Document ID: SEC-2006-1326-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange  LLC
Posted Date: 2006-10-12T04:00Z

[Federal Register: October 12, 2006 (Volume 71, Number 197)]
[Notices]               
[Page 60206-60208]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12oc06-97]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54560; File No. SR-NYSE-2006-74]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Rule 17

 October 2, 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 September 28, 2006, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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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)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to add Rule 17T (``Exchange Designated 
Default Sponsoring Member'') in order to establish an Exchange 
designated default sponsoring member broker/dealer for use when routing 
orders to the best bids and offers on other market centers in 
accordance with Exchange rules and SEC Regulation NMS.
    The text of the proposed rule change is available on the NYSE's Web 
site (http://www.nyse.com), at the NYSE's Office of the Secretary, and 

at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Since 1978, the Exchange has routed orders (as commitments to 
trade) to other market centers and received them through the 
Intermarket Trading System (``ITS'').\5\ Current anticipated changes to 
ITS, in addition to the adoption of Regulation National Market System 
(``Regulation NMS'') \6\ to modernize and strengthen the regulatory 
structure of the National Market System, result in the Exchange's need 
to establish a

[[Page 60207]]

designated default sponsoring member broker/dealer in the destination 
market (hereinafter ``default Sponsoring Member'') in order to ensure 
that customer orders sent to the Exchange for execution are able to 
access better prices on other markets.
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    \5\ ITS facilitates trades between members located in different 
markets. Through ITS, a member in any participating market may send 
orders, as commitments to trade, at the bid or offer on any other 
participating market. The ITS Plan is administered by the 
participating markets, and is filed with and approved by the 
Securities and Exchange Commission in accordance with Section 11A of 
the Securities Exchange Act of 1934.
    \6\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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    On July 17, 2006, the American Stock Exchange LLC, the Boston Stock 
Exchange, Inc., the Chicago Board Options Exchange, Inc., the Chicago 
Stock Exchange, Inc., the Nasdaq Stock Market LLC, the National Stock 
Exchange, the New York Stock Exchange LLC, and the NYSE Arca, Inc., 
executed and filed with the Commission a ``Plan for the Purpose of 
Creating and Operating an Intermarket Communications Linkage Pursuant 
to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934'' 
(``Linkage Plan'').\7\ Pursuant to the Linkage Plan the Securities 
Industry Automation Corporation (``SIAC'') will serve as the facilities 
manager for the data processing hardware, software and communications 
network (the ``System'') that links electronically the market 
participants. SIAC will further be responsible for the operation and 
maintenance of the System. The current ITS hardware will remain in use 
until June 30, 2007.
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    \7\ The Commission approved the NMS Linkage Plan on September 
29, 2006. See Securities Exchange Act Release No. 54551 (Sept. 29, 
2006). It should be noted that the Philadelphia Stock Exchange, Inc. 
(``Phlx'') executed the Linkage Plan on August 1, 2006.
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    Under the Linkage Plan, member access is provided to each market 
participant through the clearing member on the order or through the 
mechanism of a default Sponsoring Member. Upon the effective date of 
the Linkage Plan (October 1, 2006), through the end of June 2007, the 
Exchange intends to provide member access to the other market center 
participants in the Linkage Plan by utilizing the identifier of the 
default Sponsoring Member.
    Specifically, the System will automatically substitute the 
identifier of all member organizations' orders that are routed to other 
market centers with the identifier of the default Sponsoring Member 
prior to the routing of the orders to the appropriate destination 
market.
    The Linkage Plan allows participants to charge for orders executed 
in their market through the Linkage Plan. The destination market may 
bill the default Sponsoring Member for executions in that market, 
pursuant to such market's transaction fee schedule, based on the 
monthly reports provided by SIAC. As a result, the Exchange anticipates 
charging a fee for the services of the default Sponsoring Member. 
Charges related to the services of the default Sponsoring Member will 
be the subject of a separate fee filing.
    In addition, pursuant to the proposed rule change, neither the 
Exchange nor the default Sponsoring Member shall be liable for any 
damages sustained by an allied member or member organization as a 
result of the services provided by the default Sponsoring Member, 
except as stated in Exchange Rules.
    The interim establishment of the default Sponsoring Member serves 
only to provide member access to other destination market(s) for 
execution of orders at more favorable prices.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general and furthers the objectives 
of Section 6(b)(5) \9\ in particular, 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors or the public 
interest;
    (ii) Impose any significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, if 
consistent with the protection of investors and the public interest, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \10\ 
and Rule 19b-4(f)(6) thereunder.\11\ As required under Rule 19b-
4(f)(6)(iii) under the Act,\12\ the Exchange provided the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, at 
least five business days prior to the date of the filing of the 
proposed rule change.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay and render the proposed 
rule change to become operative immediately. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest. The Linkage Plan is 
expected to become operative on October 2, 2006, and waiving the 30-day 
operative period would enable the Exchange to implement the default 
Sponsoring Member mechanism at the start of the Linkage Plan's 
operation. For the reasons stated above, the Commission therefore 
designates the proposal to become operative upon filing with the 
Commission.\15\
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    \13\ Id.
    \14\ Id.
    \15\ For purposes of waiving the operative date of this proposal 
only, the Commission has considered the impact of the proposed rule 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    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 rule-comments@sec.gov. Please include 

File

[[Page 60208]]

Number SR-NYSE-2006-74 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2006-74. 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 such 
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-2006-74 and should be submitted on or before 
November 2, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-16847 Filed 10-11-06; 8:45 am]

BILLING CODE 8011-01-P