Document ID: SEC-2007-1538-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, LLC
Posted Date: 2007-11-13T05:00Z

[Federal Register: November 13, 2007 (Volume 72, Number 218)]
[Notices]               
[Page 63948-63950]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13no07-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56753; File No. SR-NYSE-2007-97]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify That a Member Organization May Still Use the Express Consent 
Procedure for Obtaining Consent From a Customer To Trade Along on an 
Order-By-Order Basis Under Rule 92(b)

November 6, 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 October 31, 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, II, 
and III below, which Items have been substantially prepared by NYSE. 
The Exchange has designated this proposal as one constituting a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) thereunder,\4\ which 
renders it 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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).

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[[Page 63949]]

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

    The Exchange proposes to clarify the consent provisions for trading 
along under NYSE Rule 92 in an NYSE Regulation, Inc. (``NYSE 
Regulation'') Information Memo (``Information Memo''). 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 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 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
    On July 5, 2007, the Commission approved amendments to NYSE Rule 92 
that, among other things, expanded the consent provisions for trading 
along under Rule 92(b).\5\ Under the pre-amended version of the rule, 
members or member organizations could trade along with a customer order 
that could be executed at the same price so long as the customer had 
given express permission, including an understanding of the relative 
price and size of allocated execution reports (``express consent 
procedure''). Under the express consent procedure, members or member 
organizations needed to obtain and document such consent on an order-
by-order basis.
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    \5\ See Securities Exchange Act Release No. 56017 (July 5, 
2007), 72 FR 38110 (July 12, 2007) (SR-NYSE-2007-21).
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    As amended, a member or member organization can trade along with a 
customer order under Rule 92(b) so long as the member organization 
``periodically provides written disclosures to its customers and 
obtains and documents affirmative consent'' (``affirmative consent 
procedure''). Because the affirmative consent procedure is broader than 
the express consent procedure, the Exchange did not keep the text of 
the express consent procedure in the rule.
    As explained in the Information Memo, in expanding the consent 
procedures under Rule 92(b), the Exchange did not intend to prohibit 
the use of the express consent procedure for obtaining trade-along 
consent in a given instance. The Information Memo clarifies that a 
member organization may still use the express consent procedure for 
obtaining consent from a customer to trade along on an order-by-order 
basis under Rule 92(b). Accordingly, if a customer does not want to 
provide blanket affirmative consent, a member organization may still 
obtain consent on an order-by-order basis to trade along with an order 
from that customer.
    In addition, the Information Memo advises member organizations of a 
recent NYSE Regulation Hearing Panel decision concerning the express 
consent procedure. In that decision, a member organization was fined 
for failing to adhere to principles of good business practice because 
it did not record both the customer contact name and the percentage 
split when documenting whether a customer provided trade-along consent 
under the Rule 92(b) express consent procedure.\6\ The Information Memo 
informs member organizations that NYSE Regulation considers the failure 
to document the contact name of the person who provided the express 
consent to be a violation not only of NYSE Rule 401, but of NYSE Rule 
92 as well.
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    \6\ See In re Merrill Lynch, Pierce, Fenner & Smith 
Incorporated, NYSE Hearing Board Decision 07-005 (January 12, 2007).
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    The Information Memo also addresses the September 30, 2007 deadline 
that was part of the original filing. The purpose of that deadline was 
to provide member organizations with a grace period to make the written 
disclosures required under amended Rule 92. That three-month grace 
period provided firms with the opportunity to use the new affirmative 
consent process immediately upon approval of the amended rule, even 
before their written disclosures were finalized, so long as the process 
of making written disclosures and documenting the orally-provided 
consents was completed by September 30, 2007. Because the grace period 
has expired, member organizations must provide written disclosures to 
their customers and document the customers' affirmative consents before 
they may trade along with such customers.\7\
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    \7\ In addition, the Information Memo answers inquiries that 
NYSE Regulation has received from a number of member organizations 
regarding the scope and application of amended Rule 92(b). That 
portion of the Information Memo is not subject to this rule filing.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \8\ 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.
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    \8\ 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 foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(i) of the Act \9\ and subparagraph (f)(1) of Rule 
19b-4 thereunder,\10\ because it constitutes a stated policy, practice, 
or interpretation with respect to the meaning, administration, or 
enforcement of an existing rule. 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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    \9\ 15 U.S.C. 78s(b)(3)(A)(i).
    \10\ 17 CFR 240.19b-4(f)(1).
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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

[[Page 63950]]

     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2007-97 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-2007-97. 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 
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-2007-97 and should be submitted on or before December 4, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-22099 Filed 11-9-07; 8:45 am]

BILLING CODE 8011-01-P