46122 Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 

20 17CFR 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 generally Securities Exchange Act Release 

No. 58184 (July 17, 2008), 73 FR 42853 (July 23, 

2008) (SR–NYSE–2008–46). 

6 Id. 

7The Display Book system is an order 

management and execution facility. The Display 

Book system receives and displays orders to the 

specialists, contains the Book, and provides a 

mechanism to execute and report transactions and 

publish the results to the Consolidated Tape. The 

Display Book system is connected to a number of 

other Exchange systems for the purposes of 

comparison, surveillance, and reporting 

information to customers and other market data and 

national market systems. 

8Exchange systems provide specialist algorithms 

with the following information: (1) Specialist dealer 

position; (2) quotes; (3) information about orders in 

the Display Book system such as limit orders, 

percentage orders (‘‘state of the book’’); (4) 

incoming orders as they are entering NYSE systems; 

and (5) information with respect to odd-lot 

executions to which the specialist was the contraside. In addition, a specialist firm may supply its 

algorithm with any publicly available information 

the specialist firm chooses. The Specialist 

Algorithm does not have access to: (1) Information 

the Exchange 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–2008–60 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549. 

All submissions should refer to File 

Number SR-NYSE–2008–60. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (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, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NYSE–2008–60 and should 

be submitted on or before August 28, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18146 Filed 8–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58268; File No. SR–NYSE–

2008–67] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Reduce the 

Order Flow Sent to the Specialist 

Application Programmed Interface 

July 30, 2008. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on July 29, 

2008, New York Stock Exchange LLC 

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

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NYSE. NYSE filed the proposed rule 

change pursuant to section 19(b)(3)(A) 

of the Act 3 and Rule 19b–4(f)(6) 

thereunder,4 which renders it effective 

upon filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NYSE proposes to reduce the order 

flow sent to the Specialist Application 

Programmed Interface (‘‘Specialist 

APISM’’ or ‘‘SAPI’’). The text of the 

proposed rule change is available at 

NYSE, the Commission’s Public 

Reference Room, and http:// 

www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NYSE included statements concerning 

the purpose of, and basis for, the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. NYSE 

has prepared summaries, set forth in 

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

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1.Purpose 

NYSE proposes to reduce the 

information that is made available to 

specialists with respect to orders as they 

enter Exchange systems. The reduction 

of order information provided to the 

specialist is the Exchange’s way of 

gradually transitioning the specialists 

into their new role as Designated Market 

Makers (‘‘DMMs’’).5 The DMM on the 

Exchange will ultimately not be 

provided any order by order information 

as of the complete implementation of 

the Exchange’s enhancements to its 

trading model.6

Background 

Pursuant to NYSE Rule 104, Exchange 

specialists in their capacity as dealers 

for their assigned securities, maintain 

systems that use proprietary algorithms, 

based on predetermined parameters, to 

electronically participate in the 

Exchange market (‘‘Specialist 

Algorithm’’). The Specialist Algorithm 

communicates with the NYSE Display 

Book system 7 via an Exchange-owned 

external application program interface 

(the ‘‘API’’). The Specialist Algorithm is 

intended to replicate electronically 

some of the activities specialists are 

permitted to engage in on the Floor in 

the auction market and to facilitate the 

specialists’ ability to fulfill their 

obligation to maintain a fair and orderly 

market. 

Specialist Algorithms may generate 

quoting and trading messages as 

prescribed by Exchange Rule 104(b)(i). 

To that end, the Specialist Algorithm 

receives information via the API,8


sroberts on PROD1PC70 with NOTICES
Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 46123 

identifying the firms entering orders, customer 

information, or an order’s clearing broker; (2) Floor 

broker agency interest files or aggregate Floor broker 

agency interest available at each price; or (3) order 

cancellations, except for cancel and replace orders. 

See NYSE Rule 104(c)(ii). 

9Ultimately, the Exchange anticipates that the 

reduction of order information will operate in all 

securities traded on the Floor. 

10Subject to Securities and Exchange 

Commission approval, the Exchange anticipates 

that DMMs will begin to trade on parity in the third 

quarter of 2008, and that the complete removal of 

order by order information to the DMM will 

commence in the fourth quarter of 2008. 

11 15 U.S.C. 78(a). 

12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78k–1(a)(1). 

14 15 U.S.C. 78s(b)(3)(A). 

15 17 CFR 240.19b–4(f)(6). 

16 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change at least five business 

days prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. NYSE has complied with this 

requirement. 

17 Id. 

including information about orders 

entering Exchange systems before that 

information is available to other market 

participants. Specialist Algorithms are 

only provided a copy of one order at a 

time and must process and respond to 

each order prior to Exchange systems 

providing any subsequent order 

information. Exchange systems enforce 

the proper sequencing of incoming 

orders and messages generated by the 

Specialist Algorithm in response to this 

information. Once an algorithmic 

message is generated, it cannot be 

stopped, changed, or cancelled on its 

way to the Display Book system. 

Proposal To Reduce Order Information 

Provided to the Specialist Algorithm 

As discussed above, the evolution of 

the Exchange’s market model will phase 

out the specialist’s role and create a 

DMM. The DMM will be a market maker 

with the ability to trade competitively 

for its dealer account. As such, the 

Exchange has proposed that the DMM 

be on parity with other market 

participants in the execution of market 

interest in most automatic trading 

situations. Recognizing, that in order for 

the DMM to compete on a more equal 

footing with other market participants, 

the DMM should not have access to 

order information not available to the 

other market participants; the Exchange 

will no longer provide the DMM 

Algorithm with a copy of order by order 

information traditionally provided to 

the specialist. 

In order to gradually transition 

specialists into their new DMM role, the 

Exchange proposes to modify its 

systems so that the current Specialist 

Algorithm will no longer receive a copy 

of all orders prior to display. Instead, 

Exchange systems will provide in 

certain securities, as explained further 

below, copies of the following types of 

orders to the Specialist Algorithm: (i) 

Market orders; (ii) buy limit orders 

priced at the NYSE bid price or sell 

limit orders priced at the NYSE offer 

price; (iii) limit orders priced in 

between the NYSE bid price and the 

NYSE offer price; and (iv) limit orders 

that are priced at or through the 

opposite side quote (i.e., below the bid 

in the case of an order to sell or at or 

above the offer in the case of an order 

to buy). 

For example, if the NYSE is quoted at 

$10.05 bid and $10.10 offer, Exchange 

systems will provide the Specialist 

Algorithm with copies of the following: 

i. All market orders; 

ii. Buy orders priced at $10.05; 

iii. Sell orders priced at $10.10; 

iv. All buy and sell Limit orders 

priced at $10.06, $10.07, $10.08 and 

$10.09; 

v. Buy orders priced at $10.10 or 

greater; and 

vi. Sell orders priced at $10.05 or 

lower. 

The Exchange will commence the 

reduction of the order information 

provided to the Specialist Algorithm in 

two securities. After a period of 

monitoring Exchange system operation, 

the Exchange will progressively 

implement the reduction in additional 

securities.9 It is anticipated that this will 

result in a reduction of approximately 

75% of orders provided to the Specialist 

Algorithm in those securities where the 

order reduction is operational. 

Specialist Algorithms will still be 

restricted to responding to one order at 

a time, and the sequencing of order 

information and responses will continue 

to be enforced by Exchange systems. 

When the new market model is fully 

implemented,10 DMMs will not receive 

a copy of orders prior to the order being 

published to Exchange systems. 

The Exchange believes that the 

reduction of order flow information to 

the current Specialist Algorithm will 

not adversely affect the quality of 

Exchange markets. Specialists will still 

be required to meet their affirmative 

obligations to maintain fair and orderly 

markets in their assigned securities. 

2. Statutory Basis 

The basis under the Act 11 for this 

proposed rule change is the requirement 

under sections 6(b)(5) of the Act 12 that 

an Exchange have rules that are 

designed to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. The 

proposed rule change is designed to 

support the principles of section 

11A(a)(1) 13 in that it seeks to assure 

economically efficient execution of 

securities transactions and fair 

competition among Exchange market 

participants. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NYSE does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to section 

19(b)(3)(A) of the Act 14 and Rule 19b–

4(f)(6) thereunder.15

A proposed rule change filed under 

19b–4(f)(6) normally may not become 

operative prior to 30 days after the date 

of filing.16 However, Rule 19b–

4(f)(6)(iii) 17 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay so that the proposal may become 

operative immediately upon filing. The 

Exchange believes the waiver of this 

period will allow it to immediately 

foster competition by continuing the 

ability of all market participants to 

compete on a more equal basis. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. The Commission hereby 


sroberts on PROD1PC70 with NOTICES
46124 Federal Register / Vol. 73, No. 153 / Thursday, August 7, 2008 / Notices 

18For purposes only of waiving the 30-day 

operative delay of this proposal, the Commission 

has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

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

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Under Rule 104(e)(i), for an incoming buy order, 

the specialist must be represented in the offer, and 

for an incoming sell order, the specialist must be 

represented in the bid. The price improvement 

offered must be at least one cent. 

grants the Exchange’s request and 

designates the proposal as operative 

upon filing.18

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

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 

No. SRVNYSE–2008–67 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, Station Place, 100 F Street, 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2008–67. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (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, on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such filing also will be available for 

inspection and copying at the principal 

office of NYSE. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–NYSE–

2008–67 and should be submitted on or 

before August 28, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–18153 Filed 8–6–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58278; File No. SR–NYSE–

2008–61] 

Self-Regulatory Organizations; Notice 

of Filing of a Proposed Rule Change by 

New York Stock Exchange LLC 

Amending NYSE Rule 104(e) (Dealings 

by Specialists) To Modify the 

Conditions Governing the Specialists’

Use of the Price Improvement Trading 

Message Pursuant to NYSE Rule 

104(b)(i)(H) 

July 31, 2008. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that, on July 25, 

2008, New York Stock Exchange LLC 

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

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Exchange Rule 104(e) (Dealings by 

Specialists) to modify the conditions 

governing the specialists’ use of the 

price improvement trading message 

pursuant to Rule 104(b)(i)(H). The text 

of the proposed rule change is available 

at NYSE, www.nyse.com, and the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange seeks to modify the 

conditions that govern the ability of 

specialists to provide price 

improvement pursuant to Rule 104 

(Dealings by Specialists). Specifically, 

the Exchange proposes to amend 

Exchange Rule 104(e) to remove the 

requirement that specialists be 

represented in the quote in a 

‘‘meaningful amount’’ before they can 

send a trading message that will provide 

price improvement to arriving 

marketable orders (i.e., those orders 

capable of trading in the current market 

upon arrival). 

Pursuant to Exchange Rule 104(b)(i), a 

specialist’s algorithm may generate and 

transmit quoting and trading messages 

in a number of specific situations 

detailed in the rule. Under Rule 

104(b)(i)(H), one of the permitted 

algorithmic trading messages allows the 

specialist to provide price improvement 

to an order subject to the provisions of 

Rule 104(e). Rule 104(e)(i) calls for the 

specialist to be represented in the quote 

for a ‘‘meaningful amount’’ in order to 

provide price improvement to an 

arriving order.3 A ‘‘meaningful amount’’

is defined in Rule 104(e)(ii) as at least 

ten round lots (usually 1,000 shares) for 

the 100 most active securities (based on 

average daily volume) on the Exchange, 

and at least five round lots (usually 500 

shares) for all other securities on the 

Exchange. 

The price improvement message 

capability was designed to provide 

trading opportunities for which the 

specialist’s algorithm could interact 

with orders electronically, supplying 


sroberts on PROD1PC70 with NOTICES