49514 Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4Amendment No. 1 removes several references to 

NYSE Rule 750A in the purposed section and 

Exhibit 1 of the filing and corrects a mislabeled 

heading in Exhibit 1 of the filing. 

5NYSE Rule 103A, Supplementary Material .01 

states that a Performance Improvement Action shall 

be initiated if a specialist unit does not meet the 

standard of acceptable performance for the 

following criteria: (1) The SPEQ; (2) Use of Order 

Reports/Administrative Responses; and (3) Timely 

Openings. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58363; File No. SR–NYSE–

2008–52] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change and 

Amendment No. 1 Thereto by New 

York Stock Exchange LLC To Modify 

the Method by Which It Allocates and 

Reallocates Securities to Specialist 

Units and To Establish an Allocation 

System Based on a Single Objective 

Measure To Determine a Specialist 

Unit’s Eligibility To Participate in the 

Allocation Process 

August 14, 2008. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on August 

11, 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. On August 13, 

2008, NYSE filed Amendment No. 1 to 

the proposed rule change.4 The 

Commission is publishing this notice, as 

amended, 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 establish 

an allocation system based on a single 

objective measure to determine a 

specialist unit’s eligibility to participate 

in the allocation process. 

The text of the proposed rule change 

is available at http://www.nyse.com, the 

NYSE, 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 

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 those 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

NYSE Rule 103A (Specialist Stock 

Reallocation and Member Education 

and Performance) and 103B (Specialist 

Stock Allocation) to create an Allocation 

Policy that is more closely reflective of 

the Exchange’s increased electronic 

trading environment. The proposed 

changes to the Allocation Policy would 

establish a quantifiable measure that 

adds more objectivity to the specialist 

unit selection process and provides 

issuers with more choice in the 

selection of its specialist unit. The 

Exchange further proposes to allow the 

issuer to select the specialist units it 

chooses to interview directly. The 

Exchange therefore seeks to eliminate 

the Allocation Committee as the 

overseer of the allocation process, the 

Allocation Panel from which the 

Allocation Committee members are 

selected, as well as eliminate allocation 

decision criteria that are in part based 

on subjective measures of specialist 

performance included in the current 

process by discontinuing the use of the 

Specialist Performance Evaluation 

Questionnaire (‘‘SPEQ’’). 

In doing so, the Exchange seeks to 

replace the SPEQ with an objective 

measure designed to set a minimum 

standard to determine a specialist unit’s 

eligibility to participate in the new 

allocation process of a security. 

With the amendment of NYSE Rule 

103A, the Exchange also proposes to 

eliminate the Market Performance 

Committee (‘‘MPC’’) as the entity that is 

responsible for reallocating securities as 

well as eliminate performance 

improvement actions in light of the 

proposed Allocation Policy. NYSE 

Regulation, Inc. (‘‘NYSER’’), will replace 

the MPC as the entity responsible for 

developing procedures and standards 

for qualification and performance of 

members active on the Floor of the 

Exchange. Current sections of NYSE 

Rule 103A that address specialist 

security reallocation are amended and 

incorporated into NYSE Rule 103B. 

I. Current Allocation Process 

A. NYSE Rule 103A 

NYSE Rule 103A currently addresses 

the MPC’s duties and responsibilities 

with specialist security reassignments, 

performance improvement actions and 

member education. 

The MPC is the entity responsible for 

developing systems and procedures, 

including the determination of specific 

kinds of data to be reviewed and the 

establishment of standards to measure 

specialist performance and market 

quality. The MPC reviews the 

performance of specialist units on a 

periodic basis to determine if 

performance improvement measures are 

required to improve or sustain market 

quality. 

The MPC is authorized to review and 

approve security assignments and 

reassignments, assignments in special 

security situations and organizational 

changes of specialist units. 

In situations where the MPC 

determines that a specialist unit’s 

performance has fallen below the 

standards established by the Exchange,5

the MPC may initiate a performance 

improvement action to improve a 

specialist unit’s performance. This 

performance improvement action 

informs the specialist unit, in writing, 

that performance improvement is 

required, identifies the particular areas 

of weak performance and proposes 

measurable goals for the specialist unit 

to achieve. The MPC appoints a 

Performance Improvement Monitoring 

Team (‘‘Monitoring Team’’) to monitor 

the progress of the specialist unit. At the 

conclusion of the Performance 

Improvement Action, the MPC receives 

a report detailing the specialist unit’s 

performance. If the specialist unit did 

not adequately satisfy the goals 

enumerated in the Performance 

Improvement Action, the Monitoring 

Team may recommend that a particular 

security or securities be considered for 

reallocation. If the MPC concurs with 

the recommendation of the Monitoring 

Team, it shall initiate a reallocation 

proceeding to determine which of the 

specialist unit’s securities should be 

reallocated. 

NYSE Rule 103A further vests the 

MPC with the authority to develop 

procedures and standards for 

qualification and performance of 

members active on the Floor of the 

Exchange. The day to day 

administration of these responsibilities 

is carried out by the Market 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 49515 

6MKS administers the New Member Orientation 

Program in conjunction with the NYSE Specialist 

and Floor Broker Training Department. It 

administers the Floor Member Continuing 

Education classes and the New Floor Official 

Education Program. MKS also develops testing 

instruments and administers the ‘‘Series 15’’

examination for general membership on the 

Exchange, the Specialist Examination, the Floor 

Official Examination and the Registered 

Competitive Market Maker Examination. All Floor 

members are required to complete these educational 

programs and pass qualification tests before they 

are permitted to act as members on the Exchange 

or serve as a Floor Official. MKS is also responsible 

for maintaining records of the aforementioned 

examinations. 

7NYSE Rule 103B, Section I. 

8As an administrative matter, NYSE Rule 103B 

provides that all specialist units are deemed to have 

filed with the Exchange a blanket application 

pursuant to which the specialist unit agrees to 

accept the allocation of any security. This allows 

the Exchange the necessary flexibility to see that 

allocation decisions are still fairly made in 

instances where few or no applications are received 

for a particular listing company. 

9The SPEQ is a survey that the Exchange 

distributes to the Floor brokers in order to evaluate 

specialist performance. Floor brokers are required 

to rate and may provide written comments on the 

performance of specialist units with whom they 

deal regularly on the Floor. The Allocation 

Committee, in its professional judgment, 

determines how much weight to afford each of the 

facets of the SPEQ. The results of the SPEQ are to 

be given 25% weight to the overall evaluation of the 

specialist unit. 

The Exchange filed with the Commission to 

impose a moratorium on the administration of the 

SPEQ (‘‘Moratorium’’). The Moratorium 

commenced on June 4, 2007, and was scheduled to 

end no later than December 31, 2007. Pursuant to 

the Moratorium, the results of the SPEQ, among 

other things, no longer serve as criteria in the 

decision to allocate a security to a specialist unit. 

See Securities Exchange Act Release No. 55852 

(June 4, 2007), 72 FR 31868 (June 8, 2007) (SR–

NYSE–2007–47). The Exchange filed to extend the 

operation of the Moratorium until March 31, 2008. 

See Securities Exchange Act Release No. 57184 

(January 22, 2008), 73 FR 5254 (January 9, 2008) 

(SR–NYSE–2008–02). [sic] The Exchange filed to 

extend the operation of the Moratorium until June 

30, 2008. See Securities Exchange Act Release No. 

57591 (April 1, 2008), 73 FR 18838 (April 7, 2008) 

(SR–NYSE–2008–21). The Exchange filed to extend 

the operation of the Moratorium until September 

30, 2008. See Securities Exchange Act Release No. 

58036 (June 26, 2008), 73 FR 38267 (July 3, 2008) 

(SR–NYSE–2008–51). 

10The current objective measures are: (1) 

Timeliness of regular openings; (2) promptness in 

seeking Floor Official approval of a non-regulatory 

delayed opening; (3) timeliness of DOT turnaround; 

and (4) response to administrative messages. 

Pursuant to the Moratorium, timeliness of DOT 

turnaround and response to administrative 

measures are not included in the assessment of 

allocations or performance improvement actions. 

See Securities Exchange Act Release No. 55852 

(June 4, 2007), 72 FR 31868 (June 8, 2007) (SR–

NYSE–2007–47); Securities Exchange Act Release 

No. 57184 (January 22, 2008), 73 FR 5254 (January 

9, 2008) (SR–NYSE–2008–02) [sic]; Securities 

Exchange Act Release No. 57591 (April 1, 2008), 73 

FR 18838 (April 7, 2008) (SR–NYSE–2008–21); 

Securities Exchange Act Release No. 58036 (June 

26, 2008), 73 FR 38267 (July 3, 2008) (SR–NYSE–

2008–51). 

Surveillance Division (‘‘MKS’’) of 

NYSER.6

B. NYSE Rule 103B 

NYSE Rule 103B sets forth the current 

allocation policy and process. The 

intent of the Allocation Policy is: (1) To 

ensure that securities are allocated in an 

equitable and fair manner and that all 

specialist units have a fair opportunity 

for allocations based on established 

criteria and procedures; (2) to provide 

an incentive for ongoing enhancement 

of performance by specialist units; (3) to 

provide the best possible match between 

specialist unit and security; and (4) to 

contribute to the strength of the 

specialist system.7 The Allocation 

Policy applies to original listings and 

reallocations of already listed 

companies. 

Currently, the duties and 

responsibilities of the Allocation 

Committee which currently oversees the 

allocation of a security to the specialist 

units are set forth in NYSE Rule 103B, 

Section II. The Committee is comprised 

of nine members consisting of six 

institutional members who are Floor 

brokers, two allied members and one 

representative of an institutional 

investor organization and is selected 

from an Allocation Panel. These market 

professionals use their business 

judgment and the criteria specified in 

NYSE Rule 103B to identify specialist 

units most suitable to interview with an 

issuer. The Allocation Committee’s role 

in making allocation decisions is based 

primarily on the expert professional 

judgment of its members. While the 

Allocation Committee is supplied with 

information that relates to specialist 

performance, including the objective 

performance measures outlined above, 

there is still a reliance on the subjective 

judgment of the committee members in 

interpreting and applying this data in 

making allocation decisions. 

Once a company has been approved 

to list on the Exchange, specialist units 

are invited to submit applications to 

become the assigned specialist of the 

listing company. This application 

describes how the specialist unit will 

allocate resources to accommodate this 

new issue, what new resources, if any, 

are needed to service the security and 

the identity of the individual specialist 

proposed to trade the security. These 

applications seeking allocation of 

securities are reviewed by the 

Allocation Committee.8 Pursuant to 

NYSE Rule 103B, the Allocation 

Committee makes the selection of a 

specialist unit, either directly for 

allocation of a listing company, or 

creates a pool of specialist units to be 

interviewed by a listing company based 

on the following criteria: (i) The SPEQ,9

(ii) objective performance measures,10

(iii) listing company input, (iv) 

allocations received, (v) capital 

deficiency, disciplinary history and 

justifiable complaints, and (vi) foreign 

listing considerations. The objective 

measures are reported to the Allocation 

Committee on a ‘‘pass/fail’’ basis. 

A listing company has two options in 

choosing its specialist unit. Under the 

first option, it may choose to have the 

Allocation Committee select the 

specialist unit to make a market in the 

listing company’s security. Under the 

second option, the listing company may 

request that the Allocation Committee 

provide the listing company with a 

group of specialist units that the 

Committee deems appropriate to trade 

the listing company’s security. A listing 

company may supply a letter to the 

Allocation Committee indicating that a 

particular specialist unit has been 

instrumental in its decision to list on 

the Exchange and if the specialist unit 

is otherwise eligible to receive listings, 

the Allocation Committee will include 

the specialist unit identified by the 

listing company in the group. Following 

an interview process, the listing 

company will then select its specialist 

unit from the group provided by the 

Allocation Committee. While the 

Allocation Committee must use the 

criteria specified in NYSE Rule 103B in 

reaching a decision under either option, 

it does so through the filter of its own 

judgment as to which specialist unit 

(first option) or units (second option) 

may be appropriate matches for the 

listing company. 

II. Proposed Allocation Process 

Securities are allocated to a qualified 

specialist unit when: (1) A security is to 

be initially listed on the Exchange; and 

(2) a security previously assigned to a 

specialist member organization must be 

re-assigned pursuant to this rule or the 

NYSE Listing Company Manual Section 

806.01. The Exchange proposes to 

modify the current Allocation Policy to 

create a process based on an objective 

measure to determine a specialist unit’s 

eligibility to participate in the allocation 

process. As such, the Exchange 

proposes to permanently discontinue 

the use of the SPEQ and to allow issuers 

to directly select the specialist units the 

issuer seeks to interview, thus obviating 

the need for an Allocation Committee. 

A. Amendments to NYSE Rule 103A 

The Exchange seeks to amend NYSE 

Rule 103A to eliminate the concept of 

a performance improvement action. The 

Exchange has recently amended its 

system of variable payments to 

specialist units to create a liquidity 

provision payment (‘‘LPP’’) to incent 

mstockstill on PROD1PC66 with NOTICES

49516 Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 

11See Securities Exchange Act Release No. 56591 

(October 1, 2007), 72 FR 57371 (October 9, 2007) 

(SR–NYSE–2007–89). 

12NYSE Rule 104 sets forth quoting messages that 

specialists are permitted to send as part of their 

quoting functionality. 

13NYSE Rule 103A, Section I. 

14Proposed Rule Text, NYSE Rule 103B, Section 

II(A). 

15Proposed Rule Text, NYSE Rule 103B, Section 

II(A). 

16Proposed Rule Text, NYSE Rule 103B, Section 

II(B). 

17Proposed Rule Text, NYSE Rule 103B, Section 

II(C). 

18Proposed Rule Text, NYSE Rule 103B, Section 

II(D). 

19Proposed Rule Text, NYSE Rule 103B, Section 

II(E). 

20The Exchange Strategic Analysis Department 

will be responsible for generating and monitoring 

the specialist units’ performance data in order to 

determine which specialist units are eligible for 

security allocation. 

21For purposes of Section II of NYSE Rule 103B, 

‘‘Trading Day’’ shall mean any day on which the 

Exchange is scheduled to be open for business. 

Days on which the Exchange closes prior to 4:00 

p.m. (Eastern Time) for any reason, which may 

include any regulatory halt or trading halt, shall be 

considered a Trading Day. 

22Proposed Rule Text, NYSE Rule 103B, Section 

II(F) and II(H)(1)–(5). 

specialist unit performance. The 

payment is based, in part, on the 

specialist unit’s trading performance by 

measuring its liquidity enhancing 

behavior. LPPs are based on two 

revenue sources in NYSE-listed 

securities: (1) The Exchange’s share of 

market data revenue derived from 

quoting share and (2) the Exchange’s 

transaction fee revenue.11 The Exchange 

believes that payments derived from 

market data incent specialist units to 

post quotes more frequently at the 

National Best Bid or Offer (‘‘NBBO’’). 

The payments derived from transaction 

revenue are based on Exchange reviews 

of the specialist unit’s executed volume 

in four categories: (1) Price 

improvement; (2) size improvement; (3) 

providing liquidity from posting bids or 

offers on the book; and (4) matching 

better bids or offers published by other 

market centers to reduce client routing 

cost.12 The Exchange believes that 

specialist units will be incented to 

engage in trading activity that provides 

liquidity and results in a better 

execution experience for the customer. 

Additionally, the Exchange believes that 

this positive incentive acts as a more 

powerful mechanism to encourage 

specialist unit performance. As such, 

the Exchange seeks to eliminate the 

performance improvement action in 

NYSE Rule 103A. 

Moreover, the Exchange proposes to 

amend NYSE Rule 103A to vest the 

overview of member education 

programs with NYSER.13 The day to day 

administration of member education is 

currently performed by MKS staff. The 

Exchange, therefore, believes that it is 

more appropriate to have NYSER 

completely responsible for this function. 

B. Amendments to NYSE Rule 103B 

The Exchange believes that the 

current allocation policy contained in 

NYSE Rule 103B is no longer consistent 

with the current more electronic trading 

environment. The Exchange believes 

that a clear single objective standard to 

determine specialist unit eligibility to 

participate in the allocation process will 

create a more efficient process that is 

consistent with its current trading 

environment. As such, the SPEQ 

(discussed more fully below), along 

with several objective performance 

measures, namely SuperDOT 

turnaround and responses to 

administrative messages, are no longer 

relevant. 

Moreover, the Exchange’s move to a 

single objective measure for eligibility 

in the allocation process simplifies the 

process by allowing an issuer to directly 

select the specialist units it seeks to 

interview in order to determine the 

ultimate specialist unit to be assigned to 

trade the security. As such, the 

Exchange proposes to eliminate the 

Allocation Committee. Furthermore, 

because the Exchange seeks to eliminate 

the Allocation Committee, such 

elimination would obviate the necessity 

for an Allocation Panel. Accordingly, 

the Exchange seeks to also eliminate the 

Allocation Panel. 

1. Proposed Objective Measure for 

Eligibility for Allocation Process 

The Exchange proposes to establish a 

single objective measure which will 

determine a specialist unit’s eligibility 

to participate in the allocation 

process.14 Proposed NYSE Rule 103B, 

Section II sets forth the objective 

measure that a specialist unit must meet 

in order to be eligible to participate in 

the allocation process. 

A specialist unit is eligible to 

participate in the allocation process of 

a listed security when the specialist unit 

meets the quoting requirements for 

‘‘Less Active’’ and ‘‘More Active’’

securities.15

A ‘‘Less Active Security’’ is defined as 

any listed security that has a 

consolidated average daily volume of 

less than one million shares per 

calendar month.16 A ‘‘More Active 

Security’’ is defined as any listed 

security that has a consolidated average 

daily volume equal to or greater than 

one million shares per calendar 

month.17

For Less Active Securities, a specialist 

unit must maintain a bid and an offer at 

the National Best Bid (‘‘NBB’’) and 

National Best Offer (‘‘NBO’’) 

(collectively herein ‘‘NBBO’’) for an 

aggregate average monthly NBBO of 

10% or more during a calendar month.18

For More Active Securities, a specialist 

unit must maintain a bid and an offer at 

the NBBO for an aggregate average 

monthly NBBO of 5% or more during a 

calendar month.19

Specialist units must satisfy the 

quoting requirement for both categories 

(Less Active and More Active) of their 

assigned securities.20 The Exchange will 

determine whether a specialist unit has 

met its quoting requirements for Less 

Active and More Active securities for 

the ‘‘Trading Days’’ 21 in a calendar 

month by calculating: 

(1) The ‘‘Daily NBB Quoting 

Percentage’’ by determining the 

percentage of time a specialist unit has 

at least one round lot of displayed 

interest in an Exchange bid at the 

National Best Bid during each Trading 

Day for a calendar month; 

(2) The ‘‘Daily NBO Quoting 

Percentage’’ by determining the 

percentage of time a specialist unit has 

at least one round lot of displayed 

interest in an Exchange offer at the 

National Best Offer during each Trading 

Day for a calendar month; 

(3) The ‘‘Average Daily NBBO 

Quoting Percentage’’ for each Trading 

Day by summing the ‘‘Daily NBB 

Quoting Percentage’’ and the ‘‘Daily 

NBO Quoting Percentage’’ then dividing 

such sum by two; 

(4) The ‘‘Monthly Average NBBO 

Quoting Percentage’’ for each security 

by summing the security’s ‘‘Average 

Daily NBBO Quoting Percentages’’ for 

each Trading Day in a calendar month 

then dividing the resulting sum by the 

total number of Trading Days in such 

calendar month; and 

(5) For the total Less Active Securities 

(More Active Securities) assigned to a 

specialist unit, the Exchange will 

determine the ‘‘Aggregate Monthly 

Average NBBO Quoting Percentage’’ by 

summing the Monthly Average NBBO 

Quoting Percentages for each Less 

Active Security (More Active Security) 

assigned to a specialist unit, then 

dividing such sum by the total number 

of Less Active Securities (More Active 

Securities) assigned to such specialist 

unit.22

Example of Quoting Requirement 

Calculation 

Below is an example of a quoting 

requirement calculation. For purposes 

of this example, it is assumed that 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 49517 

23Proposed Rule Text, NYSE Rule 103B, Section 

II(J)(1). The Exchange Specialist Liaison Department 

will be responsible for issuing the warning letter to 

a special unit that fails to meet its requirement. It 

will also be responsible for advising a specialist 

unit of its eligibility or ineligibility to participate in 

the allocation process. 

24Proposed Rule Text, NYSE Rule 103B, Section 

II(J)(1). 

25Proposed Rule Text, NYSE Rule 103B, Section 

II(J)(2). 

26Proposed Rule Text, NYSE Rule 103B, Section 

II(J)(3). 

27Proposed Rule Text, NYSE Rule 103B, Section 

II(J)(4). 

Specialist Unit 1 has two assigned 

securities, A and B, and that there were 

5 trading days in the selected calendar 

month. 

The ‘‘Average Daily NBBO Quoting 

Percentage’’ for Specialist Unit 1 is 

calculated for each security by summing 

the daily NBB and NBO of each security 

for that day and dividing that number 

by two: 

Trading days NBB 

(percent) 

NBO 

(percent) 

Calculation of ‘‘Average Daily NBBO Quoting Percentage’’ for 

Specialist Unit 1 

‘‘Average Daily 

NBBO Quoting 

Percentage’’

Security A 

T1 ...................................... 4 6 4% + 6% = 10% divided by 2 = 5% ................................................ 5 

T2 ...................................... 3 5 3% + 5% = 8% divided by 2 = 4% .................................................. 4 

T3 ...................................... 4 4 4% + 4% = 8% divided by 2 = 4% .................................................. 4 

T4 ...................................... 6 8 6% + 8% = 14% divided by 2 = 7% ................................................ 7 

T5 ...................................... 5 5 5% + 5% = 10% divided by 2 = 5% ................................................ 5 

Security B 

T1 ...................................... 5 7 5% + 7% = 12% divided by 2 = 6% ................................................ 6 

T2 ...................................... 4 6 4% + 6% = 10% divided by 2 = 5% ................................................ 5 

T3 ...................................... 6 8 6% + 8% = 14% divided by 2 = 7% ................................................ 7 

T4 ...................................... 7 9 7% + 9% = 16% divided by 2 = 8% ................................................ 8 

T5 ...................................... 9 9 9% + 9% = 18% divided by 2 = 9% ................................................ 9 

The ‘‘Monthly Average NBBO 

Quoting Percentage’’ for each security is 

then calculated by summing the 

security’s ‘‘Average Daily NBBO 

Quoting Percentages’’ for all five 

Trading Days of the calendar month and 

then dividing the resulting total by the 

number of Trading Days in the calendar 

month (in this instance 5). 

‘‘Average Daily NBBO 

Quoting Percentage’’ Calculation of ‘‘Monthly Average NBBO Quoting Percentage’’ for Specialist Unit 1 

‘‘Monthly Average 

NBBO Quoting 

Percentage’’ T1 T2 T3 T4 T5 

Security A 

5% 4% 4% 7% 5% 5% + 4% + 4% + 7% + 5% = 25% divided by 5 = 5% ................................................... 5 

Security B 

6% 5% 7% 8% 9% 6% + 5% + 7% + 8% + 9% = 35% divided by 5 = 7% ................................................... 7 

The ‘‘Aggregate Monthly Average 

NBBO Quoting Percentage’’ is 

determined by summing the ‘‘Monthly 

Average NBBO Quoting Percentage’’ for 

each security and then dividing such 

sum by two, the total number of 

securities in this example. 

‘‘Aggregate Monthly Average NBBO 

Quoting Percentage’’ for Specialist 

Unit 1 

Monthly Average NBBO Security A + 

Monthly Average NBBO Security B 

divided by 2; 5% + 7% = 12% 

divided by 2 = 6% Aggregate 

Monthly Average 

If a specialist unit fails to satisfy the 

requirements of proposed NYSE Rule 

103B, Section II(D) and (E) for a onemonth period, the Exchange will issue 

an initial warning letter to the specialist 

unit, advising it of its deficiency.23 The 

specialist unit shall provide in writing 

an explanation and articulation of 

corrective action.24 If the specialist unit 

fails to meet the requirement of 

proposed NYSE Rule 103B, Section II(D) 

and (E) for a second consecutive month, 

the specialist unit will be ineligible to 

participate in the allocation process for 

a minimum of two months following the 

second consecutive month of its failure 

to meet its quoting requirement 

(‘‘Penalty Period’’).25

The specialist unit must satisfy the 

quoting requirement for the two 

consecutive months of the Penalty 

Period. In the event a specialist unit 

fails to satisfy its quoting requirements 

for the two consecutive months of the 

Penalty Period, the specialist unit will 

remain ineligible to participate in the 

allocation process until it has met the 

quoting requirement for a consecutive 

two calendar month period.26 The 

Exchange will review each specialist 

unit’s trading on a monthly basis to 

determine whether the specialist unit 

has satisfied its quoting requirement.27

2. Elimination of the SPEQ 

The Exchange submits that the 

establishment of a single objective 

measure to determine a specialist unit’s 

ability to participate in the allocation 

process obviates the need to use 

subjective criteria in the allocation 

process and therefore proposes to 

permanently eliminate the use of the 

SPEQ. Initially, the SPEQ provided 

critical information to the Exchange to 

maintain the quality of its market when 

the Exchange’s market model was 

primarily dependent on transactions 

involving the specialist handling orders 

directly. As such, the specialist and 

Floor brokers were in contact on a more 

mstockstill on PROD1PC66 with NOTICES

49518 Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 

28Proposed Rule Text, NYSE Rule 103B, Section 

III(A)(1)–(3). 

29Proposed Rule Text, NYSE Rule 103B, Section 

II(I). 

30Proposed Rule Text, NYSE Rule 103B, Section 

III(A)(1). 

31Proposed Rule Text, NYSE Rule 103B, Section 

III(A)(2)(a). 

32Proposed Rule Text, NYSE Rule 103B, Section 

III(A)(2)(b). 

33Proposed Rule Text, NYSE Rule 103B, Section 

III(A)(2)(d). 

34Proposed Rule Text, NYSE Rule 103B, Section 

III(A)(3)(a). 

or less continual basis, as both sought 

and gave information on orders, trade 

executions and market conditions. The 

SPEQ was designed to reflect that 

relationship by seeking Floor broker 

input on the relationship the Floor 

broker had with the specialists he or she 

came in contact with most frequently. 

While the SPEQ has been an 

important mechanism to evaluate 

specialist performance for allocation 

and performance improvement action 

purposes, current trends in the 

Exchange market have rendered the 

SPEQ less reliable as an assessment tool. 

SPEQ evaluations are subjective, with 

ratings based on personal experiences 

rather than comparisons with accepted 

objective standards. Further, except for 

the written comments, which are not 

incorporated into the formula for SPEQ 

tier classifications, SPEQ does not focus 

on market-making by individual 

specialists. Importantly, as the number 

of specialist units has decreased, SPEQ 

tier classifications have become tightly 

clustered with statistically insignificant 

differences among the specialist units. 

Also, SPEQ participants recognize the 

limitations of SPEQ and have requested 

a more meaningful process for 

evaluating specialist performance. 

More significantly, the introduction of 

the Hybrid Market further diminished 

the effectiveness of the SPEQ to assess 

adequately specialist performance by 

Floor brokers. Floor brokers and 

specialists are now provided with 

electronic trading tools which 

effectively replace much of the necessity 

for continual personal and verbal 

contact between them. Furthermore, the 

increased transparency with respect to 

the Display Book through conduits like 

Exchange OPENBOOK (‘‘OPENBOOK’’) 

has also decreased the need for a Floor 

broker to obtain state of the book and 

market information verbally from a 

specialist. The SPEQ does not account 

for the operation of the electronic tools 

available in the current more electronic 

trading environment. As such, the 

Exchange seeks to permanently 

eliminate its use. 

3. Elimination of the Allocation 

Committee 

The Exchange further submits that the 

more efficient and streamlined process 

for allocation obviates the need for the 

Allocation Committee. The Exchange 

proposes to allow an issuer to select the 

specialist units it chooses to interview 

directly from the specialist units that are 

eligible to participate in the allocation 

process.28 In this manner, the Exchange 

believes that issuers will no longer be 

required to submit letters outlining a 

specialist unit that was pivotal in the 

issuer’s decision to list on the Exchange 

because the issuer will now have the 

ability to directly select specialist units 

to interview. 

C. Administration of the New Allocation 

Policy 

Once the list of specialist units that 

meet the objective standard established 

by the Exchange is generated, it will be 

provided to the listing company and the 

listing company may proceed under one 

of two options. Under the first option, 

the listing company selects the 

specialist units it wishes to interview. 

The issuer will then proceed to conduct 

interviews of the selected units. A 

specialist unit’s eligibility to participate 

in the allocation process is determined 

at the time the interview is scheduled, 

i.e., if it has met the quoting 

requirements set forth above at the time 

of the interview, it is eligible to be 

considered for allocation.29

If the issuer selects the specialist unit, 

the issuer shall select a minimum of 

three specialist units to interview from 

the pool of specialist units eligible to 

participate in the allocation process.30

Specialist units selected for an 

interview may provide material to the 

Exchange which will be given to the 

issuer the day before the scheduled 

interview. Such material may include a 

corporate overview of the specialist unit 

and the trading experience of the 

designated specialist. Specialist units 

are prohibited from giving issuers 

information about other specialist units 

or any additional market performance 

data.31

Within five business days after the 

issuer selects the specialist units to be 

interviewed (unless the Exchange has 

determined to permit a longer time 

period in a particular case), the issuer 

shall meet with representatives of each 

of the specialist units. At least one 

representative of the listing company 

must be a senior official of the rank of 

Corporate Secretary or above of that 

company. In the case of the listing of a 

structured product, a senior officer of 

the issuer may be present in lieu of the 

Corporate Secretary. No more than three 

representatives of each specialist unit 

may participate in the meeting, each of 

whom must be employees of the 

specialist unit, and one of whom must 

be the individual specialist who is 

proposed to trade the company’s 

security, unless that specialist is 

unavailable to appear, in which case a 

telephone interview is permitted. 

Meetings shall normally be held at the 

Exchange, unless the Exchange has 

agreed that they may be held 

elsewhere.32

Following its interview, a specialist 

unit may not have any contact with an 

issuer. If an issuer has a follow-up 

question regarding any specialist unit(s) 

it interviewed, it must be conveyed to 

the Exchange. The Exchange will 

contact the unit(s) to which the question 

pertains and will provide any available 

information received from the unit(s) to 

the listing company.33

Within two business days of the 

issuer’s interviews with the specialist 

units, the issuer shall select its 

specialist unit in writing, signed by a 

senior official of the rank of Corporate 

Secretary or higher, or in the case of a 

structured product listing, a senior 

officer of the issuer, duly authorized to 

so act on behalf of the company. The 

Exchange shall then confirm the 

allocation of the security to that 

specialist unit, at which time the 

security shall be deemed to have been 

so allocated. An issuer may request an 

extension from the Exchange if the 

issuer is unable to complete its selection 

within the specified period.34

If the issuer delegates authority to the 

Exchange to select its specialist unit, 

three members of the Exchange’s Senior 

Management, as designated by the Chief 

Executive Officer (‘‘CEO’’) of the 

Exchange or his or her designee, one 

non-specialist Executive Floor Governor 

(‘‘EFG’’) and two non-specialist Floor 

Governors (‘‘FGs’’) (‘‘Exchange Selection 

Panel’’), shall select a specialist unit 

based on a review of all information that 

would be available to the issuer. The 

non-specialist EFG and non-specialist 

FGs shall be designated on a rotating 

basis. 

The Exchange Selection Panel shall 

select the specialist unit pursuant to the 

provisions of 103B Section III (A) 

(‘‘Specialist Unit Selected by the 

Issuer’’) with the Exchange Selection 

Panel acting on behalf of the issuer. The 

Exchange Selection Panel will be 

responsible for informing the issuer of 

the specialist unit it selects. 

The selection of the specialist unit 

shall be made by majority vote with any 

tie votes being decided by the CEO of 

the Exchange or his/her designee. The 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 49519 

35Proposed Rule Text, NYSE Rule 103B, Section 

III(B)(1). 

36Proposed Rule Text, NYSE Rule 103B, Section 

III(B)(2). 

37Proposed Rule Text, NYSE Rule 103B, Section 

IV. 

38Proposed Rule Text, NYSE Rule 103B, Section 

V, extracted from Exchange Rule 103A(f). 

39See Securities Exchange Act Release No. 27292 

(September 26, 1989), 54 FR 41193 (October 5, 

1989) (SR–NYSE–89–13). As a result, NYSE Rule 

106 mandates interaction between a specialist unit 

and representatives of listed companies. The rule 

requires that one or more senior officials of the rank 

of Corporate Secretary or higher at the listing 

company have an opportunity to have contact with 

the specialist unit on a quarterly basis. Further, the 

rule mandates that at least one of the quarterly 

meetings be in-person. 

40NYSE Rule 106 further mandates that the 

specialist unit makes itself available to the 

Exchange’s fifteen (15) largest member 

organizations through required semi-annual ‘‘off the 

Exchange Floor’’ contact. The interpersonal 

relationship between specialist units and member 

organizations that once took front stage in the 

marketplace has been significantly replaced by 

automated trading initiatives and computerized 

market data reports. Specialist units are generally 

in contact with member organizations, either 

through electronic and/or telephonic means on a 

regular basis, which similarly renders the 

requirements of NYSE Rule 106(b) unnecessary. 

41Proposed Rule Text, NYSE Rule 103B, Section 

V(D). 

42Proposed Rule Text, NYSE Rule 103B, Section 

V(E). 

43On December 31, 2007, the Exchange 

completed a transfer of all ETF trading to NYSE 

Arca. 

Exchange shall notify the specialist unit 

and the issuer immediately of its 

decision. The specialist unit shall then 

be responsible for providing the issuer 

with the name of the specialist with the 

requisite experience and skill it believes 

is appropriate to trade the issuer’s 

security.35

Whether the issuer or the Exchange 

selects the specialist unit to receive the 

security allocation, the individual 

specialist ultimately assigned the 

proposed security shall be required to 

remain the assigned specialist for one 

year from the date that the issuer begins 

trading on the Exchange. The specialist 

unit may designate a different 

individual specialist within the year by 

notifying the Exchange of the change in 

specialist and setting forth the reasons 

for the change with the consent and 

approval of the issuer.36

D. Reallocation 

When an issuer has requested and 

confirmed a change of specialist unit 

pursuant to Section 806.01 of the 

Exchange Listed Company Manual, the 

security will be put up for reallocation 

as soon as practicable, in accordance 

with the allocation process set forth in 

proposed NYSE Rule 103B, Section III.37

E. Egregious Situations 

The Exchange seeks to move current 

provisions codified in NYSE Rule 103A 

that outline the reallocation of a security 

when a specialist unit’s performance is 

so egregiously deficient as to call into 

question the Exchange’s integrity or 

impair the Exchange’s reputation for 

maintaining an efficient, fair and 

orderly market to proposed NYSE Rule 

103B. Currently, NYSE Rule 103A 

provides that in such an instance, the 

MPC may immediately initiate a 

reallocation proceeding upon written 

notice to the specialist unit, specifying 

the reasons for the initiation of the 

proceeding. The Exchange proposes to 

incorporate this concept to NYSE Rule 

103B and transfer the authority to 

initiate a reallocation proceeding upon 

written notice to the specialist unit from 

the MPC to the CEO or his/her 

designee.38 As previously discussed 

above in Section A of the Proposed 

Allocation Process, the MPC shall no 

longer retain responsibility for security 

reassignments. The Exchange believes 

that in these instances in which the 

specialist unit’s performance is so 

egregiously deficient as to call into 

question the Exchange’s integrity or 

impair the Exchange’s reputation in 

maintaining an efficient, fair and 

orderly market, the Exchange’s CEO, as 

the most Senior Member of the 

Exchange, or his/her designee, is the 

appropriate entity to initiate 

reallocation proceedings upon written 

notice to the specialist unit. 

Following this decision, if the CEO or 

his/her designee makes a final 

determination that a security should be 

referred for reallocation, the Exchange 

proposes that the CEO or his/her 

designee will, in their expert business 

judgment, be responsible for 

distributing the security to the eligible 

specialist units. The CEO or his/her 

designee shall then make a final 

determination as to which one or more 

of the specialist unit’s securities shall be 

referred for reallocation. All 

determinations made by the CEO or his/ 

her designee shall be communicated in 

writing to the specialist unit, with a 

statement of the reasons for such 

determinations. In order to preserve due 

process, specialist units have a right to 

have this decision reviewed by the 

Exchange Board of Directors. 

F. Specialist Unit Communication 

Policies and Procedures With Listing 

Company 

Currently, NYSE Rule 106 requires, 

among other things, that specialist units 

make themselves available for contact 

with their listing companies 

periodically throughout the year. NYSE 

Rule 106 was adopted in 1989 at a time 

when orders entered with the specialist 

were handled manually and contact 

between a specialist unit and its listed 

companies was necessary to ensure that 

listed companies were informed about 

the trading in its listed security on the 

Floor.39 The Exchange believes that the 

management of the business 

relationship between the specialist unit 

and its listed company is more 

appropriately left to direct 

communications between the specialist 

unit and the listed company. 

In today’s world of electronic 

messaging, internet connectivity and 

automated trading, the entities 

described above may not need the 

contact with a specialist unit specified 

in NYSE Rule 106. In addition to the 

entities’ ability to access public 

information, specialist units have 

internal departments that are 

responsible for communicating with 

these entities during the trading day. 

Specifically, specialist units have 

corporate relations groups that serve to 

provide information and are available to 

answer questions from the 

aforementioned entities during the 

trading day. The Exchange therefore 

believes that the requirements of NYSE 

Rule 106 are unnecessary.40 As such, 

the Exchange seeks to rescind NYSE 

Rule 106 which sets forth the specialist 

unit’s obligation to communicate with 

the aforementioned entities. 

G. Right To Review 

A decision by the Exchange that one 

or more securities should be reallocated 

shall be final, subject to the specialist 

unit’s right to have that decision 

reviewed by the Exchange’s Board of 

Directors.41 In the event that a specialist 

unit asserts its right to review, no 

reallocation may occur until the Board 

of Directors completes its review.42

H. Exchange-Traded Funds 

The Exchange proposes to delete from 

NYSE Rule 103B the section related to 

the allocation of Exchange-Traded 

Funds (‘‘ETFs’’) admitted to trading on 

the Exchange on an Unlisted Trading 

Privileges (‘‘UTP’’) basis. On October 19, 

2007, the Exchange completed a transfer 

of all ETFs admitted to trading on the 

Exchange on a UTP basis to NYSE 

ArcaSM NYSE Euronext’s fully 

electronic U.S. listing and trading 

platform.43 The Exchange believes that 

a single, harmonized platform for listing 

and trading ETFs on NYSE Arca further 

improves efficiencies and market 

quality. The transfer of all ETFs trading 

on the NYSE to NYSE Arca obviates the 

necessity for this section in the rule. 

mstockstill on PROD1PC66 with NOTICES

49520 Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 

44Proposed Rule Text, NYSE Rule 103B, Section 

VI(F). 

45Proposed Rule Text, NYSE Rule 103B, Section 

VI(F). 

46Proposed Rule Text, NYSE Rule 103B, Section 

VI(A). 

47Proposed Rule Text, NYSE Rule 103B, Section 

VI(A). 

48Proposed Rule Text, NYSE Rule 103B, Section 

VI(A)(2). 

49Proposed Rule Text, NYSE Rule 103B, Section 

VI(A)(2). 

50See Rule 12a–4 under the Act; see also NYSE 

Listed Company Manual, Section 703.03(O). 

51Proposed Rule Text, NYSE Rule 103B, Section 

VI(A)(4). The Exchange Market Watch, Security 

Operations, Records Management Division is 

responsible for assigning rights to the specialist 

unit. 

52Proposed Rule Text, NYSE Rule 103B, Section 

VI(D)(1). 

53Proposed Rule Text, NYSE Rule 103B, Section 

VI(D)(1). 

54Proposed Rule Text, NYSE Rule 103B, Section 

VI(D)(3). 

55Proposed Rule Text, NYSE Rule 103B, Section 

VI(D)(4). 

56Proposed Rule Text, NYSE Rule 103B, Section 

VI(H). 

57Proposed Rule Text, NYSE Rule 103B, Section 

VI(H). 

58Proposed Rule Text, NYSE Rule 103B, Section 

VIII. 

Accordingly, the Exchange proposes to 

delete it from the rule. 

I. Closed-End Management Investment 

Companies (‘‘Funds’’) 

The Exchange further proposes that 

Funds listing on the Exchange pursuant 

to this policy will be subject to the 

allocation process pursuant to proposed 

NYSE Rule 103B, Section III. If the 

issuer of an initial Fund lists additional 

funds within nine months from the date 

of its initial listing, the issuer may 

choose to maintain the same specialist 

unit for those subsequently listed funds 

or it may select a different specialist 

unit from the group of eligible specialist 

units that the issuer interviewed in the 

allocation process for its initial fund. 

The fund may also delegate the 

selection of its specialist unit to the 

Exchange if it so chooses pursuant to 

proposed NYSE Rule 103B, Section 

III(B).44

If a specialist unit is ineligible from 

participating in an allocation as set forth 

in proposed NYSE Rule 103B, Section 

III, at the time of a subsequent new 

Fund listing (within the designated 

nine-month period), that specialist unit 

will not be included for consideration 

for subsequent listings.45

J. Spin-offs, Relistings, Common Stock, 

Target Stock, Warrants and Rights 

The Exchange proposes to rename the 

section entitled ‘‘Spin-offs and listing of 

related companies’’ to also include 

‘‘related securities’’ in order to address 

the assignment of warrants and rights.46

Proposed NYSE Rule 103B, Section 

VI(A) continues to allow the listing 

company to remain with the specialist 

unit registered in the related spin-off or 

related company and will also allow the 

listing company to be referred for 

allocation through the allocation 

process pursuant to proposed NYSE 

Rule 103B, Section III, if it so chooses. 

If the spin-off company, company 

related to a listed company or relisting 

chooses to have its specialist unit 

selected by the Exchange pursuant to 

NYSE Rule 103B, Section III(B), and 

requests not to be allocated to the 

specialist unit that was its listed 

company’s specialist unit, such request 

will be honored. 

The Exchange further proposes that 

common stock (listed after preferred 

stock) be referred for allocation through 

the allocation process pursuant to 

proposed NYSE Rule 103B, Section III.47

In addition, NYSE Rule 103B, Section 

VI(A) will be amended to codify that a 

warrant issued by a listed company and 

traded on the Exchange is allocated to 

the specialist unit registered in the 

underlying security of the listed 

company.48 Upon request by the issuer, 

the warrant may be allocated through 

the allocation process pursuant to 

proposed NYSE Rule 103B, Section III.49

Moreover, the Exchange proposes to 

further codify that rights are not subject 

to the allocation process pursuant to 

proposed NYSE Rule 103B, Section III. 

Rights are considered short-term 

securities, which are exempt from 

registration under the Act.50

Accordingly, rights are not treated as 

listed securities on the Exchange and 

are not subject to the allocation process 

pursuant to proposed NYSE Rule 103B, 

Section III. Rights are assigned, when 

issued, to the specialist unit by the 

Exchange.51

Specialist units that are ineligible to 

receive a new allocation due to its 

failure to meet the requirements of 

proposed NYSE Rule 103B, Section 

(II)(D) and (E) will remain eligible to 

receive an allocation pursuant to 

Section 103B(VI) of the Proposed Rule. 

K. Listed Company Mergers 

When two NYSE listed companies 

merge, the merged entity is assigned to 

the specialist in the company that is 

determined to be the survivor-in-fact 

(dominant company). Where no 

surviving/dominant entity can be 

identified after two NYSE listed 

companies merge, the NYSE proposes 

that the merged company may select 

one of the units trading the merging 

companies without the security being 

referred for reallocation, or it may 

request that the matter be referred for 

allocation through the allocation 

process pursuant to NYSE Rule 103B, 

Section III.52 Specialist units that are 

ineligible to receive a new allocation 

due to its failure to meet the 

requirements of NYSE Rule 103B, 

Section II(D) and (E) will remain eligible 

to receive an allocation pursuant to this 

section.53

In situations involving the merger of 

a listed company and an unlisted 

company, where the unlisted company 

is determined to be the survivor-in-fact, 

such company may choose to remain 

registered with the specialist unit that 

had traded the listed company entity in 

the merger, or it may request that the 

matter be referred for allocation through 

the allocation process pursuant to 

proposed NYSE Rule 103B, Section III.54

If the unlisted company chooses to have 

its specialist unit selected by the 

Exchange, the company may not request 

that the Exchange exclude from 

consideration the specialist unit that 

had traded the listed company.55

L. Allocation Sunset Policy 

The Exchange is proposing to extend 

the effectiveness of allocation decisions 

with respect to any initial public 

offering listing company which lists on 

the Exchange from three months to six 

months.56 In situations in which the 

selected specialist unit merges or is 

involved in a combination within the 

six month period, the company may 

choose whether to stay with the selected 

specialist unit, or be referred to 

allocation. If a listing company does not 

list within six months, the matter shall 

be referred for allocation through the 

allocation process pursuant to proposed 

NYSE Rule 103B, Section III.57

M. Provisions For Allocation Of Listing 

Companies Transferring From NYSE 

ARCA, Inc. (‘‘NYSE ARCASM’’) To The 

NYSE 

The Exchange further proposes that if 

a listing company transferring from 

NYSE ArcaSM to the NYSE was assigned 

a NYSE Arca Lead Market Maker unit, 

the listing company can choose to 

follow the regular allocation process 

and refer the matter for allocation 

through the allocation process pursuant 

to NYSE Rule 103B.58 Since the 

Exchange is proposing elimination of 

the Allocation Committee, the Exchange 

believes that this amendment is 

appropriate. 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 49521 

59 In March 2006 after the NYSE’s business 

combination with Archipelago Holdings, Inc., the 

QoMC ceased to exist upon completion of the 

revised corporate structure. 60 15 U.S.C. 78f(b)(5). 

III. Conforming Changes to NYSE Rule 

476a, NYSE Rule 123e and NYSE Listed 

Manual Section 106.02 

A. NYSE Rule 476A 

The Exchange seeks to make a 

conforming amendment to NYSE Rule 

476A by removing failure to complete 

the SPEQ from the list of minor rule 

violations. NYSE Rule 476A provides 

for the imposition of fines for Minor 

Violation(s) of NYSE Rules. The 

Supplementary Material of NYSE Rule 

476A enumerates the specific rules and 

conduct eligible for the imposition of a 

fine. Included in this list is 

‘‘Participation in the Specialist 

Performance Evaluation Questionnaire 

(SPEQ) Process (Rule 103A).’’ Since the 

Exchange proposes the elimination of 

the SPEQ process in the New Allocation 

Policy, the Exchange further proposes to 

amend NYSE Rule 476A to reflect this 

rescission. 

B. NYSE Rule 123E 

The Exchange also seeks to make 

conforming amendments to NYSE Rule 

123E to change specialist ‘‘organization’’

to specialist ‘‘unit’’ and ‘‘stock’’ to 

‘‘security’’ throughout the proposed 

rule. The Exchange further proposes to 

delete and replace all references to the 

Quality of Markets Committee 

(‘‘QoMC’’) and the MPC with ‘‘the 

Exchange.’’ 59 Given the proposed 

changes to NYSE Rule 103A that rescind 

MPC’s responsibility to monitor 

specialist performance, the Exchange 

seeks to assume responsibility for 

conducting a review of a proposed 

specialist combination. Similarly, the 

Exchange seeks to make a conforming 

amendment to eliminate the specialist 

performance measures from NYSE Rule 

123E that are also proposed for deletion 

in connection with the proposed 

amendments to NYSE Rule 103B. 

Finally, the Exchange seeks to correct a 

typographical error from the existing 

rule. 

C. NYSE Listed Company Manual 

Finally, the Exchange seeks to make 

conforming changes to Section 106.02 of 

the NYSE Listed Company Manual. 

Currently Section 106.02 provides in 

pertinent part: 

As soon as the Exchange makes the 

allocation decision, the company is 

immediately notified by telephone and in 

writing of the name of the specialist unit, 

selected background information on the unit 

and the reasons why the unit was selected. 

Section 106.02 gives the reader the 

impression that the Exchange is always 

responsible for the selection of the 

specialist unit to be allocated a listing 

company’s security. The Exchange 

proposes to clarify Section 106.02 by 

amending it to read as follows: 

In instances where a company has 

delegated to the Exchange the selection of its 

specialist unit, the Exchange will 

immediately notify the company by 

telephone and in writing of the name of the 

specialist unit, selected background 

information on the unit and the reasons why 

the unit was selected. 

IV. Conclusion 

The proposed Allocation Policy is in 

keeping with the Exchange’s overall 

objective to maintain the integrity of the 

market and to further the Exchange’s 

goal of an allocation system that is 

based primarily on an objective measure 

of specialist unit performance. The new 

objective measure is designed to 

promote fairness and consistency, 

reward performance, provide an 

incentive for a specialist unit to 

continually improve its performance 

and give the issuer more choice in the 

selection of its assigned specialist unit. 

The Exchange believes that the 

establishment of an objective minimum 

performance standard on which to 

determine a specialist unit’s eligibility 

to participate in the allocation or 

reallocation process protects the 

investor and the public interest because 

it creates a system that provides 

specialist units with incentive for 

maximum performance which the 

Exchange believes will result in a better 

quality market. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with and 

furthers the objectives of Section 6(b)(5) 

of the Act,60 in that it is 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. The proposed rule 

change is consistent with these 

objectives in that it enables the 

Exchange to further enhance the process 

by which securities are allocated. The 

Exchange seeks to create an allocation 

policy that is rooted in an objective 

performance measure that 

accommodates the increased electronic 

trading environment. The Exchange 

believes that the quantifiable measure of 

specialist unit performance proposed in 

this current rule filing provides the 

objective criteria to continue an 

allocation process that is not designed 

to permit unfair discrimination between 

specialist units as it relates to a 

specialist unit’s receipt of an allocation. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

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 the 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–2008–52 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2008–52. This file 

number should be included on the 

mstockstill on PROD1PC66 with NOTICES

49522 Federal Register / Vol. 73, No. 163 / Thursday, August 21, 2008 / Notices 

61 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See NYSE Arca Equities Rule 8.202 and 

Securities Exchange Act Release No. 53253 

(February 8, 2006), 71 FR 8029 (February 15, 2006) 

(SR–PCX–2005–123) (order granting accelerated 

approval for the Exchange to adopt listing and 

trading standards for Currency Trust Shares and 

approving the UTP trading of shares of the Euro 

Currency Trust (now known as the 

‘‘CurrencyShares Euro Trust’’)). E-mail from 

Michael Cavalier, Associate General Counsel, NYSE 

Group, Inc., to Brian O’Neill, Staff Attorney, and 

Edward Cho, Special Counsel, Division of Trading 

and Markets, Commission, dated August 4, 2008 

(confirming the name change of the Euro Currency 

Trust to the CurrencyShares Euro Trust). As defined 

in NYSE Arca Equities Rule 8.202(c), the term 

‘‘Currency Trust Shares’’ means a security that (a) 

Is issued by a trust (‘‘Trust’’) that holds a specified 

non-U.S. currency deposited with the Trust; (b) 

when aggregated in some specified minimum 

number may be surrendered to the Trust by the 

beneficial owner to receive the specified non-U.S. 

currency; and (c) pays beneficial owners interest 

and other distributions on the deposited non-U.S. 

currency, if any, declared and paid by the Trust. 

4The Commission has previously approved 

listing or UTP trading of issues of CurrencyShares 

based on non-US currencies. See Securities 

Exchange Act Release No. 52843 (November 28, 

2005), 70 FR 72486 (December 5, 2005) (SR–NYSE–

2005–65) (order granting accelerated approval for 

the New York Stock Exchange (‘‘NYSE’’) to list and 

trade shares of the CurrencyShares Euro Trust); 

Securities Exchange Act Release No. 54020 (June 

20, 2006), 71 FR 36579 (June 27, 2006) (SR–NYSE–

2006–35) (order granting accelerated approval for 

NYSE to list and trade shares of the CurrencyShares 

Australian Dollar Trust, CurrencyShares British 

Pound Sterling Trust, CurrencyShares Canadian 

Dollar Trust, CurrencyShares Mexican Peso Trust, 

CurrencyShares Swedish Krona Trust and 

CurrencyShares Swiss Franc Trust); Securities 

Exchange Act Release No. 55268 (February 9, 2007), 

72 FR 7793 (February 20, 2007) (SR–NYSE–2007–

03) (order granting accelerated approval for NYSE 

to list and trade shares of the CurrencyShares 

Japanese Yen Trust); Securities Exchange Act 

Release No. 55320 (February 21, 2007), 72 FR 8828 

(February 27, 2007) (SR–NYSEArca–2007–15) 

(order granting accelerated approval for the 

Exchange to UTP trade shares of the 

CurrencyShares Japanese Yen Trust); Securities 

Exchange Act Release No. 56131 (July 25, 2007), 72 

FR 42212 (August 1, 2007) (SR–NYSEArca–2007–

57) (order granting accelerated approval for 

Exchange to list eight CurrencyShares Trusts). 

5See Preliminary Prospectuses for the 

CurrencyShares Hong Kong Dollar Trust 

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 the filing also will 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–2008–52 and should 

be submitted on or before September 11, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.61

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–19357 Filed 8–20–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58365; File No. SR–

NYSEArca–2008–81] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and Order 

Granting Accelerated Approval of 

Proposed Rule Change, as Modified by 

Amendment No. 1 Thereto, Relating to 

Listing and Trading of Four 

CurrencyShares Trusts 

August 14, 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 30, 

2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

‘‘Exchange’’), through its wholly owned 

subsidiary, NYSE Arca Equities, Inc. 

(‘‘NYSE Arca Equities’’), filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. On August 

11, 2008, the Exchange filed 

Amendment No. 1 to the proposed rule 

change. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons and is granting 

approval to the proposed rule change, as 

modified by Amendment No. 1 thereto, 

on an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list shares 

(‘‘Shares’’) of the following trusts: 

CurrencySharesSM Hong Kong Dollar 

Trust, CurrencySharesSM Russian Ruble 

Trust, CurrencySharesSM Singapore 

Dollar Trust, and CurrencySharesSM

South African Rand Trust (‘‘Trusts’’) 

under NYSE Arca Equities Rule 8.202. 

The text of the proposed rule change is 

available on the Exchange’s Web site at 

http://www.nyse.com, at the Exchange’s 

principal office 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, 

NYSE Arca 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 III below. NYSE 

Arca 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 

Under NYSE Arca Equities Rule 

8.202, the Exchange may propose to list 

and/or trade pursuant to unlisted 

trading privileges (‘‘UTP’’) ‘‘Currency 

Trust Shares.’’ 3 The Exchange proposes 

to list the Shares of the Trusts under 

NYSE Arca Equities Rule 8.202.4

Rydex Specialized Products LLC is 

the sponsor of the Trusts (‘‘Sponsor’’); 

The Bank of New York is the trustee of 

the Trusts (‘‘Trustee’’); JPMorgan Chase 

Bank, N.A., London Branch, is the 

depository for the Trusts (‘‘Depository’’); 

and Rydex Distributors, Inc. is the 

distributor for the Trusts (‘‘Distributor’’). 

The Sponsor, Trustee, Depository and 

Distributor are not affiliated with the 

Exchange or one another, with the 

exception that the Sponsor and 

Distributor are affiliated. For more 

information on these entities, see below. 

The Shares represent units of 

fractional undivided beneficial interest 

in, and ownership of, the respective 

Trust. The investment objective of the 

Trusts is for the Shares issued by the 

Trusts to reflect the price of the 

applicable foreign currency owned by 

the specific Trust, plus accrued interest, 

less the expenses and liabilities of such 

Trust, according to the Registration 

Statements for the Trusts.5 The Shares 

mstockstill on PROD1PC66 with NOTICES