Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices 9985 

22 17 CFR 200.30–3(a)(34). 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 supersedes the original filing 

in its entirety. 

4Amendment No. 2 supersedes Amendment No. 

1 in its entirety. 

5The Exchange inadvertently failed to identify 

the numbering of Rule 134(g)(i) and (ii) as proposed 

new text. For clarity, this numbering has been 

italicized herein. The Exchange has committed to 

file an amendment reflecting the fact that this 

section numbering is new text prior to Commission 

approval of the proposed rule change. Telephone 

conversation between Deanna Logan, Director, 

Office of the General Counsel, NYSE and David 

Michehl, Special Counsel, Commission, Division of 

Market Regulation, on February 21, 2007. 

It is therefore ordered that ISE is 

relieved of those responsibilities 

allocated to the NASD under the Plan in 

File No. 4–529. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.22

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3837 Filed 3–5–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55361; File No. SR–NYSE–

2006–28] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing of a Proposed Rule Change as 

Modified by Amendment No. 2 Thereto 

Relating to NYSE Rules 134 and 411 

February 27, 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 May 2, 

2006, the New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been substantially prepared by 

NYSE. NYSE filed Amendment No. 1 to 

the proposed rule change on September 

22, 2006.3 NYSE filed Amendment No. 

2 to the proposed rule change on 

February 20, 2007.4 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change, 

as amended, from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The proposed rule change consists of 

amendments to NYSE Rules 134 

(Differences and Omissions-Cleared 

Transactions) and 411 (Erroneous 

Reports). The proposed amendments 

seek to incorporate recognized trading 

errors into NYSE Rule 134. The 

Exchange further seeks to expand the 

use of the Floor broker’s error account 

to include certain situations involving 

‘‘not held’’ orders. Furthermore, the 

proposed rule change would amend 

NYSE Rule 411 to allow erroneous 

reports of an execution involving an 

incorrect security, incorrect side of the 

market, incorrect price or whether an 

execution actually took place, to be 

treated as an erroneous trade. 

The text of the proposed rule change 

appears below. Proposed new language 

is italicized; proposed deletions are in 

[brackets].5

* * * * * 

Rule 134. 

Differences and Omissions-Cleared 

Transactions 

(‘‘QTs’’) 

* * * * * 

(d) 

* * * * * 

(iii) Records as to all errors shall be 

contemporaneous to the error and be 

maintained by the member or his or her 

member organization. Such records 

shall include the audit trail data 

elements prescribed in Rule 132, as well 

as the nature and amount of the error, 

the means whereby the member 

resolved the error with the member or 

member organization that cleared the 

error trade on the member’s behalf, the 

aggregate amount of liability that the 

member has incurred and has 

outstanding, as of the time each such 

error trade entry is recorded, and such 

other information as the Exchange may 

from time to time require. 

* * * * * 

(g) For the purposes of this rule an 

‘‘error’’ occurs as described in this 

subsection (g) and (h) below. When an 

order is executed outside of the 

customer instructions as entered in the 

electronic order tracking system of the 

Exchange pursuant to Rule 123(e). This 

includes, but is not limited to: 

(i) When a held or a not held order is 

executed in: 

(a) The wrong security; or 

(b) on the wrong side of the market; 

or 

(c) at a price outside the limit price 

of the order; or 

(d) is over bought or over sold; or 

(e) duplicates an execution. 

(ii) When an error is committed in the 

execution of a not held order as it 

relates to symbol, side, or price as noted 

in (i) above, which causes such not held 

order to remain unexecuted. 

(h) When: (i) There is a failure to 

execute a held order when market 

conditions permitted; or (ii) when a not 

held order remains unexecuted, in 

whole or in part, due to the order being 

lost or misplaced, or as a result of a 

system malfunction. 

(i) The Floor broker must maintain a 

signed, time-stamped record, including 

supporting documentation of such error. 

(j)(i) For the types of errors referred to 

in (h)(ii) above, such record and 

supporting documents must be provided 

to the Exchange Division of Market 

Surveillance prior to the opening of the 

Floor on the next trade date following 

the error. 

(ii) With respect to the errors 

described in (h)(ii) above, the Floor 

broker may execute the order in 

alignment with half the volume of each 

Exchange tape print up to the size of the 

order between the time that the order 

was entered and the time that the Floor 

Broker realized that the order was lost, 

misplaced or not executed as a result of 

a system malfunction. If executing half 

the volume of an order based on the 

Exchange tape print would result in 

more than a unit of trading, but not a 

multiple thereof (such as 150 shares), 

the customer would be entitled to the 

nearest full unit of shares rounded 

down (such as 100 shares). 

(iii) If the Floor broker fails to provide 

sufficient documentation, (which must 

include, but is not limited to, the date 

and time of the error, the date and time 

the error was discovered, the size of the 

error, the stock in which the error 

occurred, the original instructions, the 

names of all involved parties including 

the client and any upstairs trader, a 

detailed narrative of how the error 

occurred, detail narrative of discussions 

with relevant parties, the steps taken to 

correct the error and the ultimate 

resolution of the error) prior to the next 

trade date following the error, the Floor 

broker is prohibited from relying on the 

provisions of (j)(ii) above. 

* * * * * 

Rule 411. 

Erroneous Reports 

(a) 

* * * * * 

(iii) Except as provided in (iv) below, 

[A] a report shall not be binding and 

must be rescinded if an order was not 

actually executed but was in error 

reported to have been executed; an 

order which was executed, but in error 

reported as not executed, shall be 

binding; provided, however, when a 

member who is on the Floor reports in 

good faith the execution of an order 

entrusted to him by another member or 


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6A ‘‘not held’’ order is a market or limit order 

that gives the broker both time and price discretion 

to attempt to get the best possible execution. 

7A ‘‘held’’ order is a market or limit order that 

the broker must execute as instructed without 

discretion as to the time of an execution. 

8See NYSE Rules 134 and 411. 

9See NYSE Regulation, Information Memoranda 

01–38, 02–07, 02–19, and 06–34. 

10See NYSE Regulation, Information 

Memorandum 02–19, issued April 17, 2002, 

clarifying the application of NYSE Rules 134, 411, 

and 407A. 

11A ‘‘difference check’’ is a check issued to the 

customer by the member to cover the monetary 

difference between the execution price and the 

price the customer and the member agree was the 

proper price. 

member organization and the other 

party to that transaction does not know 

it, the member or member organization 

to whom such report was rendered and 

the member Floor broker who made the 

report shall treat the transaction as 

made for the account of the member 

who made the report, or the account of 

his member organization, if the price 

and size of the transaction were within 

the price and volume of transactions in 

the security at the time that the member 

who made the report believed he had 

executed the order. A detailed 

memorandum of each such transaction 

shall be prepared and filed with the 

Exchange by the member assuming the 

transaction. 

(iv) A Floor broker who fails to 

execute a not held order because of the 

Floor broker’s error as to symbol, side or 

price, but reports to the customer the 

order had been executed in accordance 

with the customer’s instructions, may 

treat the terms of the execution report as 

though they were the terms of a trade, 

provided: 

(1) The price and size of the erroneous 

report are within the range of prices and 

sizes in the subject security reported on 

the Exchange portion of the 

Consolidated Tape on the day in which 

the order was erroneously reported; 

(2) the Floor broker reports the error 

to the customer, and whether the error 

was favorable or unfavorable to the 

customer; 

(3) the Floor broker documents, on a 

trade-by-trade basis, the name of 

individual authorized to accept the 

erroneous report for the customer, the 

amount of the error, and whether the 

error was in the customer’s favor; 

(4) the Floor broker treats the 

erroneous report as though it were an 

erroneous trade and his or her error 

account or the error account of the 

member organization becomes the 

opposite side to the report; and 

(5) the Floor broker assumes any loss 

occasioned by the erroneous report, and 

pays any profit to the New York Stock 

Exchange Foundation. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change 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 

This filing seeks to codify current 

recognized trading errors and to expand 

the use of the Floor broker’s error 

account to include certain situations 

involving not held6 orders. NYSE Rules 

134 and 411, related to trading errors 

and erroneous reports, currently require 

members who ‘‘assume or acquire’’ a 

position as a result of an error when 

handling transactions for a customer to 

report such position in their designated 

error account. Pursuant to Information 

Memoranda 01–38, 02–07, 02–19, and 

06–34, the Exchange currently interprets 

an error to be a mistake in the execution 

of the order. 

Current Policy and Procedure for 

Recognized Trading Errors. At present, 

recognized trading errors fall into two 

categories. The first category applies to 

held7 and not held orders and includes 

trades that are mistakenly executed 

outside the written order instructions. 

These types of errors encompass 

situations where the transaction was 

incorrectly executed: (i) In the wrong 

security; (ii) on the wrong side of the 

market; (iii) outside of the price 

instructions; (iv) for a quantity greater 

than specified in the instructions; or (v) 

duplicating a prior execution of the 

same original order. The second 

category of trading errors applies only to 

held orders and involves situations 

where a held order was executable in 

the prevailing market; however, the 

member failed to take advantage of the 

opportunity to execute the order at that 

time. 

Under the current rules8 and 

interpretations9, a Floor broker’s failure 

to execute a not held order when such 

not held order was executable in the 

prevailing market is not an error and the 

Floor broker cannot use his or her error 

account to issue reports at prices that 

the customer would have been entitled 

to, had the Floor broker executed the 

not held order in the prevailing market. 

Similar to the second category of 

recognized trading errors noted above, 

that apply only to held orders, there can 

be instances where a not held order is 

accepted from a customer but is lost or 

misplaced or remains unexecuted as a 

result of a system malfunction and thus 

the Floor broker fails to execute the not 

held order when the order would have 

been executable in the prevailing 

market. If at the time the Floor broker 

identifies the execution failure, the 

customer’s order can be executed in the 

market at an equal or better price than 

the customer could have received had 

the order been executed in the 

prevailing market, then the Floor broker 

will execute the order. In the event the 

market is adverse to the customer’s 

interest at the time the error is 

identified, under the current rules and 

interpretation,10 the remedy is to have 

the Floor broker issue a difference 

check11 or offer a commission reduction 

to address any disadvantage to the 

customer. 

In practice, the issuance of a 

difference check or commission 

adjustment to resolve any monetary 

disadvantage suffered by the customer 

as a result of the Floor broker’s failure 

to execute a not held order due to 

administrative mistake or system 

malfunction has proved cumbersome. 

Many institutional investors do not 

want the administrative burden of 

processing a difference check or 

commission adjustment. More 

importantly, the issuance of the 

difference check or commission 

adjustment is ultimately not in the best 

interest of the customer because the 

administrative cost associated with the 

processing of the difference check or 

commission adjustment is ultimately 

borne by the customer and thus the 

remedy does not serve to make the 

customer whole. 

Proposed Amendments to Rule 134 

(Differences and Omissions-Cleared 

Transactions). According to the 

Exchange, this proposed rule change 

seeks to create greater efficiency and 

increase uniformity in the handling of 

trading errors. This proposed rule 

change seeks to codify in NYSE Rule 

134 the types of currently recognized 

trading errors. The filing further seeks to 

expand the currently recognized trading 

errors to include certain types of trading 

errors involving not held orders. 

The proposed amendment seeks to 

define a trading error to include 


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Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices 9987 

12See NYSE Rule 123(e). 13See proposed NYSE Rule 134(g)(i). 14See proposed NYSE Rule 134(h)(i). 15See proposed NYSE Rule 134(g)(ii). 16See proposed NYSE Rule 134(h)(ii) 17See NYSE Rule 134(d) and proposed NYSE 

Rule 134(g). 18See proposed NYSE Rule 134(g)(i)(a). 

19See proposed NYSE Rule 134(g)(i)(b). 

20See proposed NYSE Rule 134(g)(i)(c). 

21See proposed NYSE Rule 134(g)(i)(d). 

22See proposed NYSE Rule 134(g)(i)(e). 

situations when an order is executed 

outside of a customer’s instructions as 

entered in the electronic order tracking 

systems12 of the Exchange. Under the 

proposed amendment, types of 

recognized trading errors include, but 

are not limited to, the execution of a 

held or not held order: (i) In the 

incorrect security; (ii) on the wrong side 

of the market; (iii) at a price outside the 

price instructions; (iv) for a quantity of 

shares greater than the amount of shares 

specified in the order instructions; or (v) 

the execution of an order in duplicate.13

In addition, under the proposed 

amendment the definition of an error 

includes when a Floor broker: (i) 

Neglects to execute a not held order 

when market conditions permit;14 (ii) 

fails to execute a not held order because 

he or she committed an error as to 

symbol, side or price in the execution of 

said order;15 or (iii) fails to execute a not 

held order because the order was lost, 

misplaced or remains unexecuted as a 

result of a system malfunction.16

Pursuant to the above proposed 

definition of trading errors, a Floor 

broker would be allowed to use his or 

her error account to execute a 

customer’s not held order in alignment 

with the Consolidated Tape, when the 

Floor broker incorrectly executed a 

customer’s not held order: (i) In the 

incorrect security; (ii) on the wrong side 

of the market; or (iii) at a price outside 

the price instructions when the 

prevailing market is adverse to the 

customer’s interest at the time that the 

error is discovered.17

a. Not Held Orders—Incorrect 

Security. 18 For example, in instances 

where the Floor broker purchases or 

sells the incorrect security, and the 

market in the correct security is adverse 

to the customer’s interest when the error 

is discovered, the proposed rule change 

would allow the broker to review 

reports of executions on the 

Consolidated Tape in the correct 

security and determine if, from the time 

the Floor broker executed the order in 

the incorrect security until the time the 

error was discovered, the customer’s 

order was executable in the correct 

security. In the event the customer’s 

order was executable during that period 

of time, the customer is given an 

execution in the correct stock at the 

price the stock traded at the time of the 

broker’s error or during the time the 

error remained unrecognized. The 

broker’s error account is the contra-side 

of this trade and is then long or short 

the number of shares ordered by the 

customer at the price the stock was 

trading in the relevant time range. For 

example: 

Order: Buy 10,000 XYZ at the market, 

not held. 

Execution: Bought 10,000 KYZ at 

$98.05 at 11:20 a.m. 

Error Discovered: 11:45 a.m. prior to 

rendering a report of execution. 

Result: Error account long 10,000 KYZ 

at $98.05. 

If between 11:20 a.m. and 11:45 a.m. 

the customer’s order in XYZ was 

executable in its entirety, then the 

customer buys 10,000 XYZ in its 

entirety and error account is short 

10,000 XYZ at the 11:20 a.m. price. 

b. Not Held Order—Wrong Side of 

Market 19. In instances where the broker 

incorrectly executes a customer’s order 

on the wrong side of the market, and the 

market in the correct security is adverse 

to the customer’s interest when the error 

is discovered, the proposed rule change 

seeks to allow the Floor broker to use 

his or her error account to take over the 

incorrect position and execute the 

customer’s order on the correct side of 

the market. For example: 

Order: Buy 10,000 XYZ at the market, 

not held. 

Execution: Sold 10,000 XYZ at $45.10. 

Result: Floor broker takes over error; 

and Sells customer 10,000 XYZ at 

$45.10. The error account is ultimately 

short 20,000 shares XYZ at $45.10 

which is the sum of the mistakenly sold 

10,000 shares of XYZ taken over by the 

error account and 10,000 shares sold to 

the customer at a price of $45.10 from 

the error account. 

c. Not Held Orders—Outside of Price 

Instructions 20

In instances where the Floor broker 

executes the customer’s order at the 

incorrect price, the proposed rule 

change seeks to allow the Floor broker 

to take the position into the Floor 

broker’s error account. The Floor broker 

would then be allowed to execute the 

customer’s order consistent with the 

executions, sizes and prices as printed 

on the Consolidated Tape, if between 

the time that the Floor broker 

committed the error and when the error 

was discovered, the stock traded within 

the customer’s order price. For example: 

Order: Buy 10,000 XYZ at $80.50, Not 

Held. 

Execution: Bought 10,000 XYZ at 

$80.80 at 3:00 p.m. 

Error Discovered: After close buy 

order limited to $80.50 is unexecuted. 

Result: Error Account Long 10,000 at 

$80.80. 

If XYZ traded within the customer’s 

limit anytime from 3 p.m. to the close, 

the error account sells 10,000 consistent 

with the executions, sizes and prices as 

printed on the Consolidated Tape and 

customer order is executed. 

d. Not Held Orders—Over Buy or 

Over Sell 21

In instances where the Floor broker 

executes a quantity greater than 

contained in the order instructions, the 

proposed rule change seeks to allow the 

Floor broker to take the position into the 

Floor broker’s error account. When 

executing a held or not held order a 

Floor broker may incorrectly calculate 

the quantity of shares remaining to fill 

the order and execute a quantity of 

shares greater than the instructed 

amount. For example: 

Order: Buy 50,000 XYZ at $80.50, Not 

Held. 

Execution: Bought 5,000 XYZ at 

$80.50 at 3 p.m. 

Bought 5,000 XYZ at $80.49 at 3:10 

p.m. 

Bought 15,000 XYZ at $80.48 at 3:30 

p.m. 

Bought 15,000 XYZ at $80.47 at 3:31 

p.m. 

Bought 5,000 XYZ at $80.48 at 3:36 

p.m. 

Bought 5,000 XYZ at $80.48 at 3:37 

p.m. (Order filled) 

Bought 5,000 XYZ at $80.50 at 3:48 

p.m. (Overbuy) 

Result: Error Account Long 5,000 at 

$80.50 

The last execution of 5,000 shares of 

XYZ at $80.50 which exceed the 

quantity specified by the customer is 

taken into the Floor broker error 

account. 

e. Not Held Orders—Duplicate 

Execution.22 In instances where the 

Floor broker duplicates an execution, 

the proposed rule change seeks to allow 

the Floor broker to take the position into 

the Floor broker’s error account. During 

the execution of an order a Floor broker 

may inadvertently fail to document the 

execution of an order or may receive a 

duplicate transmission of an order and 

thus execute the order in duplicate. The 

proposal would allow the Floor broker 

to take the duplicate execution into the 

Floor broker’s error account. For 

example: 

Order: Buy 10,000 XYZ at $80.50, Not 

Held. 

Execution: Bought 10,000 XYZ at 

$80.50 at 3 p.m. 

Duplicate: Bought 10,000 XYZ at 

$80.50 at 3:40 p.m. 


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23See proposed NYSE Rule 134(h)(ii). 

24See proposed NYSE Rule 134(j)(ii). 

25Securities are generally traded in units of 100 

shares referred to as lots. A full round lot is 100 

shares. If a trade involves securities that are not in 

100 share increments then it is referred to as a 

partial round lot, e.g., 150 shares. 

26See proposed NYSE Rule 134(i). 

27The record must include the date and time of 

the error, the date and time the error was 

discovered, the size of the error, the stock in which 

the error occurred, the original instructions, the 

names of all involved parties including the client 

and any upstairs trader, a detailed narrative of how 

the error occurred, detail narrative of discussions 

with relevant parties, the steps taken to correct the 

error and the ultimate resolution of the error. See 

proposed NYSE Rule 134(j)(iii). 

28See proposed NYSE Rule 134(j)(iii). 

29See proposed NYSE Rule 134(j)(i). 

30See proposed NYSE Rule 134(j)(iii). 

31An ‘‘erroneous report’’ is a report of an 

execution that is incorrect as to stock, price or 

whether an execution actually took place. 

Result: Error Account Long 10,000 at 

$80.50. 

The duplicate purchase is taken into 

the Floor broker’s error account. 

f. Not Held Order—Lost or 

Misplaced.23 Pursuant to the proposed 

rule change, the Floor broker would be 

allowed to use his or her error account 

to report executions in alignment with 

the New York portion of the 

Consolidated Tape when the Floor 

broker fails to execute a not held order 

because of an administrative error that 

resulted in the order being lost or 

misplaced or remaining unexecuted as a 

result of a system malfunction and the 

market at the time the error is 

discovered is adverse to the customer’s 

interest (i.e., trading at a price worse 

than the customer could have received 

had the error not occurred). 

Significantly, this proposed amendment 

would not allow a Floor broker to issue 

a report of execution from his or her 

error account in instances where the 

customer merely did not like the 

execution, in order to prevent abuse of 

the new procedure. 

In instances where the Floor broker 

fails to execute an order as a result of 

an administrative error, such as the loss 

or misplacement of an order or a system 

malfunction and the current market 

conditions are adverse to the customer’s 

interests, the proposed rule change 

seeks to allow the Floor broker to use 

his or her error account as the contra 

party to the misplaced order in 

alignment with the New York portion of 

the Consolidated Tape. The Floor broker 

would be required to execute the 

customer’s order in alignment with half 

the volume of every New York portion 

of the Consolidated Tape print up to the 

size of the customer order, from the time 

that the order was entered up to the 

time that the Floor broker realized that 

the order was lost, misplaced or not 

executed because of a system 

malfunction.24 In the event that this 

results in a partial round lot, 25 the 

customer would be entitled to the 

nearest full lot, rounded down. 

Therefore if executed volume on the 

New York portion of the Consolidated 

Tape was 300 shares, half that volume 

would result in 150 shares and the 

customer would be entitled to a report 

of 100 shares. This is similar to how 

percentage orders are executed pursuant 

to NYSE Rules 13 and 123A.30. For 

example: 

Order: Buy 50,000 XYZ at the market, 

not held. 

Event: Order is lost or misplaced or 

system malfunction. 

Execution: Execution in alignment 

according to the New York portion of 

the Consolidated Tape unless a better 

price is available in the market. 

20,000 shares traded a minute after 

order entry time on the NYSE as 

reported to the Consolidated Tape. Floor 

broker sells 10,000 shares to customer at 

the same price of the 20,000 share 

execution. 

Next transaction in XYZ on the New 

York portion of the Consolidated Tape 

was 30,000 shares executed. Floor 

broker sells 15,000 shares to customer 

from error account at same price as 

30,000 share execution. 

Next transaction on New York portion 

of the Consolidated Tape in XYZ was 

50,000 shares traded. Floor broker sells 

25,000 shares to customer at the same 

price as the 50,000 share execution. 

Customer order is now complete. 

Result: Error account sells to the 

customer and customer receives 

appropriate report without having to 

process adjustments. 

In order to prevent abuse of the 

proposed new rules, the filing also seeks 

to amend NYSE Rule 134(d)(iii) to 

require a Floor broker to make and keep 

contemporaneous and detailed records 

documenting the circumstances 

surrounding errors. A Floor broker 

would be required to make and keep a 

time stamped record 26 of the error 

containing supporting information the 

Exchange shall, from time to time, 

require.27 In addition, the Member Firm 

Regulation Division of NYSE 

Regulation, Inc. would include a review 

of these records during the course of its 

routine member firm examinations. 

The burden of proof would be on the 

Floor broker to substantiate that a 

legitimate error occurred.28 In instances 

where the Floor broker asserts that an 

error occurred as a result of an 

administrative error, such as the loss or 

misplacement of the order, or a system 

malfunction, the proposed amendment 

requires that a Floor broker submit the 

aforementioned time stamped record to 

the Exchange prior to the opening of the 

Floor on the next trade date following 

the error.29 Absent the required 

documentation, the Floor broker would 

be prohibited from using his or her error 

account to address these situations.30

Proposed Amendments to NYSE Rule 

411 (Erroneous Reports). The Exchange 

further proposes to amend NYSE Rule 

411 to allow a Floor broker to treat 

erroneous reports 31 as erroneous trades 

when the Floor broker committed an 

error as to security, side, or price in 

order to alleviate disadvantage to the 

customer. 

When a Floor broker commits an error 

as to security, side or price, there are 

instances where the Floor broker issues 

a report to the customer as a result of 

the execution. The report is issued to 

the customer prior to the Floor broker 

identifying that an error occurred. 

Currently, pursuant to NYSE Rule 411, 

in instances where a Floor broker issued 

a report to a customer based on a 

transaction that was made outside of the 

customer’s instructions on a not held 

order as discussed above, the Floor 

broker would be required to rescind the 

report leaving the customer’s order 

unexecuted and disadvantaging the 

customer. The actual execution price 

and size are binding, and the trade 

clears and settles in accordance with the 

terms of the transaction as executed. 

The member and the customer resolve 

any monetary issues between 

themselves. 

In instances where a Floor broker 

executed an order in accordance with its 

terms but the execution details were 

reported in error, members and member 

organizations must always accept a 

corrected report. In the event the 

erroneous report was made to a nonmember, then the non-member may 

choose to refuse acceptance of a 

corrected report. In those instances, the 

Floor broker is allowed to treat the 

erroneous report to a non-member as 

though it were an erroneous trade. 

Pursuant to the proposed rule change, 

a Floor broker would treat ‘‘erroneous 

reports’’ as erroneous trades when the 

price and size of the order would have 

been executable in the market at or near 

the time of the erroneous transaction. 

NYSE Rule 411 (Erroneous Reports), in 

part, addresses these situations and 

establishes procedures for members and 

member organizations to follow in 

handling erroneous report situations; 

however erroneous reports issued to 


cprice-sewell on PROD1PC67 with NOTICES
Federal Register / Vol. 72, No. 43 / Tuesday, March 6, 2007 / Notices 9989 

32See proposed NYSE Rule 411(a)(iv)(1). 

33See proposed NYSE Rule 411(a)(iv)(2). 

34See proposed NYSE Rule 411(a)(iv)(3). 

35See proposed NYSE Rule 411(a)(iv)(4). 

36See proposed NYSE Rule 411(a)(iv)(5). 

37 15 U.S.C. 78f(b)(5). 38 17 CFR 200.30–3(a)(12). 

customers based on a transaction that 

was made outside of the customer’s 

instructions, as discussed above, must 

be rescinded, leaving the customer’s 

order unexecuted. 

The proposed rule change would 

allow the erroneous report based on a 

transaction that was made in error as to 

security, side or price to stand, provided 

the price and size of the erroneous 

report were within the range of prices 

and sizes in the specified security 

reported to the NYSE portion of the 

Consolidated Tape on the day in which 

the order was executed.32 The Floor 

broker would be required to report the 

error to the customer, including 

explaining to the customer whether the 

error was favorable or unfavorable to the 

customer.33 The Floor broker would 

also be required to document on a tradeby-trade basis, the name of the 

individual authorized to accept the 

erroneous report for the customer, the 

amount of the error and whether the 

error was favorable to the customer.34

The Floor broker would then treat the 

erroneous report as though it was an 

erroneous trade and his or her error 

account would become the opposite 

side to the report.35 In addition, the 

Floor broker would assume any loss 

incurred and any profit that resulted 

would be paid to the New York Stock 

Exchange Foundation 36 as currently 

required by NYSE Rule 411(a)(ii)(5). 

Thus, any disadvantage would be borne 

by the Floor broker who was responsible 

for committing the error, not the 

customer. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6(b)(5) of the 

Act 37 because it is 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. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

A. By order approve such proposed 

rule change; or 

B. Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

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

Number SR–NYSE–2006–28 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2006–28. 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 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–2006–28 and should 

be submitted on or before March 27, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.38

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. E7–3795 Filed 3–5–07; 8:45 am] 

BILLING CODE 8010–01–P 

SMALL BUSINESS ADMINISTRATION 

National Small Business Development 

Center Advisory Board; Public Meeting 

The U.S. Small Business 

Administration, National Small 

Business Development Center Advisory 

Board will be hosting a public meeting 

via conference call to discuss such 

matters that may be presented by 

members, staff of the U.S. Small 

Business Administration, or interested 

others. The conference call will be held 

on Tuesday, March 20, 2007 at 1 p.m. 

Eastern Standard Time. 

The purpose of the meeting is to 

discuss the internal Board issues; the 

March 5th agency meeting with senior 

program management; the Association 

of Small Business Development Center 

(ASBC) Board March meeting; and 

congressional visits conducted by board 

members. 

Anyone wishing to make an oral 

presentation to the Board must contact 

Erika Fischer, Senior Program Analyst, 

U.S. Small Business Administration, 

Office of Small Business Development 

Centers, 409 3rd Street, SW., 

Washington, DC 20416, telephone (202) 

205–7045 or fax (202) 481–0681. 

Matthew Teague, 

Committee Management Officer. 

[FR Doc. E7–3812 Filed 3–5–07; 8:45 am] 

BILLING CODE 8025–01–P 


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