rule
change also is designed to support the
principles of Section 11A(a)(1) 15 in that
it seeks to assure economically efficient
execution of securities transactions,
make it practicable for brokers to
execute investors’ orders in the best
market and provide an opportunity for
investors’ orders to be executed without
the participation of a dealer. Due to the
Exchange’s transition to a more
electronic market, the current SPEQ,
SuperDot turnaround for orders
received and response to administrative
messages no longer provide meaningful
objective standards to evaluate
specialist performance. The Exchange
requests this continued extension of the
Moratorium to determine whether
elimination of the SPEQ as well as
SuperDot turnaround for orders
received and response to administrative
messages as objective measures would
remove an impediment to a free and
open electronic market which would
result in the more economically efficient
execution of securities transactions.
Given the current trend to a more
electronically-based market, the
Exchange believes that the use of more
objective and detailed measures will
promote healthy competition between
specialist units and ultimately result in
better market-making for Exchange
customers.
Because the 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 after the date of
filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 16 and
subparagraph (f)(6) of Rule 19b–4
thereunder.17
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.18 However, Rule 19b–
4(f)(6)(iii) 19 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 preoperative delay and designate the
proposed rule change to become
operative upon filing.20
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest. The
Commission designates the proposal to
become effective and operative upon
filing.21
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
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
14 15
15 15
PO 00000
U.S.C. 78f(b)(5).
U.S.C. 78k–1(a)(1).
Frm 00100
Fmt 4703
Sfmt 4703
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
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
18 17 CFR 240.19b–4(f)(6)(iii). 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 satisfied
this requirement.
19 17 CFR 240.19b–4(f)(6)(iii).
20 Id.
21 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
impact of the proposed rule on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
17 17
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Federal Register / Vol. 73, No. 196 / Wednesday, October 8, 2008 / Notices
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in the 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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58713; File No. SR–NYSE–
2008–96]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by New York
Stock Exchange LLC To Extend for
Three Months the Moratorium Related
to the Qualification and Registration of
Registered Competitive Market Makers
(‘‘RCMMs’’) Pursuant to NYSE Rule
107A and Competitive Traders (‘‘CTs’’)
Pursuant to NYSE Rule 110
• 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–2008–94 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
jlentini on PROD1PC65 with NOTICES
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–23837 Filed 10–7–08; 8:45 am]
October 2, 2008.
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
All submissions should refer to File
September 30, 2008, New York Stock
Number SR–NYSE–2008–94. This file
Exchange LLC (‘‘NYSE’’ or the
number should be included on the
subject line if e-mail is used. To help the ‘‘Exchange’’) filed with the Securities
and Exchange Commission
Commission process and review your
(‘‘Commission’’) the proposed rule
comments more efficiently, please use
only one method. The Commission will change as described in Items I and II
post all comments on the Commission’s below, which Items have been prepared
by the self-regulatory organization. The
Internet Web site (https://www.sec.gov/
Commission is publishing this notice to
rules/sro.shtml). Copies of the
solicit comments on the proposed rule
submission, all subsequent
change from interested persons.
amendments, all written statements
with respect to the proposed rule
I. Self-Regulatory Organization’s
change that are filed with the
Statement of the Terms of Substance of
Commission, and all written
the Proposed Rule Change
communications relating to the
The Exchange proposes to extend for
proposed rule change between the
Commission and any person, other than three months the moratorium related to
the qualification and registration of
those that may be withheld from the
Registered Competitive Market Makers
public in accordance with the
(‘‘RCMMs’’) pursuant to NYSE Rule
provisions of 5 U.S.C. 552, will be
107A and Competitive Traders (‘‘CTs’’)
available for inspection and copying in
pursuant to NYSE Rule 110. The text of
the Commission’s Public Reference
the proposed rule change is available at
Room, 100 F Street, NE., Washington,
https://www.nyse.com, the NYSE, and
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m. the Commission’s Public Reference
Room.
Copies of such filing also will be
available for inspection and copying at
II. Self-Regulatory Organization’s
the principal office of NYSE. All
Statement of the Purpose of, and
comments received will be posted
Statutory Basis for, the Proposed Rule
without change; the Commission does
Change
not edit personal identifying
In its filing with the Commission, the
information from submissions. You
self-regulatory organization included
should submit only information that
you wish to make available publicly. All statements concerning the purpose of,
submissions should refer to File
22 17 CFR 200.30–3(a)(12).
Number SR–NYSE–2008–94 and should
1 15 U.S.C.78s(b)(1).
be submitted on or before October 29,
2 15 U.S.C. 78a.
2008.
3 17 CFR 240.19b–4.
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18:10 Oct 07, 2008
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Frm 00101
Fmt 4703
Sfmt 4703
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 proposes to extend for
three months the moratorium related to
the qualification and registration of
RCMMs pursuant to NYSE Rule 107A
and CTs pursuant to NYSE Rule 110.
On September 22, 2005, the Exchange
filed SR–NYSE–2005–63 4 with the
Securities and Exchange Commission
(‘‘Commission’’) proposing to
implement a moratorium on the
qualification and registration of new
RCMMS and CTs (‘‘Moratorium’’). The
purpose of the Moratorium was to allow
the Exchange an opportunity to review
the viability of RCMMs and CTs in the
NYSE HYBRID MARKET SM (‘‘Hybrid
Market’’).5
During each phase of the Hybrid
Market, new system functionality was
included in the operation of Exchange
systems and new data was generated. As
a result, the Exchange was unable to
make an informed decision as to the
viability of RCMMs and CTs in the
Hybrid Market. The phasing in
implementation of the Hybrid Market
required the Exchange to extend the
Moratorium an additional seven times
over the next twenty-seven (27)
months.6
On June 12, 2008, the Exchange filed
its proposal to create its new market
model (‘‘New Model’’).7 Pursuant to its
filing, the Exchange proposed to: (i)
4 See Securities Exchange Act Release No. 52648
(October 21, 2005), 70 FR 62155 (October 28, 2005)
(SR–NYSE–2005–63).
5 See Securities Exchange Act Release No. 53539
(March 22, 2006), 71 FR 16353 (March 31, 2006)
(SR–NYSE–2004–05) (establishing the NYSE
HYBRID MARKET SM).
6 See Securities Exchange Act Release Numbers
54140 (July 13, 2006), 71 FR 41491 (July 21, 2006)
(SR–NYSE–2006–48); 54985 (December 21, 2006),
72 FR 171 (January 3, 2007) (SR–NYSE–2006–113);
55992 (June 29, 2007), 72 FR 37289 (July 9, 2007)
(SR–NYSE–2007–57); 56556 (September 27, 2007),
72 FR 56421 (October 3, 2007) (SR–NYSE–2007–
86); 57072 (December 31, 2007), 73 FR 1252
(January 7, 2008) (SR–NYSE–2007–125); 57601
(April 2, 2008), 73 FR 19123 (April 8, 2008) (SR–
NYSE–2008–22); 58033 (June 26, 2008), 73 FR
38265 (July 3, 2008) (SR–NYSE–2008–49).
7 See Securities Exchange Act Release No. 58184
(July 17, 2008, 2006), 73 FR 42853 (July 23, 2008)
(SR–NYSE–2008–46).
E:\FR\FM\08OCN1.SGM
08OCN1
]]>Agencies
[Federal Register Volume 73, Number 196 (Wednesday, October 8, 2008)]
[Notices]
[Pages 59021-59024]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-23837]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58699; File No. SR-NYSE-2008-94]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To
Extend the Moratorium on the Administration of the Specialist
Performance Evaluation Questionnaire (``SPEQ'') Pursuant to Exchange
Rule 103A and the Use of the SPEQ Pursuant to Rule 103B
(``Moratorium'') to the Earlier of December 31, 2008 or the Approval of
SR-NYSE-2008-52, To Continue To Suspend the Use of SuperDot Turnaround
for Orders Received and Responses to Administrative Messages as
Objective Measures in the Assessment of Specialist Performance During
the Moratorium and That the SPEQ and Order Reports/Administrative
Responses Continue To Be Removed From the Criteria Used To Commence a
Specialist Performance Improvement Action
October 1, 2008.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on September 30, 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 and II below, which Items have been prepared by the self-
regulatory organization. The Exchange has designated the proposed rule
change as ``non-controversial'' under Section 19(b)(3)(A)(iii) \4\ of
the Act and Rule 19b-4(f)(6) thereunder,\5\ 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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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 15 U.S.C. 78s(b)(3)(A)(iii).
\5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the moratorium on the
administration of the Specialist Performance Evaluation Questionnaire
(``SPEQ'') pursuant to Exchange Rule 103A and the use of the SPEQ
pursuant to Rule 103B (``Moratorium''), which was implemented on June
8, 2007 to the earlier of December 31, 2008 or the approval of SR-NYSE-
2008-52. In addition, the Exchange proposes to continue to suspend the
use of SuperDot turnaround for orders received and responses to
administrative messages as objective measures in the assessment of
specialist performance during the Moratorium. The Exchange further
proposes that the SPEQ and Order Reports/Administrative Responses
continue to be removed from the criteria used to commence a specialist
performance improvement action during the Moratorium.
The text of the proposed rule changes is available on the
Exchange's Web site (https://www.nyse.com), at the Exchange's Office of
the Secretary, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to extend the moratorium on the
administration of the Specialist Performance Evaluation Questionnaire
(``SPEQ'') pursuant to Exchange Rule 103A and the use of the SPEQ
pursuant to Rule 103B (``Moratorium''), which was implemented on June
8, 2007,\6\ to the earlier of December 31, 2008 or the approval of SR-
NYSE-2008-52.\7\
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\6\ See Securities Exchange Act Release Nos. 55852 (June 4,
2007), 72 FR 31868 (June 8, 2007) (NYSE-2007-47) (``Original
Request''); 57184 (January 22, 2008), 73 FR 5254 (January 29, 2008)
(NYSE-2008-02); 57591 (April 1, 2008), 73 FR 18838 (April 7, 2008)
(NYSE-2008-21); and 58036 (June 26, 2008), 73 FR 38267 (July 3,
2008) (NYSE-2008-51).
\7\ See Securities Exchange Act Release No. 58363 (August 14,
2008), 73 FR 49514 (August 21, 2008) (SR-NYSE-2008-52).
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In addition, the Exchange proposes that the use of SuperDot
turnaround for orders received and responses to administrative messages
continue to be removed from the objective measures
[[Page 59022]]
used in the assessment of specialist performance pursuant to Exchange
Rule 103B or as criteria used to commence specialist performance
improvement action pursuant to Exchange Rule 103A during the
Moratorium.
SPEQ
Prior to June 2007, pursuant to Exchange Rule 103A, on a quarterly
basis, the Exchange distributed a twenty question survey known as the
SPEQ to eligible Floor brokers \8\ to evaluate specialist performance
during the quarter immediately prior to the distribution of the SPEQ.
Initially, this subjective feedback provided critical information to
assist the Exchange in maintaining the quality of the NYSE market.
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\8\ The Exchange believed that conscientious participation in
the SPEQ process was a critical element in the Exchange's program
for evaluating the overall performance of its specialists. All
eligible Floor brokers are required to participate in the process
and evaluate from one to three specialist units each quarter. Floor
brokers were selected to participate in the SPEQ process based on
broker badge data submitted in accordance with audit trail
requirements. Brokers who intentionally failed or refused to
participate in the SPEQ process were potentially subject to
disciplinary action, including the imposition of a summary fine
pursuant to Exchange Rule 476A.
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However, the Exchange believed that the SPEQ no longer adequately
allowed a Floor broker to assess the electronic interaction between the
specialist and the Floor broker. The Hybrid Market provided Floor
brokers and specialists with electronic trading tools that have
resulted in less personal and verbal contact between Floor brokers and
specialists. Currently, the majority of transactions executed on the
Exchange are done through electronic executions.
In addition, the dramatic increase in transparency with respect to
the Display Book through, among other things, Exchange initiatives like
NYSE OPENBOOK\TM\ \9\ (``OPENBOOK'') has decreased the need for the
Floor broker to obtain market information verbally from the specialist.
This increased transparency gives all market participants, both on and
off the Floor, a greater ability to see and react to market changes.
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\9\ OPENBOOK Online Database is an Exchange online service that
allows subscribers to view the contents of the specialist book for
any stock at any given point in the day, or over a period of time.
Results are returned in an Excel spreadsheet. OPENBOOK Online
Database is a historical database with data stored online for a 12-
month period.
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The questions on the SPEQ did not take into account the operation
of the electronic tools available in the Hybrid Market. The SPEQ did
not provide Floor brokers with a means to evaluate specialist
performance under the current market model. As a result of the more
electronic interaction between Floor brokers and specialists, Floor
brokers were unable to assess specialist performance using the SPEQ.
The questions posed to the Floor brokers on the SPEQ required Floor
brokers to opine on the specialists' ability to offer single price
executions and specialists' ability to provide notification to Floor
brokers of market changes in particular stocks. In the current more
electronic market, specialists are unable to offer single price
executions and the relative speed of executions makes it virtually
impossible for specialists to notify brokers of changes in a particular
security.
Given the above, the SPEQ no longer served as a meaningful measure
of specialist performance.
Objective Measures
The Exchange further requests that during the extension of the
Moratorium, allocations of newly listed securities on the Exchange
continue to be based on the objective measures identified in Exchange
Rule 103B,\10\ with the exception of SuperDot turnaround for orders
received and response to administrative messages.
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\10\ Pursuant to Exchange Rule 103B, specialist dealer
performance is measured in terms of participation (TTV);
stabilization; capital utilization, which is the degree to which the
specialist unit uses its own capital in relation to the total dollar
value of trading in the unit's stocks; and near neighbor analysis,
which is a measure of specialist performance and market quality
comparing performance in a stock to performance of stocks that have
similar market characteristics. Additional objective measures
pursuant to Exchange Rule 103B are those measures included in
Exchange Rule 103A which are: (a) Timeliness of regular openings;
(b) promptness in seeking Floor official approval of a non-
regulatory delayed opening; (c) timeliness of DOT turnaround; and
(d) response to administrative messages.
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As explained in the Original Request and previously requested
extensions, SuperDot turnaround for orders received and response to
administrative messages no longer provide meaningful objective
standards to evaluate specialist performance in today's electronic
market. Specifically, in the more electronic market, orders received by
Exchange systems that are marketable upon entry are eligible to be
immediately and automatically executed by Exchange systems. As such,
SuperDot turnaround no longer provided a meaningful objective measure
of a specialist's performance.
Furthermore, in the current more electronic market, the Exchange
systems automatically respond to the majority of the administrative
messages. Today, there are two administrative messages that require a
manual response from specialists. These are messages that require the
specialist to provide status information on market orders and stop
orders. With regard to requests for the status of stop orders, the
specialists are no longer capable of providing this information. In
December 2006, following Commission approval,\11\ the Exchange changed
its stop order handling process. Stop orders are no longer visible to
the part of the NYSE Display Book[reg] that the specialist ``sees.''
When a transaction on the Exchange results in the election of a stop
order that had been received prior to such transaction, the elected
stop order is sent as a market order \12\ to the Display Book and the
specialist's system employing algorithms, where it is handled in the
same way as any other market order. The specialist, therefore, is
unable to provide any information regarding the status of stop orders.
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\11\ See Securities Exchange Act Release No. 54820 (November 27,
2006), 71 FR 70824 (December 6, 2006) (SR-NYSE-2006-65).
\12\ As used herein, the term ``market order'' refers to market
orders that are not designated as ``auction market orders.''
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Market orders are eligible to receive immediate and automatic
execution on the Exchange. The immediate and automatic execution of
market orders eliminates the need for the specialists to respond to the
administrative request for the status of market orders. In practice, a
customer that submits a market order will likely receive a report of
execution before the administrative message requesting the status of
the market order has been printed and read by the specialist.
This change has had a minimal impact on Exchange customers. In the
past few years, the average number of administrative messages received
on a daily basis has steadily declined. The Exchange believes that
immediate and automatic execution of orders will virtually eliminate
administrative messages that require a manual response from a
specialist. As a result, a specialist's ability to respond to
administrative messages no longer provides a meaningful measure of
specialists' performance during the Moratorium.
Given the above, the Exchange seeks to continue suspension of the
use of both measures as criteria used to assess specialists'
performance during the extension of the Moratorium.
Performance Improvement Actions
Similarly, during the extension of the Moratorium, the Exchange
seeks to continue suspending the use of the SPEQ and Order Reports/
Administrative
[[Page 59023]]
Reports as criteria for the implementation of a performance improvement
action pursuant to Exchange Rule 103A. Exchange Rule 103A(b) provides
that:
The Market Performance Committee shall initiate a Performance
Improvement Action (except in highly unusual or extenuating
circumstances, involving factors beyond the control of a particular
specialist unit, as determined by formal vote of the Committee) in
any case where a specialist unit's performance falls below such
standards as are specified in the Supplementary Material to this
rule. The objective of a Performance Improvement Action shall be to
improve a specialist unit's performance where the unit has exhibited
one or more significant weaknesses, or has exhibited an overall
pattern of weak performance that indicates the need for general
improvement.
Prior to June 2007, the SPEQ and Order Reports/Administrative
Reports were two criteria included in the standards specified in
Exchange Rule 103A Supplementary Material. Given that SPEQ and Order
Reports/Administrative Reports no longer provided significant objective
measures of specialists' performance in the Hybrid Market, the Exchange
sought to suspend the use of both measures as criteria for the
implementation of a performance improvement action during the
Moratorium. Through this filing, the Exchange seeks to continue this
suspension for the duration of the Moratorium.
Creation of a New Process
The Exchange has established a quantifiable measure in order to
determine a specialist unit's eligibility to participate in the new
Allocation Process. The Exchange has formally submitted a proposal to
the Commission to amend Exchange rules that govern the allocation of
securities to specialist units and other related rules.\13\
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\13\ See Securities Exchange Act Release No. 58363 (August 14,
2008), 73 FR 49514 (August 21, 2008) (NYSE-2008-52).
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The Exchange believes that the use of a single objective measure to
determine specialist unit eligibility for allocation will create a more
efficient process that is consistent with the Exchange's current more
electronic trading environment.
Conclusion
The Exchange therefore requests to extend the Moratorium on the
administration of the Specialist Performance Evaluation Questionnaire
(``SPEQ'') pursuant to Exchange Rule 103A and the use of the SPEQ
pursuant to Rule 103B until the earlier of December 31, 2008 or the
approval of SR-NYSE-2008-52. In addition, the Exchange proposes to
continue to suspend the use of SuperDot turnaround for orders received
and responses to administrative messages continue to not be used as
objective measures in the assessment of specialist performance during
the Moratorium. The Exchange further proposes that the SPEQ and Order
Reports/Administrative Responses continue to be removed from the
criteria used to commence a specialist performance improvement action
during the Moratorium.
2. Statutory Basis
The Exchange believes that the basis under the Act for this
proposed rule change is the requirement under Section 6(b)(5) \14\ that
an Exchange have rules that are designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and, in
general, to protect investors and the public interest. The proposed
rule change also is designed to support the principles of Section
11A(a)(1) \15\ in that it seeks to assure economically efficient
execution of securities transactions, make it practicable for brokers
to execute investors' orders in the best market and provide an
opportunity for investors' orders to be executed without the
participation of a dealer. Due to the Exchange's transition to a more
electronic market, the current SPEQ, SuperDot turnaround for orders
received and response to administrative messages no longer provide
meaningful objective standards to evaluate specialist performance. The
Exchange requests this continued extension of the Moratorium to
determine whether elimination of the SPEQ as well as SuperDot
turnaround for orders received and response to administrative messages
as objective measures would remove an impediment to a free and open
electronic market which would result in the more economically efficient
execution of securities transactions. Given the current trend to a more
electronically-based market, the Exchange believes that the use of more
objective and detailed measures will promote healthy competition
between specialist units and ultimately result in better market-making
for Exchange customers.
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\14\ 15 U.S.C. 78f(b)(5).
\15\ 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
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 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 after the date of filing, or such shorter time as the Commission
may designate if consistent with the protection of investors and the
public interest, the proposed rule change has become effective pursuant
to Section 19(b)(3)(A) of the Act \16\ and subparagraph (f)(6) of Rule
19b-4 thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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.\18\
However, Rule 19b-4(f)(6)(iii) \19\ 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 pre-operative delay and designate the
proposed rule change to become operative upon filing.\20\
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\18\ 17 CFR 240.19b-4(f)(6)(iii). 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 satisfied this requirement.
\19\ 17 CFR 240.19b-4(f)(6)(iii).
\20\ Id.
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission designates the proposal to become effective and
operative upon filing.\21\
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\21\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the impact of the proposed rule 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
[[Page 59024]]
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in the furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov.
Please include File Number SR-NYSE-2008-94 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2008-94. 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 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-2008-94 and should be
submitted on or before October 29, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-23837 Filed 10-7-08; 8:45 am]
BILLING CODE 8011-01-P
