Document ID: SEC-2007-0224-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-02-13T05:00Z

[Federal Register: February 13, 2007 (Volume 72, Number 29)]
[Notices]               
[Page 6799-6801]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13fe07-80]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55244; File No. SR-NYSE-2007-11]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Rule 122 (Orders With More Than One Broker) Until the 
Availability of Full d-Quote Functions in a Particular Security or 
March 5, 2007, Whichever Comes First

February 5, 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 5, 2007, 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 substantially prepared by the self-
regulatory organization. NYSE filed the proposed rule change pursuant 
to Section 19(b)(3) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to continue the Floor brokers' ability to 
maintain discretionary e-Quotes (``d-Quotes'') \5\ and CAP-DI orders 
\6\ in a security on the same side of the market for the same order 
that are capable of trading at the same price until the completion of 
Phase IV implementation of the HYBRID MARKETSM (``Hybrid 
Market'') in the relevant security or until March 5, 2007, whichever 
comes first. 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.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 54577 (October 5, 
2006), 71 FR 60208 (October 12, 2006) (SR-NYSE-2006-36).
    \6\ See Exchange Rules 13 and 123A.30(a). Exchange Rule 
123A.30(a) describes a CAP-DI order as: ``The elected or converted 
portion of a `percentage order that is convertible on a 
destabilizing tick and designated immediate execution or cancel 
election' (``CAP-DI order'') may be automatically executed and may 
participate in a sweep.''
---------------------------------------------------------------------------

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 self-regulatory organization 
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 self-regulatory organization 
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
    On October 25, 2006, the Exchange filed with the Commission an 
amendment to Rule 122 to permit Floor brokers to enter d-Quotes and 
CAP-DI orders in a security on the same side of the market for the same 
underlying order that are capable of trading at the same price until 
the implementation of full d-Quoting functionality in the relevant 
security or until February 5, 2007, whichever came first.\7\
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 54653 (October 26, 
2006), 71 FR 64594 (November 2, 2006) (SR-NYSE-2006-94).
---------------------------------------------------------------------------

    On January 25, 2007, the Exchange commenced the implementation of 
Phase IV of the Hybrid Market, which includes the remaining d-Quote 
functions: (i) The ability to trade against non-marketable interest 
within a Floor broker's discretionary range and (ii) routing control 
for Floor brokers with respect to d-Quotes.\8\
---------------------------------------------------------------------------

    \8\ Other d-Quote functions were implemented in Phase III.
---------------------------------------------------------------------------

    The Exchange anticipates that the implementation of Phase IV will 
not be completed as originally anticipated by February 5, 2007. Through 
this filing the Exchange therefore requests to extend Floor brokers' 
ability to enter d-Quotes and CAP-DI orders in a security on the same 
side of the market for the same orders that are capable of trading at 
the same price until the implementation of

[[Page 6800]]

full d-Quoting functionality in the relevant security or until March 5, 
2007 whichever comes first.
    The Exchange believes that extending the time period in which Floor 
brokers have this capability is necessary in order to ensure that Floor 
brokers remain competitive. Currently, the specialist can send 
electronically a ``hit bid'' or ``take offer'' message based on an 
incoming order that would create a new best bid or best offer; thus 
allowing the specialist to trade electronically with the newly 
published bid or offer. Without complete d-Quote functionality, a Floor 
broker only has the ability to interact manually with such new bid or 
offer. As a result, the speed disparity between a manual action and an 
electronic one places the Floor broker at a competitive disadvantage.
    While a Floor broker can seek to trade at the bid or offer price by 
manually ``hitting the bid'' or ``taking the offer'' the Floor broker 
can also send a CAP-DI order to the specialist for conversion or 
election at that price. Marketable CAP-DI orders are automatically 
converted and trade along with specialist proprietary executions. 
Accordingly, by allowing Floor brokers to have CAP-DI orders and d-
Quotes, they retain the ability to compete with specialist algorithmic 
trading for executions involving marketable incoming orders via 
discretionary pricing instructions, but do not miss participating in 
executions when specialists algorithmically hit a bid or take an offer.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) of the Act \9\ 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 a national market system and, in general, to protect 
investors and the public interest. The proposed rule change also is 
designed to support the principles of Section 11A(a)(1) of the Act \10\ 
in that it seeks to assure economically efficient execution of 
securities transactions, make it practicable for brokers to execute 
investors' orders in the best market and provide an opportunity for 
investors' orders to be executed without the participation of a dealer.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 15 U.S.C. 78k-1(a)(1).
---------------------------------------------------------------------------

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

    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) 
by its terms, 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 \11\ 
and Rule 19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \13\ 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 designate the proposed 
rule change immediately operative upon filing. The Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. Specifically, the 
Commission believes that the proposal would enable floor brokers to 
continue to compete with specialists in certain trades on behalf of 
their customers, while the Exchange is in the process of implementing 
the d-Quote functions. Accordingly, the Commission designates the 
proposal to be effective and operative upon filing with the Commission 
until the availability of full d-Quote functions in a particular 
security or March 5, 2007, whichever comes first.\14\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such proposed 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 Number SR-NYSE-2007-11 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-2007-11. 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 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

[[Page 6801]]

submissions should refer to File Number SR-NYSE-2007-11 and should be 
submitted on or before March 6, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2406 Filed 2-12-07; 8:45 am]

BILLING CODE 8010-01-P