Document ID: SEC-2007-0394-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-03-16T04:00Z

[Federal Register: March 16, 2007 (Volume 72, Number 51)]
[Notices]               
[Page 12650-12651]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr07-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55439; File No. SR-NYSE-2007-16]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Eliminate the Individual Investor Express Delivery Service

March 9, 2007.
    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 February 14, 2007, the New York Stock Exchange LLC (``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 substantially prepared by the 
Exchange. The Commission is publishing this notice to solicit comment 
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.
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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 amend Exchange Rule 123B, ``Exchange 
Automated Order Routing Systems,'' by eliminating the functionality of 
the Individual Investor Express Delivery Service[supreg] (``IIEDS''). 
The text of the proposed rule change is available on the Exchange's Web 
site (http://www.nyse.com), at the Exchange'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 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. 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
    IIEDS is an order processing service that, in certain situations, 
provides priority delivery to the specialist's post through 
SuperDOT[supreg] for simple round-lot market orders and market GTC 
(``good 'til canceled'') orders that are for an amount up to 2,099 
shares and are for the account of an individual investor \3\ as 
identified by the member organization or its customer, if enabled by 
the member organization, entering the order. Market orders to buy 
minus, sell plus, sell short, buy or sell stop, as well as limit orders 
are not eligible for IIEDS. In addition, a limit order that is 
cancelled and replaced with a market order when entered as a single 
cancel/replacement order is not eligible for IIEDS. IIEDS was adopted 
in the wake of the 1987 market correction to enable retail-sized orders 
to avoid being negatively impacted by a sudden and significant influx 
of non-retail orders such as what generally happens when automated 
program trading benchmarks are reached.
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    \3\ The term ``individual investor'' is defined to parallel the 
concept of ``natural person'' contained in Section 11(a)(1)(E) of 
the Act, 15 U.S.C. 78k(a)(1)(E), including the interpretations made 
by the Commission pursuant to that section.
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    IIEDS provides eligible orders with priority systematized delivery, 
ahead of other orders, to the specialist's post only when a queue of 
orders, which is caused by extraordinarily high levels of message 
traffic, exists in the Common Message Switch (``CMS'').\4\ Where no 
queue exists in CMS, IIEDS-eligible orders received by the Exchange are 
routed to the specialist's post through SuperDOT, along with all other 
orders received by CMS, in the normal sequence in which they are 
received. Once an IIEDS order reaches the specialist's post, whether it 
received priority delivery or not in arriving there, all normal 
Exchange market procedures, including rules related to priority and 
parity, are applied in executing the order.
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    \4\ CMS is the central communications hub between member 
organizations and the NYSE. CMS receives, validates, and passes 
orders and administrative inquiries from member organizations to 
other NYSE systems, including SuperDOT. In addition, CMS sends 
execution reports, responses to administrative inquiries, and status 
messages back to member organizations.
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    The NYSE is proposing to eliminate the functionality of IIEDS 
because it is no longer necessary due to systems capacity upgrades made 
to CMS that the Exchange has implemented over time. In addition, IIEDS 
is infrequently used, and orders eligible for the service represent a 
very small percentage of order flow received on the Exchange. Finally, 
the service is no longer needed in light of the increased speed and 
efficiency of order executions that will occur as a result of the NYSE 
HYBRID MARKETSM initiative.\5\
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    \5\ The Hybrid Market initiative was proposed in SR-NYSE-2004-05 
and Amendments No. 1, 2, 3, 5, 6, 7, and 8 thereto, approved on 
March 22, 2006. See Securities Exchange Act Release No. 53539 (March 
22, 2006), 71 FR 16353 (March 31, 2006).
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    Due to capacity increases made to CMS on an annual basis over the 
years, the Exchange rarely experiences order queues, a condition 
precedent for an IIEDS order to be sent to the specialist's post ahead 
of another order. Historically, the Exchange has maintained ``message 
per second'' system capacity for CMS equaling approximately two times 
the highest Floor-wide five-minute average message per second rate 
experienced during the year. Thus, for example, during 2005, the 
Exchange experienced a peak five-minute average message per second rate 
of 6,043, while the actual CMS system capacity for year end 2005 was 
increased to handle approximately 13,000 messages per second. Year-to-
year evaluation of actual message per second rate coupled with 
attendant proportional increases in CMS capacity has enabled the 
Exchange to experience a statistically insignificant number of order 
queues, thereby obviating the need for IIEDS.
    The Exchange is also proposing to eliminate IIEDS because the 
service is seldom used by its customers; less than two-tenths of 1% 
(approximately .18%) of order flow received by the Exchange is eligible 
for IIEDS processing. The average number of IIEDS-eligible orders is 
approximately 64,000 orders per day, out of approximately 35.36 million

[[Page 12651]]

orders received by the Exchange per day.
    In addition, the wider availability and increased speed of NYSE 
Direct+[supreg] (``Direct+''), the Exchange's electronic execution 
facility, which is being implemented in connection with the Hybrid 
Market, should prove a beneficial substitute to those Exchange 
customers seeking processing for individual investor orders similar to 
that obtained through IIEDS. The enhancements to Direct+ being 
introduced involve immediate execution at the best bid and best offer 
without restrictions on order size or frequency to the extent of the 
displayed volume associated with the bid and offer. The speed and 
continued operation of electronic executions through Direct+ will also 
eliminate the queues that developed during the slower, more manual 
execution process, further obviating the need for IIEDS.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirement under Section 6(b)(5) \6\ of the Act that an 
Exchange have rules that are designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and national market system, and, in general, 
to protect investors and the public interest.
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    \6\ 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

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

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act\7\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\8\ Because the Exchange has designated the foregoing 
proposed rule change as one that: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) does not 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, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
and Rule 19b-4(f)(6)(iii) thereunder. 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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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. 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 No. SR-NYSE-2007-16 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-2007-16. 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 Commissions 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 Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSE-2007-16 and should be submitted on or before April 
6, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-4813 Filed 3-15-07; 8:45 am]

BILLING CODE 8010-01-P