15926 Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices 

13 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). 

5See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005). 

6NYSE Rule 127.10 defines a ‘‘block’’ size as at 

least 10,000 shares or a quantity of stock having a 

market value of $200,000 or more, whichever is 

less. 

7See NYSE Rule 60(e)(i)(B). 

8See NYSE Rule 1000(a)(v). 

9See NYSE Rule 60(e)(ii)(B). 

10See NYSE Rule 1000(b). 

11See NYSE Rule 60(e)(i)(A). For a description of 

gapped quotations, see Securities Exchange Act 

Release No. 53539 (March 22, 2006), 71 FR 16353 

(March 31, 2006) (SR–NYSE–2004–05) (the ‘‘Hybrid 

MarketSM Approval Order’’). 

12See NYSE Rule 60(e)(i)(C). For a description of 

LRPs, see Hybrid MarketSM Approval Order, supra 

note 11. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6125 Filed 4–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55543; File No. SR–NYSE–

2007–31] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend Rule 

60 To Allow the Exchange To Identify 

Its Quotation as Slow Non-Firm During 

the Manual Reporting of a Block-Sized 

Transaction 

March 27, 2007. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) and Rule 19b–4 thereunder,2

notice is hereby given that on March 20, 

2007, the New York Stock Exchange 

LLC (‘‘NYSE’’ or the ‘‘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 the 

Exchange. NYSE has designated the 

proposed rule change as constituting a 

‘‘non-controversial’’ rule change under 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

the proposal effective upon filing with 

the Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is proposing to amend 

Rule 60 to provide that when the 

Exchange quotation is not available for 

automatic execution due to the manual 

reporting of a block-sized transaction, 

the Exchange will identify such quotes 

with an indicator signifying that they 

are non-firm within the context of 

Regulation National Market System 

(‘‘Reg. NMS’’).5 The text of the rule 

proposal is available on the Exchange’s 

Web site (http://www.nyse.com), at the 

Exchange, 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 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change. The text of 

these statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in Sections A, B, and C below, 

of the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The NYSE proposes to amend Rule 60 

to specify that when a specialist 

manually reports a block-sized 

transaction 6 that involves orders in the 

Display Book( system (‘‘block-sized 

transaction’’), the Exchange will use an 

indicator to signify that the NYSE quote 

is non-firm. During the brief moment it 

takes a specialist to manually report a 

block-sized transaction in a security, 

autoquoting of the highest bid/lowest 

offer is suspended in that stock.7 In 

addition, during that same period of 

time, automatic executions against the 

displayed quotation are not available.8

After the specialist has completed the 

report of a block-sized transaction, 

autoquote will resume immediately,9

and the NYSE quotation will similarly 

again be available for automatic 

executions.10

In the NYSE Hybrid MarketSM

(‘‘Hybrid Market’’), autoquote and the 

availability of the Exchange quotation 

for automatic executions are likewise 

both disengaged for limited periods in 

connection with two other specific 

auction market activities: (1) When the 

specialist gaps the quotation in 

accordance with Exchange policies and 

procedures,11 and (2) when trading on 

the Exchange reaches a Liquidity 

Replenishment Point (‘‘LRP’’).12 For 

both of these situations, as provided in 

Rule 60(c)(2)(b), the Exchange identifies 

its quotation as unavailable for 

automatic execution in accordance with 

Reg. NMS. 

Through this filing, the Exchange 

proposes to specify in Rule 60(c)(2)(b) 

that in addition to the two situations 

described in the preceding paragraph, 

the NYSE will identify its quotation as 

non-firm as soon as the report template 

is opened by the specialist to report a 

block-sized transaction, and will 

continue to do so until the trade has 

been reported. This change is necessary 

because the quotation that is 

disseminated when a block-sized 

transaction is being manually reported 

may not reflect the current state of the 

market in the stock, given the temporary 

suspension of autoquoting of the highest 

bid/lowest offer that occurs during the 

reporting of a block-sized transaction. 

Thus, identifying the quotation as nonfirm when autoquote and automatic 

executions are suspended by a blocksized transaction will provide market 

participants with more accurate 

information about the state of the NYSE 

quotation. Moreover, identifying the 

NYSE quotation as non-firm will bring 

the dissemination of the quotation 

during block-sized transactions more in 

line with the way in which they are 

identified during other Exchange 

manual auction market activities that 

similarly cause the suspension of 

autoquote and automatic executions—

i.e., gap quotes and LRPs. 

The Exchange completed Phase IV of 

the Hybrid MarketSM rollout on 

February 28, 2007. However, the Phase 

IV software does not contain the coding 

necessary to properly identify the 

Exchange quotation as non-firm during 

the manual report of a block-sized 

transaction that involves orders in the 

Display Book. The NYSE has made the 

software changes required and is 

currently rolling it out as part of the 

post-Phase IV software in phases 

through March 30, 2007, the date by 

which it currently expects the rollout to 

be completed. 

In addition, the NYSE notes that it has 

requested from the Commission limited 

no-action relief from the requirement 

that the NYSE enforce compliance by its 

specialist members with NYSE Rule 19 

(Locking or Crossing Protected 

Quotations in NMS Stocks), with 

respect only to the display of a 

quotation when a block-sized 

transaction is being manually reported, 


ycherry on PROD1PC64 with NOTICES
Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices 15927 

13See Letter from Mary Yeager, Assistant 

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

Commission, dated March 2, 2007. In the letter, the 

NYSE requested that the no action relief be granted 

through April 5, 2007, rather than through March 

30, 2007, because at the time of the request it was 

contemplated that the post-Phase IV rollout would 

not conclude until April 5, 2007. 

14 15 U.S.C. 78f(b)(5). 

15 15 U.S.C. 78s(b)(3)(A). 

16 17 CFR 240.19b–4(f)(6). 

17Rule 19b–4(f)(6)(iii) under the Act requires that 

a self-regulatory organization submit to the 

Commission written notice of its intent to file the 

proposed rule change, along with a brief description 

and text of 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 

the pre-filing requirement. 

18 17 CFR 240.19b–4(f)(6)(iii). 19The Commission notes that the Exchange must 

continue to conduct surveillance with respect to 

manual auction market activities, including the 

manual reporting of block transactions addressed in 

this proposed rule change, in order to monitor for 

abuse. 20For 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). 

beginning on the Trading Phase Date 

until April 5, 2007.13

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) of the Act 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. 

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 

The proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 15 and Rule 19b–4(f)(6) 

thereunder 16 because the proposal does 

not: (i) Significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may if consistent 

with the protection of investors and the 

public interest.17

Normally, a proposed rule change 

filed under 19b–4(f)(6) may not become 

operative prior to 30 days after the date 

of filing. However, Rule 19b–

4(f)(6)(iii) 18 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay and designate an operative date of 

March 30, 2007 for the proposal. In its 

filing, the Exchange noted that, given 

the temporary suspension of 

autoquoting of the highest bid/lowest 

offer that occurs during the reporting of 

a block-sized transaction, the quotation 

that is disseminated when a block-sized 

transaction is being manually reported 

may not reflect the current state of the 

market in the subject stock. Moreover, 

identifying the NYSE quotation as nonfirm during the manual reporting of 

block transactions will bring the 

dissemination of the quotation more in 

line with the way in which quotes are 

identified during other Exchange 

manual auction market activities that 

similarly cause the suspension of 

autoquote and automatic executions—

i.e., gap quotes and LRPs (discussed 

above). Accordingly, the Exchange 

believes that this proposed rule change 

does not significantly affect the 

protection of investors or the public 

interest and does not impose any 

significant burden on competition. 

The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposed rule change will 

allow the NYSE to accurately identify 

the status of the NYSE quotation during 

the manual reporting of block 

transactions in line with the way in 

which quotes are identified during other 

Exchange manual auction market 

activities that similarly cause the 

suspension of autoquote and automatic 

executions—i.e., gap quotes and LRPs.19

Accordingly, consistent with the 

protection of investors and the public 

interest, the Commission designates the 

proposed rule change to be operative on 

March 30, 2007, as requested by the 

Exchange.20

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

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

Number SR–NYSE–2007–31 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2007–31. 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 will also be 

available for inspection and copying at 

the principal office of the 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–2007–31 and should be 

submitted on or before April 24, 2007. 


ycherry on PROD1PC64 with NOTICES
15928 Federal Register / Vol. 72, No. 63 / Tuesday, April 3, 2007 / Notices 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3An ICU is defined in Section 703.16 of the NYSE 

Manual as a security that represents an interest in 

a registered investment company that could be 

organized as a unit investment trust, an open-end 

management investment company, or a similar 

entity. A registered investment company is 

registered under the Investment Company Act of 

1940, 15 U.S.C. 80a et seq. 

4See Securities Exchange Act Release No. 55343 

(February 23, 2007), 72 FR 9814. 

5 17 CFR 240.19b–4(e). 

6See Section 703.16 of the NYSE Manual. 

7 17 CFR 240.19b–4(e). 

8 17 CFR 240.19b–4(e). 

9 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). 

10 15 U.S.C. 78f. 

11 15 U.S.C. 78f(b)(5). 

12See Section 703.16(C)(2)(a)(iii) of the NYSE 

Manual. 

13See Section 703.16(C)(2)(a)(iv) of the NYSE 

Manual. 

14See Section 703.16(C)(2)(a)(i) and (a)(ii) of the 

NYSE Manual. 

15See Section 703.16(C)(2)(b)(iii) of the NYSE 

Manual. 

16See Section 703.16(C)(2)(b)(iv) of the NYSE 

Manual. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6082 Filed 4–2–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55545; File No. SR–NYSE–

2007–12] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Granting Accelerated Approval to a 

Proposed Rule Change as Modified by 

Amendment No. 1 To Amend Section 

703.16 of the NYSE Listed Company 

Manual To Eliminate Requirement 

Regarding Index Weighting and 

Calculation Methodology 

March 27, 2007. 

I. Introduction 

On February 5, 2007, the New York 

Stock Exchange LLC (‘‘NYSE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposal to amend 

Section 703.16 of the NYSE Listed 

Company Manual (‘‘NYSE Manual’’), 

the Exchange’s generic listing standard 

for investment company units 

(‘‘ICUs’’),3 to eliminate the requirement 

that the weighting and calculation 

methodology for the index underlying a 

series of ICUs must be one of those 

specified in Section 703.16(C)(4)(a). On 

February 15, 2007, the NYSE submitted 

Amendment No. 1 to the proposed rule 

change. The proposed rule change was 

published for comment in the Federal 

Register on March 5, 2007 for a 15-day 

comment period.4 The Commission 

received no comments regarding the 

proposal. This order approves the 

proposed rule change, as modified by 

Amendment No. 1, on an accelerated 

basis. 

II. Description of the Proposal 

The Exchange has proposed to amend 

its ‘‘generic’’ listing standard pursuant 

to Rule 19b–4(e) under the Act 5 for 

ICUs (which include exchange-traded 

funds) to eliminate the requirement that 

an eligible index be calculated and 

weighted according to a specific 

methodology. 

The Exchange currently has listing 

and trading standards, which permit the 

Exchange either to list and trade ICUs or 

trade such ICUs on the Exchange on an 

unlisted trading privileges (‘‘UTP’’) 

basis, subject to the procedures 

contained in Rule 19b–4(e) under the 

Act.6 The existence of generic listing 

standards allows qualifying ICUs to list 

or trade without the need to file a rule 

change for each security. Section 

703.16(C)(4)(a) of the NYSE Manual 

requires that, if a series of ICUs is listed 

for trading on the Exchange in reliance 

upon Rule 19b–4(e) under the Act,7 the 

index underlying the series must follow 

a market capitalization, modified market 

capitalization, price, equal-dollar, or 

modified equal-dollar weighting 

methodology, or alternately, a 

methodology weighting components of 

the index based on any, some or all of 

the following: Sales, cash flow, book 

value and dividends. The proposed rule 

change would eliminate this standard, 

and, as a result, the Exchange would no 

longer consider index methodology in 

its review of an ICU’s eligibility for 

listing and trading pursuant to Rule 

19b–4(e) under the Act.8

III. Discussion 

After careful consideration, 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 9 and, in 

particular, the requirements of Section 6 

of the Act.10 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,11 which requires, 

among other things, that the rules of a 

national securities exchange be 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

As the market for ICUs has expanded, 

the variety of weighting and calculation 

methodologies for underlying indexes 

has grown, limiting the applicability of 

NYSE’s current generic listing standards 

for ICUs. The Commission believes that 

eliminating the index methodology 

requirement from the Exchange’s 

generic listing standards for ICUs will 

facilitate bringing ICUs based on 

indexes with nontraditional weighting 

techniques to the market, encourage 

innovation in index construction, 

reduce costs to issuers and other market 

participants, and promote competition. 

The Commission believes that these 

goals may be furthered without 

compromising investor protection. The 

Commission notes that the numerical 

criteria in Section 703.16(C) of the 

NYSE Manual addressing concentration, 

diversity, and liquidity of an underlying 

index’s components would continue to 

apply. For example, the generic listing 

standards for domestic indexes will 

continue to require, without limitation, 

that the most heavily weighted 

component stock of an index not exceed 

30% of the weight of the index, and the 

five most heavily weighted component 

stocks of an index not exceed 65% of 

the weight of the index,12 and that an 

index include a minimum of 13 

component stocks.13 In addition, 

component stocks that in the aggregate 

account for at least 90% of the weight 

of the index must have a market value 

of at least $75 million and minimum 

monthly trading volume of at least 

250,000 shares for each of the last six 

months.14 Similarly, the generic listing 

standards for international or global 

indexes require, without limitation, that 

the most heavily weighted component 

stock of an index not exceed 25% of the 

weight of the index, and the five most 

heavily weighted component stocks of 

an index not exceed 60% of the weight 

of the index,15 and that an index 

include a minimum of 20 component 

stocks.16 Component stocks that in the 

aggregate account for at least 90% of the 

weight of the index must have a market 

value of at least $100 million and 

minimum monthly trading volume of at 

least 250,000 shares for each of the last 


ycherry on PROD1PC64 with NOTICES