Document ID: SEC-2006-1590-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2006-12-08T05:00Z

[Federal Register: December 8, 2006 (Volume 71, Number 236)]
[Notices]               
[Page 71217-71219]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de06-146]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54850; File No. SR-NYSE-2006-105]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Prohibit Specialists From Charging Commissions on Transactions in Their 
Specialty Securities

November 30, 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 November 30, 2006, 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 and 
II below, which Items have been substantially prepared by the Exchange. 
The Exchange has designated this proposal as non-controversial under 
Section 19(b)(3)(A)(iii) 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)(iii).
    \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 adopt new Rule 104B prohibiting specialist 
firms from charging commissions on transactions in their specialty 
securities, including exchange traded fund (``ETF'') securities, and to 
make changes to Rules 104 and 123B to reflect the fact that specialists 
will no longer be able to charge commissions. In connection with the 
elimination of specialist commissions, the Exchange proposes in a 
separate filing (the ``Fee Filing'') \5\ to institute a program of 
revenue sharing for the specialists. The proposed rule changes will 
take effect as of December 1, 2006. The amendments to the Exchange's 
Rules are included in Exhibit 5 to the Exchange's filing.
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    \5\ See SR-NYSE-2006-106 (filed on November 30, 2006).
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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.
    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.

[[Page 71218]]

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

1. Purpose
    The Exchange proposes to adopt new Rule 104B prohibiting specialist 
firms from charging commissions on transactions in their specialty 
securities, including ETF securities, and to make changes to Rules 104 
and 123B to reflect the fact that specialists will no longer be able to 
charge commissions. In connection with the elimination of specialist 
commissions, the Exchange proposes, in the separate Fee Filing, to: (i) 
Eliminate the specialist trading privilege fee and the specialist 
allocation fee, and (ii) institute a program of revenue sharing for the 
specialists. In the Fee Filing, the Exchange is also: (i) Eliminating 
its $750,000 monthly fee cap on equity transactions, (ii) adopting a 
flat equity transaction fee of $0.000275 per share, and (iii) applying 
the $0.0030 per share ETF fee to ETFs traded on an unlisted trading 
privilege basis. We are requesting that the Commission make the 
effectiveness of this filing operative on December 1, 2006, the same 
day the changes contained in the Fee Filing take effect.
    The Exchange proposes to implement new Rule 104B prohibiting 
specialist firms from charging commissions on transactions in their 
specialty securities, including ETFs, and to make technical conforming 
changes to Rules 104 and 123B to reflect the fact that specialists will 
no longer be able to charge commissions on equity or ETF 
transactions.\6\ The elimination of specialist commissions will take 
effect on December 1, 2006, and will not have retroactive effect. 
Therefore, specialist firms will not be prohibited from collecting 
commissions owed on transactions completed before that date.
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    \6\ The ETF transactions with respect to which specialists will 
be prohibited from charging commissions will include transactions in 
Investment Company Units pursuant to Exchange Rule 1100, Trust 
Issued Receipts pursuant to Exchange Rule 1200, and 
streetTRACKS[supreg] Gold Shares pursuant to Exchange Rule 1300, 
Currency Trust Shares pursuant to Exchange Rule 1300A, Commodity 
Trust Shares pursuant to Exchange Rule 1300B or any security 
governed by Exchange Rule series 1100, 1200, 1300, 1300A or 1300B.
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    Subsection (4) of Supplementary Material .20 of Rule 104 
(``Dealings by Specialists'') provides that, for those members 
registered as a regular specialist subject to the Commission's Net 
Capital Rule,\7\ the term ``net liquid assets'' refers to excess net 
capital computed in accordance with the provisions of Rule 325 
(``Capital Requirements'') with certain adjustments, including 
deductions for floor brokerage and/or commissions receivable. 
Similarly, Rule 123B(b)(1) and Supplementary Material .10 to Rule 123B 
provide that a specialist may not charge floor brokerage (i.e., a 
commission) for the execution of an order which he or she receives by 
means of the Exchange's automated order routing system, known as 
SuperDot, if such order is executed within five minutes of receipt by 
the specialist. As, under new Rule 104B, specialists will be prohibited 
from charging any commissions in relation to trades in their specialty 
securities, the foregoing provisions will cease to be relevant and the 
Exchange proposes to delete them upon adoption of new Rule 104B.
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    \7\ See 17 CFR 240.15c3-1.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 \8\ of the Securities Exchange Act of 
1934 in general and furthers the objectives of Section 6(b)(5) \9\ in 
particular, in that it is designed to promote just and equitable 
principles of trade, to remove impediments, and to 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.
    \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

    Written comments were neither solicited nor received.

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 \10\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\11\ 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ The Exchange provided written notice to the Commission 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 filing, as required by Rule 19b-4(f)(6)(iii).
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    The Exchange requests that the Commission waive the 30-day 
operative delay specified in Rule 19b-4(f)(6)(iii) with respect to the 
proposed rule change.\13\ The Exchange represents that the specialist 
firms affected by the proposal have all agreed to the elimination of 
commissions contingent upon the Exchange's implementation of the 
revenue sharing program proposed in the Fee Filing. As the proposal and 
the revision to the Exchange's trading fees are both parts of an 
integrated plan in which (i) the revenues generated from the revised 
fees will partially offset the cost to the Exchange of the payments the 
Exchange will make to the specialists under the revenue sharing 
program, and (ii) the cost to customers of the increased transaction 
fees will be offset at least partially by the elimination of 
commissions, it is essential that the proposals in this filing takes 
effect at the same time as the fee change. Therefore, the Exchange 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest.
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission has determined to waive the 30-day delay and allow 
the proposed rule change to become operative on December 1, 2006.\14\ 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the Exchange has represented that the elimination of specialist 
commissions will benefit investors by helping to offset their increased 
transaction fees under the Fee Filing.
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    \14\ For purposes only of waiving the operative delay of this 
proposal, the Commission notes that it 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 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

[[Page 71219]]

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 No. SR-NYSE-2006-105 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-2006-105. 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-2006-105 and should be submitted on or before December 29, 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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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-20874 Filed 12-7-06; 8:45 am]

BILLING CODE 8011-01-P