9370 Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Notices 

13For the purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

14 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 54592 

(October 12, 2006), 71 FR 61524. 

4See letter from George Rutherfurd, Consultant, 

dated April 24, 2006 to Commission’s rulecomments e-mail. 

5A specialist may only stop stock when requested 

to by another member if certain other conditions are 

met. See Exchange Rule 116.30(3). 

6See note 4 supra. 

7See letter from Mary Yeager, Assistant Secretary, 

NYSE, to Nancy M. Morris, Secretary, Commission, 

dated January 19, 2007. 

consistent with the protection of 

investors and the public interest 

because such waiver would permit the 

Exchange to immediately update its 

rules to reflect that the compliance date 

for Regulation NMS has been changed to 

March 5, 2007. For this reason, the 

Commission designates the proposed 

rule change to be operative upon filing 

with the Commission.13

At any time within 60 days of the 

filing of such proposed rule change the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2007–005 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–NASDAQ–2007–005. 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 (http://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. Copies of the filing also will be 

available for inspection and copying at 

the principal office of Nasdaq. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2007–005 and 

should be submitted on or before March 

22, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3554 Filed 2–28–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55337; File No. SR–NYSE–

2006–04] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving Proposed Rule Change as 

Modified by Amendment Nos. 1 and 2 

Thereto Relating to NYSE Rule 116 

(‘‘Stop’’ Constitutes Guarantee) and 

NYSE Rule 123B (Exchange Automated 

Order Routing Systems) 

February 23, 2007. 

I. Introduction 

On February 9, 2006, the New York 

Stock Exchange LLC (f/k/a New York 

Stock Exchange, Inc.) (‘‘NYSE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’)1 and Rule 19b–4 

thereunder,2 a proposal to amend NYSE 

Rule 116 (‘‘Stop’’ Constitutes Guarantee) 

and NYSE Rule 123B (Exchange 

Automated Order Routing Systems) 

regarding a specialist’s ability to ‘‘stop’’

stock and report such a transaction. On 

April 5, 2006, NYSE filed Amendment 

No. 1 to the proposed rule change. On 

September 8, 2006, NYSE filed 

Amendment No. 2 to the proposed rule 

change. The proposed rule change was 

published for comment in the Federal 

Register on October 18, 2006.3 The 

Commission received one comment 

regarding the proposal.4 This order 

approves the proposed rule change, as 

modified by Amendment Nos. 1 and 2. 

II. Description of the Proposal 

NYSE Rule 116 provides that an 

agreement by a member to ‘‘stop’’ stock 

at a specified price constitutes a 

guarantee of a purchase or sale by the 

member of the security at that price. 

Paragraph .30 in the Rule’s 

Supplementary Material provides three 

circumstances in which a specialist may 

stop stock, including: (i) At the opening 

or reopening of trading in a stock; (ii) 

when a broker in the trading crowd is 

representing another order at the stop 

price; or (iii) when requested to by 

another member.5 The practice of 

stopping stock by specialists on the 

Exchange refers to a guarantee by a 

specialist that an order he or she 

receives will be executed at no worse a 

price than the contra side price in the 

market at the time the order was 

stopped, with the understanding that 

the order may in fact receive a better 

price. 

The Exchange proposes to remove the 

provisions in NYSE Rule 116.30 that 

permit a specialist to ‘‘stop’’ stock. 

According to the Exchange, the practice 

of specialists stopping stock makes less 

sense in the Hybrid Market, primarily 

due to the dynamics of increased speed 

of trading and automated functioning of 

the market. The Exchange further stated 

that the procedures in NYSE Rule 

116.30(3) for granting stops are not an 

efficient mechanism for seeking price 

improvement an automated market due 

to the time required to perform the 

current manual procedures. 

III. Comment Summary 

The Commission received one 

comment letter on the proposal,6 to 

which NYSE has filed a response letter.7

In the comment letter, the commenter 

argued the proposal is not in the public 

interest because the Hybrid Market, and 

specifically NYSE’s Auction Market and 

Auction Limit Orders, do not provide 

investors with the price improvement 

opportunities that the NYSE’s auction 

market did. The commenter stated that 

he believed that specialists in the 

Hybrid Market have been relieved of 


rmajette on PROD1PC67 with NOTICES
Federal Register / Vol. 72, No. 40 / Thursday, March 1, 2007 / Notices 9371 

8 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. 15 U.S.C. 78c(f). 

9 15 U.S.C. 78f. 

10 15 U.S.C. 78f(b)(5). 

11 15 U.S.C. 78s(b)(2). 

12 17 CFR 200.30–3(a)(12). 

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). 

5LEAPS are Long-term Equity Anticipation 

Securities or long-term options series. See Phlx 

Rules 1079, 1012, and 1101A. 

6See Securities Exchange Act Release No. 35993 

(July 19, 1995), 60 FR 38073 (July 25, 1995) (SR–

Phlx–95–08, SR–Amex–95–12, SR–PSE–95–07, SR–

CBOE–95–19, and SR–NYSE–95–12). 

their responsibility to obtain price 

improvement for orders. 

In its response letter, NYSE noted that 

specialists are not currently obligated to 

stop stock and further noted that, in 

fact, specialists infrequently choose to 

stop stock. NYSE reiterated its belief 

that there are many opportunities for 

price improvement in the Hybrid 

Market and stated that specialists were 

not ‘‘being relieved of their 

responsibility to obtain price 

improvement.’’ The Exchange argued 

that it was eliminating a practice that its 

data showed was rarely used. The 

Exchange also argued that retaining the 

manual process for the specialist to stop 

stock would increase specialist risk if 

used. 

The commenter also asserted that 

NYSE could easily reprogram its 

systems to replicate electronically the 

manual practice of stopping stock. In 

response, NYSE disagreed, indicating 

that there are difficulties inherent in 

maintaining the stopping stock 

functionality amid systems designed to 

enable increased automatic executions. 

Further, NYSE argued that the decision 

to remove systemic support for stopped 

orders was based in part on data that 

showed that specialists do not stop 

stock frequently. 

IV. Discussion 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange 8 and, in particular, the 

requirements of Section 6 of the Act.9

Specifically, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,10 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 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. 

According to the Exchange, the 

practice of stopping stock by specialists 

is rarely used. Therefore, the Exchange 

decided that it would not develop an 

electronic, systemic process to support 

this little used, voluntary function. The 

Exchange also argued that retaining a 

manual process to stop stock in the 

Hybrid Market would be inefficient. 

Accordingly, the Commission finds that 

eliminating specialists’ ability to stop 

stock is reasonable and consistent with 

the Act. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,11 that the 

proposed rule change (SR–NYSE–2006–

04), as modified by Amendment Nos. 1 

and 2, be, and it hereby is approved. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3556 Filed 2–28–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55338; File No. SR–Phlx–

2007–04] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Listing LEAPS 

Pursuant to the $2.50 Strike Price 

Program 

February 23, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

21, 2007, the Philadelphia Stock 

Exchange, Inc. (‘‘Phlx’’ 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 substantially prepared by Phlx. 

The Exchange has filed the proposal as 

a ‘‘non-controversial’’ 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Phlx proposes to clarify that LEAPS 5

can be listed at $2.50 strike price 

intervals pursuant to the $2.50 Strike 

Price Program set forth in Commentary 

.05 to Phlx Rule 1012 (Series of Options 

Open for Trading). There is no new rule 

text. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Phlx included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. The Exchange has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposal is to 

clarify that LEAPS can be listed at $2.50 

strike price intervals pursuant to the 

$2.50 Strike Price Program. 

The current $2.50 Strike Price 

Program is set forth in Commentary .05 

to Phlx Rule 1012. The $2.50 Strike 

Price Program permits the Exchange to 

list options with $2.50 strike price 

intervals for selected options trading at 

strike prices greater than $25 but less 

than $75. In addition, each options 

exchange is permitted to list options 

with $2.50 strike price intervals on any 

option class that another options 

exchange selects under the $2.50 Strike 

Price Program. 

Initially adopted in 1995 as a pilot 

program, the pilot $2.50 Strike Price 

Program allowed options exchanges to 

list options with $2.50 strike price 

intervals for options trading at strike 

prices greater than $25 but less than $50 

on a total of up to 100 option classes.6

In 1998, the pilot program was 

permanently approved and expanded to 

allow the options exchanges to select up 

to 200 option classes for the $2.50 Strike 


rmajette on PROD1PC67 with NOTICES