Document ID: SEC-2007-0497-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New YorkStock Exchange LLC
Posted Date: 2007-04-03T04:00Z

[Federal Register: April 3, 2007 (Volume 72, Number 63)]
[Notices]               
[Page 15926-15928]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ap07-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55543; File No. SR-NYSE-2007-31]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 60 To Allow the Exchange To Identify Its Quotation as Slow 
Non-Firm During the Manual Reporting of a Block-Sized Transaction

March 27, 2007.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 20, 2007, the New York Stock Exchange LLC (``NYSE'' or 
the ``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 
Exchange. NYSE has designated the proposed rule change as constituting 
a ``non-controversial'' rule change under Section 19(b)(3)(A) of the 
Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
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 is proposing to amend Rule 60 to provide that when the 
Exchange quotation is not available for automatic execution due to the 
manual reporting of a block-sized transaction, the Exchange will 
identify such quotes with an indicator signifying that they are non-
firm within the context of Regulation National Market System (``Reg. 
NMS'').\5\ The text of the rule proposal is available on the Exchange's 
Web site (http://www.nyse.com), at the Exchange, and at the 

Commission's Public Reference Room.
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    \5\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005).
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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 Exchange 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 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 NYSE proposes to amend Rule 60 to specify that when a 
specialist manually reports a block-sized transaction \6\ that involves 
orders in the Display Book[supreg]( system (``block-sized 
transaction''), the Exchange will use an indicator to signify that the 
NYSE quote is non-firm. During the brief moment it takes a specialist 
to manually report a block-sized transaction in a security, autoquoting 
of the highest bid/lowest offer is suspended in that stock.\7\ In 
addition, during that same period of time, automatic executions against 
the displayed quotation are not available.\8\ After the specialist has 
completed the report of a block-sized transaction, autoquote will 
resume immediately,\9\ and the NYSE quotation will similarly again be 
available for automatic executions.\10\
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    \6\ NYSE Rule 127.10 defines a ``block'' size as at least 10,000 
shares or a quantity of stock having a market value of $200,000 or 
more, whichever is less.
    \7\ See NYSE Rule 60(e)(i)(B).
    \8\ See NYSE Rule 1000(a)(v).
    \9\ See NYSE Rule 60(e)(ii)(B).
    \10\ See NYSE Rule 1000(b).
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    In the NYSE Hybrid MarketSM (``Hybrid Market''), 
autoquote and the availability of the Exchange quotation for automatic 
executions are likewise both disengaged for limited periods in 
connection with two other specific auction market activities: (1) When 
the specialist gaps the quotation in accordance with Exchange policies 
and procedures,\11\ and (2) when trading on the Exchange reaches a 
Liquidity Replenishment Point (``LRP'').\12\ For both of these 
situations, as provided in Rule 60(c)(2)(b), the Exchange identifies 
its quotation as unavailable for automatic execution in accordance with 
Reg. NMS.
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    \11\ See NYSE Rule 60(e)(i)(A). For a description of gapped 
quotations, see Securities Exchange Act Release No. 53539 (March 22, 
2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05) (the ``Hybrid 
MarketSM Approval Order'').
    \12\ See NYSE Rule 60(e)(i)(C). For a description of LRPs, see 
Hybrid MarketSM Approval Order, supra note 11.
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    Through this filing, the Exchange proposes to specify in Rule 
60(c)(2)(b) that in addition to the two situations described in the 
preceding paragraph, the NYSE will identify its quotation as non-firm 
as soon as the report template is opened by the specialist to report a 
block-sized transaction, and will continue to do so until the trade has 
been reported. This change is necessary because the quotation that is 
disseminated when a block-sized transaction is being manually reported 
may not reflect the current state of the market in the stock, given the 
temporary suspension of autoquoting of the highest bid/lowest offer 
that occurs during the reporting of a block-sized transaction. Thus, 
identifying the quotation as non-firm when autoquote and automatic 
executions are suspended by a block-sized transaction will provide 
market participants with more accurate information about the state of 
the NYSE quotation. Moreover, identifying the NYSE quotation as non-
firm will bring the dissemination of the quotation during block-sized 
transactions more in line with the way in which they are identified 
during other Exchange manual auction market activities that similarly 
cause the suspension of autoquote and automatic executions--i.e., gap 
quotes and LRPs.
    The Exchange completed Phase IV of the Hybrid MarketSM 
rollout on February 28, 2007. However, the Phase IV software does not 
contain the coding necessary to properly identify the Exchange 
quotation as non-firm during the manual report of a block-sized 
transaction that involves orders in the Display Book. The NYSE has made 
the software changes required and is currently rolling it out as part 
of the post-Phase IV software in phases through March 30, 2007, the 
date by which it currently expects the rollout to be completed.
    In addition, the NYSE notes that it has requested from the 
Commission limited no-action relief from the requirement that the NYSE 
enforce compliance by its specialist members with NYSE Rule 19 (Locking 
or Crossing Protected Quotations in NMS Stocks), with respect only to 
the display of a quotation when a block-sized transaction is being 
manually reported,

[[Page 15927]]

beginning on the Trading Phase Date until April 5, 2007.\13\
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    \13\ See Letter from Mary Yeager, Assistant Secretary, NYSE, to 
Nancy M. Morris, Secretary, Commission, dated March 2, 2007. In the 
letter, the NYSE requested that the no action relief be granted 
through April 5, 2007, rather than through March 30, 2007, because 
at the time of the request it was contemplated that the post-Phase 
IV rollout would not conclude until April 5, 2007.
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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) of the Act \14\ 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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    \14\ 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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \15\ and Rule 19b-4(f)(6) thereunder \16\ 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) become operative for 30 days from the date on 
which it was filed, or such shorter time as the Commission may if 
consistent with the protection of investors and the public 
interest.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ Rule 19b-4(f)(6)(iii) under the Act 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. NYSE 
has satisfied the pre-filing requirement.
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    Normally, a proposed rule change filed under 19b-4(f)(6) may not 
become operative prior to 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \18\ 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 an operative 
date of March 30, 2007 for the proposal. In its filing, the Exchange 
noted that, given the temporary suspension of autoquoting of the 
highest bid/lowest offer that occurs during the reporting of a block-
sized transaction, the quotation that is disseminated when a block-
sized transaction is being manually reported may not reflect the 
current state of the market in the subject stock. Moreover, identifying 
the NYSE quotation as non-firm during the manual reporting of block 
transactions will bring the dissemination of the quotation more in line 
with the way in which quotes are identified during other Exchange 
manual auction market activities that similarly cause the suspension of 
autoquote and automatic executions--i.e., gap quotes and LRPs 
(discussed above). Accordingly, the Exchange believes that this 
proposed rule change does not significantly affect the protection of 
investors or the public interest and does not impose any significant 
burden on competition.
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    \18\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposed rule change will allow the NYSE to accurately 
identify the status of the NYSE quotation during the manual reporting 
of block transactions in line with the way in which quotes are 
identified during other Exchange manual auction market activities that 
similarly cause the suspension of autoquote and automatic executions--
i.e., gap quotes and LRPs.\19\ Accordingly, consistent with the 
protection of investors and the public interest, the Commission 
designates the proposed rule change to be operative on March 30, 2007, 
as requested by the Exchange.\20\
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    \19\ The Commission notes that the Exchange must continue to 
conduct surveillance with respect to manual auction market 
activities, including the manual reporting of block transactions 
addressed in this proposed rule change, in order to monitor for 
abuse.
    \20\ 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 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.

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-2007-31 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-2007-31. 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 the filing 
will also be available for inspection and copying at the principal 
office of the 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-2007-31 and should be submitted on or before April 24, 2007.

[[Page 15928]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-6082 Filed 4-2-07; 8:45 am]

BILLING CODE 8010-01-P