Document ID: SEC-2008-1440-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-10-20T04:00Z

[Federal Register: October 20, 2008 (Volume 73, Number 203)]
[Notices]               
[Page 62352-62354]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20oc08-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58758; File No. SR-NYSE-2008-100]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend NYSE Rule 123B.30 (Exchange Automated Order Routing System) To 
Align the Rule Governing Sponsored Access to the Exchange With the 
Current Industry Standard

October 8, 2008.
    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 October 2, 2008, 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 
has designated the proposed rule change as a ``non-controversial'' rule 
change pursuant to Section 19(b)(3)(A) 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.
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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 proposes to amend NYSE Rule 123B.30 (Exchange 
Automated Order Routing System) to align its rule governing sponsored 
access to the Exchange with the current industry standard. The text of 
the proposed rule change is available at NYSE, the Commission's Public 
Reference Room, and http://www.nyse.com.

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 and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below.

[[Page 62353]]

The Exchange 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 proposes to amend NYSE Rule 123B.30 (Exchange 
Automated Order Routing System) to align its rule governing sponsored 
access to the Exchange with the current industry standard.
Background and Current NYSE Rule 123B.30
    The Exchange recently adopted NYSE Rule 123B.30, which sets forth 
the requirements for a member or member organization (``Sponsoring 
Member Organization'') to provide a non-member firm or customer 
(``Sponsored Participant'') with sponsored access to Exchange systems 
and facilities.\5\ The Exchange modeled NYSE Rule 123B.30 on the 
industry standard sponsored access rules of its affiliate exchange, 
NYSE Arca, Inc. (``NYSE Arca''), and those of other exchanges, 
including NASDAQ Stock Market LLC, subject to one key distinction.\6\
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    \5\ See Securities Exchange Release No. 58429 (August 27, 2008), 
73 FR 51676 (September 4, 2008) (SR-NYSE-2008-71).
    \6\ See Securities Exchange Act Release No. 53615 (April 7, 
2006), 71 FR 19226 (April 13, 2006) (SR-PCX-2006-24) (adopting NYSE 
Arca Equities Rules 7.29 and 7.30). See also Securities Exchange Act 
Release No. 55550 (March 28, 2007), 72 FR 16389 (April 4, 2007) (SR-
NASDAQ-2007-010) (amending NASDAQ Rule 4611(d) to conform its 
requirements to NYSE Arca Rules 7.29 and 7.30).
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    Unlike other sponsored access rules, NYSE Rule 123B.30 requires 
agreements between (i) a Sponsoring Member Organization and a Sponsored 
Participant, and (ii) the Sponsoring Member Organization and the 
Exchange.\7\ A Sponsored Participant must enter into a sponsored access 
agreement containing specific provisions governing use and access of 
Exchange systems and facilities that establishes a proper customer 
relationship and account(s) with a Sponsoring Member Organization 
through which the Sponsored Participant may trade on the Exchange. The 
Sponsoring Member Organization must enter into an agreement with the 
Exchange designating its Sponsored Participant(s) and acknowledging its 
responsibilities thereto.\8\
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    \7\ Other sponsored access rules require both the Sponsoring 
Member Organization and the Sponsored Participant to enter into 
agreements with the Exchange governing the use of and access to 
Exchange systems and facilities. See, e.g., NYSE Rules 86(o)(2)(A) 
and 1500(g)(3)(B)(ii), concerning sponsored access to NYSE Bonds and 
NYSE MatchPoint, respectively.
    \8\ See NYSE Rule 123B.30, paragraphs (c)(1)-(3).
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    Pursuant to the above agreements, the Sponsored Participant and the 
Sponsoring Member Organization agree to comply with the rules and 
procedures of the Exchange. In addition, the Sponsoring Member 
Organization must file a notice of consent and must agree to be 
responsible for the conduct of the Sponsored Participant and/or any 
person acting on its behalf, and any and all orders entered by, or 
executions of, the Sponsored Participant or its employees or agents 
(including unauthorized transactions) are binding on the Sponsoring 
Member Organization. The Sponsoring Member must also have adequate 
procedures and controls to provide oversight of Authorized Traders who 
enter orders on behalf of Sponsored Participants and to prevent the 
improper use of or access to Exchange systems or facilities.\9\
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    \9\ See NYSE Rule 123B.30(c)(2), (d).
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    Sponsored Participants are required to establish adequate 
procedures and controls to monitor the use and access of Exchange 
systems and facilities by their employees, agents, and customers. The 
Sponsored Participant must also agree to compensate the Sponsoring 
Member Organization, the Exchange, or any other third party, for any 
amounts due arising out of the Sponsored Participant's access to and 
the use of Exchange systems and facilities.\10\
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    \10\ See NYSE Rule 123B.30(c)(2).
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Proposed Amendments
    In order to better align its sponsored access rule with the current 
industry standard the Exchange proposes to amend NYSE Rule 123B.30. 
First, the Exchange proposes to amend Rule 123B.30(c)(2)(A) to provide 
for agreements (i) between a Sponsoring Member Organization and a 
Sponsored Participant, and (ii) among the Sponsoring Member 
Organization, the Sponsored Participant and the Exchange.
    In addition, the Exchange proposes to amend the language contained 
in subparagraph (d)(4) to refer to access ``to the Exchange'', as 
opposed to Exchange facilities or NYSE systems. Throughout NYSE Rule 
123B.30, with the exception of (d)(4), the provisions governing 
sponsored participation reference access ``to the Exchange''. NYSE 
believes that these inconsistent references within Rule 123B.30(d)(4) 
could cause confusion unless it is amended to track the other 
provisions of the Rule.
    Insofar as the amendments proposed herein have been previously 
determined by the Commission to be consistent with the protection of 
investors and the public interest, the Exchange believes that the 
proposed amendments to NYSE Rule 123B.30 are necessary to further align 
it with the industry standard for sponsored access.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
and furthers the objectives of Section 6(b)(5) of the Act,\11\ in that 
it is designed to prevent fraudulent and manipulative practices, to 
promote just and equitable principles of trade, to remove impediments 
to, and perfect the mechanisms 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 supports the principles 
of Section 11A(a)(1) \12\ of the Act in that it seeks to ensure 
economically efficient execution of securities transactions and fair 
competition among brokers and dealers and among exchange markets. The 
Exchange believes the proposed amendments to NYSE Rule 123B.30 will 
provide a procedure for sponsored access to the Exchange consistent 
with the current industry standard and the Act.
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    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78k-1(a)(1).
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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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section

[[Page 62354]]

19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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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.\15\ 
However, Rule 19b-4(f)(6)(iii) \16\ 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 proposal may 
become operative upon filing. The Commission believes that waiving the 
30-day operative delay is consistent with the protection of investors 
and the public interest. The Commission hereby grants the Exchange's 
request and designates the proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission 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 filing 
of the proposed rule change, or such shorter time as designated by 
the Commission. The Exchange has requested the Commission to waive 
this five-day pre-filing notice requirement. The Commission hereby 
grants this request.
    \16\ Id.
    \17\ For the purposes only of waiving the 30-day operative 
delay, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2008-100 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2008-100. 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 the 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-2008-100 and should be submitted on or before November 10, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-24753 Filed 10-17-08; 8:45 am]

BILLING CODE 8011-01-P