Document ID: SEC-2008-1751-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-12-31T05:00Z

[Federal Register: December 31, 2008 (Volume 73, Number 251)]
[Notices]               
[Page 80492-80494]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31de08-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59145; File No. SR-NYSE-2008-101]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Establish Its New Risk 
Management Gateway Service

December 22, 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 December 12, 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, II, 
and III below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to establish its new Risk Management Gateway 
(``RMG'') service.

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

    In its filing with the Commission, 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. NYSE 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 offer, through its wholly-owned subsidiary 
NYSE Euronext Advanced Trading Solutions, Inc., the Risk Management 
Gateway (``RMG'') service to NYSE members and member organizations. 
NYSE Transact Tools, Inc., a division of the NYSE Euronext Advanced 
Trading Solutions Group (``NYXATS''), owns RMG.\3\
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    \3\ NYXATS will similarly offer the same services to NYSE 
Alternext via a separate filing SR-NYSEALTR-2008-12.
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Background
    NYSE Rule 54 provides that only members are permitted to ``* * * 
make or accept bids or offers, consummate transactions, or otherwise 
transact business on the Floor for any security admitted to dealings on 
the [Exchange] * * *.'' \4\ However, the Exchange permits NYSE members 
and member organizations (a ``Sponsoring Member Organization'') to 
sponsor access to Exchange systems by non-member firms or customers 
(``Sponsored Participants'').
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    \4\ See also NYSE Rule 2.
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    Prior to August 2008, requirements related to sponsored access on 
the Exchange were included in certain NYSE rules that govern specific 
Exchange products or facilities: NYSE MatchPoint\SM\ \5\ and NYSE 
Bonds\SM\.\6\ However, in August, the Exchange submitted a rule change 
to the SEC to amend NYSE Rule 123B (Exchange Automated Order Routing 
System) \7\ in order to create a general sponsored access rule that 
permits a Sponsoring Member Organization to sponsor a Sponsored 
Participant's access to Exchange systems for the Sponsored 
Participant's entry and execution of orders on the Exchange. The 
proposed amendments to NYSE Rule 123B reflect the Exchange's general 
policy regarding sponsored access to the Exchange, though they do not 
govern NYSE MatchPoint or NYSE Bonds.\8\ NYSE

[[Page 80493]]

Arca, Inc. and other market centers similarly permit sponsored access 
to their trading systems.
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    \5\ See NYSE Rule 1500.
    \6\ See NYSE Rule 86.
    \7\ See Securities Exchange Act Release No. 58429 (August 27, 
2008), 73 FR 51676 (September 4, 2008) (SR-NYSE-2008-71) (initial 
filing to create NYSE's general sponsored access rule); see also, 
Securities Exchange Act Release No. 58758 (October 8, 2008), 73 FR 
62352 (October 20, 2008) ( SR-NYSE-2008-100) (filing to conform 
NYSE's sponsored access rule to current industry standards).
    \8\ That is, currently, the provisions of NYSE Rule 123B do not 
apply to NYSE Rules 1500 and 86 as those rules independently contain 
provisions related to how a user gains sponsored access to the NYSE 
MatchPoint and NYSE Bonds systems.
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RMG
    Traditionally, the customers of a member or member organization 
gave orders to the member or member organization and the member or 
member organization then submitted those orders to the Exchange on 
behalf of the customer. By means of sponsored access, a member or 
member organization will allow its customers to enter orders directly 
into the trading systems of the Exchange as Sponsored Participants, 
without the Sponsoring Member Organization acting as an intermediary.
    To facilitate the ability of Sponsoring Member Organizations to 
monitor and oversee the sponsored access activity of their Sponsored 
Participants, NYXATS will offer an order-verification service to 
Sponsoring Member Organizations. This service will act as a risk filter 
by causing the orders of Sponsored Participants to pass through RMG 
prior to entering the Exchange's trading systems for execution. When a 
Sponsored Participant's order passes through RMG, RMG software 
determines whether the order complies with order criteria that the 
Sponsoring Member Organization has established for that Sponsored 
Participant. The order criteria pertain to such matters as the size of 
the order (per order or daily quantity limits) or the credit limit (per 
order or daily value) that the Sponsoring Member Organization has 
established for the Sponsored Participant. Additional risk filters may 
also be selected by the Sponsoring Member Organization relating to 
specific symbols or end users.
    If the order is consistent with the parameters set by the 
Sponsoring Member Organization, then RMG allows the order to continue 
along its path to the Exchange's trading systems. If the order falls 
outside of those parameters, then RMG returns the order to the 
Sponsored Participant. RMG will only return an order to the Sponsored 
Participant when the order fails to comply with the criteria set by the 
Sponsoring Member Organization.
    RMG software interacts with orders only prior to the orders' entry 
into the Exchange's trading system for execution. RMG does not have 
order execution or trade reporting capabilities (though it will allow a 
Sponsoring Member Organization to monitor the orders of its Sponsored 
Participants). RMG maintains a record of all messages relating to 
Sponsored Participants' transactions and supplies a copy of such 
messages to the applicable Sponsoring Member Organization.
    The Sponsoring Member Organization, and not RMG, will have full 
responsibility for ensuring that Sponsored Participants' sponsored 
access to the Exchange complies with the Exchange's sponsored access 
rules. The use of RMG by a Member Organization does not automatically 
constitute compliance with Exchange rules.
    NYXATS will host RMG software on NYXATS' infrastructure. After 
passing through RMG software, each order will enter the NYSE Common 
Customer Gateway (CCG) for connectivity to the Exchange's matching 
engine. In the future NYXATS may integrate RMG into the NYSE CCG for 
more direct access to the Exchange's matching engine.
    The Exchange does not require Sponsoring Member Organizations to 
use RMG (even when it is integrated into NYSE CCG in the future). 
Sponsoring Member Organizations are free to use a competing risk-
management service or to use none at all. The Exchange will not provide 
preferential treatment to Sponsoring Member Organizations using RMG.
    The Exchange proposes to make RMG available to its members and 
member organizations pursuant to contractual arrangements. The Exchange 
believes that RMG will offer its members and member organizations 
another option in the efficient risk management of its Sponsored 
Participant's access to the NYSE.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \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) \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. The 
Exchange believes that RMG is consistent with all the aforementioned 
principles because it fosters competition by providing another option 
in the efficient risk management of trading on the Exchange without the 
participation of a dealer.
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    \9\ 15 U.S.C. 78f(b)(5).
    \10\ 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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2008-101 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2008-101. 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

[[Page 80494]]

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 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-2008-101 and should be submitted on or before January 21, 2009.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-31102 Filed 12-30-08; 8:45 am]

BILLING CODE 8011-01-P