53912 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Notices 

5 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

6 15 U.S.C. 78f(b)(5). 

7See, e.g., Securities Exchange Act Release No. 

50405 (September 16, 2004), 69 FR 57118 

(September 23, 2004) (SR–NASD–2007–071) 

(approving Nasdaq’s Opening Cross); Securities 

Exchange Act Release No. 49406 (March 11, 2004), 

69 FR 12879 (March 18, 2004) (SR–NASD–2003– 

173) (approving Nasdaq’s Closing Cross); Securities 

Exchange Act Release No. 53687 (April 20, 2006), 

71 FR 24878 (April 27, 2006) (SR–NASD–2006–015) 

(approving the Nasdaq Halt Cross); Securities 

Exchange Act Release No. 54101 (July 5, 2006), 71 

FR 39382 (July 12, 2006) (SR–NASD–2005–140) 

(approving the Nasdaq Crossing Network). 

8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78s(b)(2). 

10 17 CFR 200.30–3(a)(12). 

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

2 5 U.S.C. 78a. 

3 17 CFR 40.19b–4. 

4See Securities Exchange Act Release No. 58488 

(September 8, 2008). For a complete list of the 

securities affected by this filing, see SR–NYSE– 

2008–81. 

5See Securities Exchange Act Release No. 51808 

(June 9, 2005), 17 CFR Parts 200, 201, 230, 240, 242, 

249 and 270. 

6See 17 CFR 242.611. 

7See Securities Exchange Act Release No. 55160 

(January 24, 2007), 72 FR 4202 (January 30, 2007) 

(S7–10–04). 

8See 17 CFR 242.612. Rule 612 originally was to 

become effective on August 29, 2005, but the date 

was later extended to January 29, 2006. See 

Securities Exchange Act Release No. 52196 (Aug. 2, 

2005), 70 FR 45529 (Aug. 8, 2005). 

would not assess a fee for that port, and 

Nasdaq has not proposed to assess any 

transaction fees for purchases of EVI 

Securities. 

III. Discussion 

After careful review, 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.5 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

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

among other things, that the rules of an 

exchange be designed to prevent 

fraudulent and manipulative acts and 

practices; to promote just and equitable 

principles of trade; to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities; and, in general, to protect 

investors and the public interest; and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. The 

proposal offers a potentially useful 

service to issuers and does not appear 

to raise any issue under the Exchange 

Act. 

The Commission believes that the 

proposed trading rules are consistent 

with the Act and notes that they are 

based on those of Nasdaq’s crossing 

platforms that have previously been 

approved by the Commission.7 The 

Commission finds that the proposed 

fees for the EVI Cross are consistent 

with Section 6(b)(4) of the Act,8 which 

requires that the rules of an exchange 

provide for the equitable allocation of 

reasonable dues, fees, and other charges 

among its members and issuers and 

other persons using its facilities. The 

Commission notes that an issuer will 

not be charged a fee unless an auction 

is carried out, and that Nasdaq has not 

proposed any transaction fees on 

members that purchase EVI Securities in 

an auction. 

This order addresses only whether 

Nasdaq’s rules and fees relating to the 

EVI Cross are consistent with the Act. 

The Commission is offering no opinion 

here as to whether prices of EVI 

Securities derived from auctions 

conducted pursuant to this proposal 

may be employed to value employee 

stock options consistent with FASB 

Statement of Financial Accounting 

Standards No. 123(R), or whether the 

offering of any particular EVI Securities 

is consistent with the federal securities 

laws. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,9 that the 

proposed rule change (SR–NASDAQ– 

2008–025), as modified by Amendment 

No. 2, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21705 Filed 9–16–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58522; File No. SR–NYSE– 

2008–83] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by New York 

Stock Exchange LLC To Resume the 

Operation of NYSE Rule 123D(3) With 

Respect to Trading in the Securities of 

Fannie Mae and Freddie Mac 

Beginning on September 11, 2008, 

Following the Suspension of That Rule 

Pursuant to SR–NYSE–2008–81 

September 11, 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 

September 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 and II 

below, which Items have been prepared 

by the self-regulatory 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 resume the 

operation of NYSE Rule 123D(3) with 

respect to trading in the securities of 

Fannie Mae and Freddie Mac beginning 

on September 11, 2008, following the 

suspension of that rule pursuant to SR– 

NYSE–2008–81.4

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 

Regulation NMS, adopted by the 

Securities and Exchange Commission 

(‘‘SEC’’) in April 2005,5 provides that 

each trading center intending to qualify 

for trade-through protection under 

Regulation NMS Rule 611 6 is required 

to have a Regulation NMS-compliant 

trading system fully operational by 

March 5, 2007 (the ‘‘Trading Phase 

Date’’).7

For stocks priced below $1.00 per 

share, Regulation NMS Rule 612 8

permits markets to accept bids, offers, 

orders and indications of interest in 

increments smaller than $0.01, but not 

less than $0.0001, and to quote and 

trade such stocks in sub-pennies. 

Markets may choose not to accept such 


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Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Notices 53913 

9Order Granting National Securities Exchanges a 

Limited Exemption from Rule 612 of Regulation 

NMS under the Securities Exchange Act of 1934 to 

Permit Acceptance by Exchanges of Certain SubPenny Orders. See Securities and Exchange 

Commission Release No. 54714 (November 6, 2006). 

10See Securities and Exchange Commission 

Release No. 34–55398; File No. SR–NYSE–2007–25 

(Mar. 5, 2007). 

11See Securities and Exchange Commission 

Release No. 34–55537; File No. SR–NYSE–2007–30 

(Mar. 27, 2007). 

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

13 15 U.S.C. 78f(b)(5). 

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

15 17 CFR 240.19b–4(f)(6). 

16 Id. 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 satisfied this requirement. 

17 Id. 

bids, offers, orders or indications of 

interest and the NYSE has done so, 

maintaining a minimum trading and 

quoting variation of $0.01 for all 

securities trading below $100,000. See 

NYSE Rule 62. 

The SEC’s interpretation of Rule 612 

requires a market that routes an order to 

another market in compliance with Rule 

611 and receives a sub-penny execution, 

to accept the sub-penny execution, 

report that execution to the customer, 

and compare, clear and settle that trade. 

The SEC, however, provided a limited 

exemption to Rule 611’s proscription 

against trade-throughs to protected 

quotes that include a sub-penny 

component to such quotes that are 

better-priced by a minimum of $0.01.9

In March 2007, the Exchange 

amended Rule 123D to provide for a 

‘‘Sub-penny trading’’ condition because 

the Exchange’s trading systems did not 

then accommodate sub-penny 

executions on orders routed to betterpriced protected quotations, nor could it 

recognize a quote disseminated by 

another market center if such quote had 

a sub-penny component and, therefore, 

could have inadvertently traded through 

better protected quotations. The 

amended rule automatically halts 

trading on the Exchange in a security 

whose price was about to fall below 

$1.00, without delisting the security, so 

that the security could continue to trade 

on other markets that deal in bids, 

offers, orders or indications of interest 

in sub-penny prices, until the price of 

the security had recovered sufficiently 

to permit the Exchange to resume 

trading in minimum increments of no 

less than one penny or the issuer is 

delisted for failing to correct the price 

condition within the time provided 

under NYSE rules.10 A subsequent 

amendment established that any orders 

received by the NYSE in a security 

subject to a ‘‘Sub-penny trading’’ 

condition would be routed to NYSE 

Arca, Inc. and handled in accordance 

with the rules governing that market.11

Suspension of NYSE Rule 123D(3) 

On September 7, 2008, Secretary of 

the Treasury Henry Paulson announced 

that the federal government would force 

Fannie Mae and Freddie Mac into a 

conservatorship that will result in the 

companies issuing warrants to the 

federal government representing 

approximately 80% ownership of the 

entities. Details of the plan are available 

at the Department of the Treasury’s Web 

site, at http://www.treas.gov/press/ 

releases/reports/ 

pspa_factsheet_090708%20hp1128.pdf. 

The NYSE was concerned that the 

Treasury Department’s action could 

cause securities of Fannie Mae and 

Freddie Mac to trade below $1.00, and 

that as a result, trading on the NYSE in 

such securities would have been halted 

automatically under the NYSE Rule 

123D(3), which governs Sub-penny 

trading halts. The NYSE was further 

concerned that, given the scope of the 

government’s action, it would have been 

deleterious to the overall depth and 

quality of the market if the NYSE halted 

NYSE trading in those issues. As a 

result, the NYSE filed with the SEC for 

immediate effectiveness a proposal to 

suspend the operation of NYSE Rule 

123D with respect to the securities of 

Fannie Mae and Freddie Mac. That rule 

filing proposed suspending the rule 

through the end of the primary trading 

session on September 15, 2008. 

Notwithstanding that proposal, the 

NYSE now believes that the impact of 

the Treasury Department’s action has 

been fully absorbed by the market, and 

that as a result, the need to continue 

trading on the NYSE below $1.00 is 

significantly less, while the potential for 

NYSE trades below $1.00 to cause the 

Exchange to violate its obligations under 

Reg NMS remains constant. As a result, 

commencing on September 11, 2008, the 

NYSE is proposing to lift the suspension 

of its Rule 123D(3) and to halt trading 

in securities of Fannie Mae and Freddie 

Mac any time they trade, or would open 

below $1.05 per share, as prescribed by 

the rule. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) 12 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’), in general, and furthers the 

objectives of Section 6(b)(5) 13 in 

particular in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. 

In particular, the NYSE notes that the 

proposed rule change reinstates a rule 

whose initial purpose was to ensure that 

the NYSE did not inadvertently violate 

Reg NMS; the rule was only suspended 

in order to respond to a highly unusual 

market situation. The NYSE believes 

that reinstating the rule before 

September 15 is warranted since the 

need underlying the suspension request 

appears to have dissipated, and 

therefore it is appropriate to resume 

applying NYSE Rule 123D(3) as a 

prophylactic. 

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 

The Exchange has designated the 

proposed rule change as one that: (1) 

Does not significantly affect the 

protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) does not become operative for 30 

days from the date of filing, or such 

shorter time as the Commission may 

designate if consistent with the 

protection of investors and the public 

interest. Therefore, the foregoing rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 14 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.15

A proposed rule change filed under 

19b–4(f)(6) normally does not become 

operative until 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 


pwalker on PROD1PC71 with NOTICES
53914 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 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. 

3See Securities Exchange Act Release No. 58278 

(July 31, 2008), 73 FR 46124 (‘‘Notice’’). 

4As part of this rule change, NYSE also proposes 

deleting the definition of ‘‘meaningful amount’’ in 

Rule 104(e)(ii). 

5 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). 

6 15 U.S.C. 78f(b)(5). 

7See Notice supra note 3, at 46125. 

proposal may become operative, and the 

suspended rule may be reinstated, 

immediately upon filing. The Exchange 

believes that, while a suspension of 

Rule 123D(3) for Fannie Mae and 

Freddie Mac securities was warranted 

by the Treasury Department’s actions, 

the immediate benefits of suspending 

that rule have diminished, and that 

therefore it is consistent with the 

Exchange Act that the rule be reinstated 

as expeditiously as possible, since the 

reinstated rule would prevent the 

Exchange from executing transactions in 

Fannie Mae and Freddie Mac securities 

at prices below $1.00 that may violate 

Regulation NMS. 

The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest. The 

Commission therefore grants the 

Exchange’s request and designates the 

proposal to be 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. SR–NYSE–2008–83 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–2008–83. 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– 

2008–83 and should be submitted on or 

before October 8, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–21704 Filed 9–16–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58517; File No. SR–NYSE– 

2008–61] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving Proposed Rule Change 

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) 

September 11, 2008. 

On July 25, 2008, 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 proposed rule 

change to modify the rule governing the 

specialists’ use of the price 

improvement trading message. The 

proposed rule change was published for 

comment in the Federal Register on 

August 7, 2008.3 The Commission 

received no comments regarding the 

proposal. This order approves the 

proposed rule change. 

Pursuant to NYSE Rule 104(b), 

specialists may use algorithms to 

generate quoting and trading messages. 

Such trading messages may provide 

price improvement to an order, subject 

to the conditions set forth in Rule 

104(e). In order to provide price 

improvement to a marketable incoming 

order, Rule 104(e)(i) requires that the 

specialist must be represented in the bid 

or offer in a ‘‘meaningful amount.’’ Rule 

104(e)(ii) defines ‘‘meaningful amount’’ 

as at least ten round-lots for the 100 

most active securities on the Exchange, 

based on average daily volume, and at 

least five round-lots for all other 

securities on the Exchange. NYSE 

proposes to delete the requirement in 

Rule 104(e)(i) that specialists must be 

represented in a bid or offer in a 

meaningful amount to provide price 

improvement to the incoming order.4

The Commission has carefully 

reviewed the proposed rule change and 

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,5 and, in particular, 

Section 6(b)(5) of the Act,6 which 

requires, among other things, that NYSE 

rules be 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. 

As NYSE stated in its proposal, 

average quote sizes on the Exchange 

have decreased in recent years.7

Because of this, the Exchange believes 

the meaningful amount requirement for 

price improvement is a deterrent to 

specialists’ participation in price 

improvement. The Commission believes 

that deletion of the meaningful amount 

requirement should encourage greater 

participation by specialists in the 

Exchange’s price improvement 

mechanism. At the same time, the 

Commission must carefully review 


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