Document ID: SEC-2006-0040-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.
Posted Date: 2006-01-13T05:00Z

[Federal Register: January 13, 2006 (Volume 71, Number 9)]
[Notices]               
[Page 2281-2283]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ja06-142]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53071; File No. SR-NYSE-2005-91]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Revise Certain of the Exchange's Facility and Equipment Fees and System 
Processing Fees Charged to Members

January 6, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 29, 2005, the New York Stock Exchange, Inc. (``Exchange'' 
or ``NYSE'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the NYSE. The NYSE has 
designated this proposal as establishing or changing a due, fee, or 
other charge imposed by a self-regulatory organization pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \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)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes to revise certain of its Facility and Equipment 
Fees and System Processing Fees charged to members. The text of the 
proposed rule change is available on the NYSE Web site, (http://www.nyse.com
), at the NYSE'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, the NYSE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The 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
    The Exchange has undertaken a thorough analysis of its various fees 
charged to Exchange members for floor and equipment and system 
processing services. This analysis has taken into account the changing 
business models of the Exchange's members. In most cases, the 
Exchange's fees have not been meaningfully revised for a period of five 
to 15 years.
    In response to this analysis, the Exchange proposes to revise its 
fee schedules for certain floor and equipment and system processing 
services. These revisions to the Exchange's fee schedules would take 
effect January 1, 2006 and form part of the Exchange's 2006 Price List. 
The proposed changes are defined by certain core objectives:
     Establish a fee structure that more accurately and 
equitably reflects member firms' utilization of floor and equipment and 
system processing services;
     Simplify the Exchange's fee schedules and make them easier 
to understand;
     Recognize the overall costs members incur in order to 
trade at the Exchange; and
     Encourage participation in the NYSE's marketplace.
    The Exchange proposes to revise the pricing of trading floor 
services in four primary areas: Specialist Fees, Booth Fees, Clerk 
Badge Fees, and Usage-Based Fees.
    Specialist Fees. The Exchange will charge specialist firms a new 
``Trading Privilege Fee'' that will replace several existing Exchange 
fees including the Specialist Floor Fee, the Specialist Post Fee, 
Specialist Odd Lot Charges, and Specialist System Charges. This Trading 
Privilege Fee will be assessed monthly on the Exchange's specialist 
firms for each security, including any investment company unit 
(``ICU'') traded,\5\ and will be determined based on each security's 
consolidated average daily dollar volume.
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    \5\ Includes securities and ICUs admitted to dealings on an 
unlisted trading privileges (UTP) basis.
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    The Exchange anticipates that this Trading Privilege Fee will:
     Further increase transparency and simplify Exchange fees 
for specialists by replacing four separate fees with one new fee;
     Position the Exchange's floor revenues to grow with 
potential future growth in the NYSE's new listings business;
     More closely align the Exchange's floor-related fees from 
specialists with the fundamental driver of their business activity; and
     Help offset the costs incurred to provide technology and 
other infrastructure to support specialist firms operating on the floor 
of the Exchange.
    Booth Fees. Currently, the Exchange charges an annual fee per 
booth,\6\ billed monthly on a pro-rated basis,\7\ that is

[[Page 2282]]

determined based on the particular size and location of each booth 
within the Exchange's five trading rooms. Under its revised booth 
pricing schedule, the Exchange will charge a flat fee per booth based 
solely on the trading room where each booth is located. This change 
will allow the Exchange to simplify its price schedule by reducing the 
number of booth fees from several hundred to four and will enable 
member firms to more easily assess their booth-related floor costs. In 
order to further simplify the current booth pricing schedule, and to 
ensure that members are only charged for services actually utilized on 
the trading floor, the Exchange is also eliminating the minimum Floor 
Privilege Fee.
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    \6\ Booths are workspaces located around the perimeter of the 
trading floor where member firms and independent brokers receive 
orders.
    \7\ In its filing, the Exchange described this fee as a monthly 
fee. The Exchange confirmed in a telephone conference between John 
Carey, Assistant General Counsel, NYSE, and David L. Orlic, 
Attorney, Division of Market Regulation, Commission, on January 6, 
2006 that the fee is in fact an annual fee billed monthly on a pro-
rated basis.
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    Clerk Badge Fees. Currently, the Exchange maintains two different 
rates for Telephone Clerk Tickets, depending upon the ratio of 
telephone clerks per booth or post space. The Exchange will now charge 
one flat fee per eligible person. This flat fee is intended to simplify 
for member firms the process of calculating the incremental cost of an 
individual employee on the floor and to provide greater transparency to 
member firms with respect to the subsidized services their employees 
utilize at the Exchange, such as security and subsidized cafeteria and 
medical services. In addition, the name of this fee is being changed 
from Telephone Clerk Ticket to Clerk Badge Fee to further enhance the 
transparency of the Exchange's price structure.
    Usage-Based Fees. The Exchange is changing its fees for several 
usage-based services provided by the Exchange, including eBroker 
handheld devices, telephone lines, the Online Comparison System, and 
Exceptional System Messages.
     eBroker Handheld Devices. The Exchange currently provides 
its proprietary eBroker handheld device to brokers on the floor of the 
Exchange free of charge. The Exchange is introducing an annual charge 
of $5,000 per eBroker device in order to:
     Allow the Exchange to recoup a portion of the costs 
incurred to develop and maintain the proprietary eBroker system;
     Encourage competition and technological development by 
outside vendors in the provision of products such as handheld devices 
for use on the trading floor; and
     Recognize that eBroker is not used by all brokers, thus 
creating an incentive for those brokers who do use it to do so 
efficiently.
     Telephone Lines. The Exchange currently charges brokers 
for telephone lines that originate on the floor of the Exchange and 
terminate at a customer site, and the Exchange does not currently 
charge for telephone lines that terminate at a broker's own back-office 
or trading room. The Exchange will now charge brokers a fee for each 
telephone line, regardless of where the line terminates. The Exchange 
believes this change in the telephone line charge will:
     Establish a more equitable usage-based pricing structure 
by imposing a standard rate per telephone line, regardless of where the 
line terminates; and
     Create an incentive for member firms to more efficiently 
use the Exchange's telephone capacity and systems.
     Online Comparison System. The Exchange has not revised any 
fees related to its Online Comparison System (``OCS'') since the system 
was first introduced in 1989. The Exchange is revising the prices for 
OCS access and per-submission fees in order to:
     Recover incremental fees to help offset OCS development 
and maintenance costs, which have continued to increase as a result of 
ongoing system improvements; and
     Establish a more simplified and equitable usage-based fee 
schedule by: (i) Establishing a flat remote access fee regardless of 
how a member firm chooses to access the OCS system; and (ii) 
establishing a flat per-submission fee rather than differentiating 
pricing based on the size of each particular transaction, which has no 
bearing on the actual cost to process a submission.
     Exceptional System Message Fee. A new fee of $0.01 per 
``Exceptional System Message'' will be applied. An Exceptional System 
Message is defined as any system \8\ message, as measured by mnemonic 
\9\ on a daily basis, that exceeds the following criteria: (i) The 
ratio of a mnemonic's share of the total system messages to the 
mnemonic's share of total executed system volume exceeds 10:1; and (ii) 
the mnemonic's cancelled system orders as a percentage of its total 
system orders exceeds 90.0%. If a mnemonic exceeds these two thresholds 
for a particular trading day, the Exceptional System Message fee will 
be applied only towards those cancelled system messages in excess of 
90.0% of that mnemonic's total system orders for the day. Any fees 
incurred as a result of this Exceptional System Message fee will not be 
applied towards either the monthly dollar cap on transaction fees 
(which is currently set at $600,000) or the commission-based 2% cap on 
transaction fees. It is intended that this fee will help to compensate 
the Exchange for the cost of the incremental system capacity that must 
be readily available to accommodate trading strategies that result in 
significant volumes of system messages and cancellations.
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    \8\ The relevant system is SuperDOT[supreg], the Exchange's 
Designated Order Turnaround System.
    \9\ Mnemonics, which are alphabetical identifiers issued by the 
NYSE to its member firms and their customers, are required for order 
entry and identification purposes.
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1. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \10\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \11\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\13\ because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such 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.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(2).
    \14\ See 15 U.S.C. 78s(b)(3)(C).
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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.

[[Page 2283]]

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 rule-comments@sec.gov. Please include 

File Number SR-NYSE-2005-91 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-NYSE-2005-91. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all 

written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room. Copies of the filing 
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-2005-91 and should be submitted on or before February 3, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-325 Filed 1-12-06; 8:45 am]

BILLING CODE 8010-01-P