Document ID: SEC-2009-0392-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2009-03-24T04:00Z

[Federal Register: March 24, 2009 (Volume 74, Number 55)]
[Notices]               
[Page 12431-12433]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr09-142]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59581; File No. SR-NYSE-2009-26]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Extending Until June 9, 2009, the Operation of Interim NYSE Rule 128 
Which Permits the Exchange To Cancel or Adjust Clearly Erroneous 
Executions if They Arise Out of the Use or Operation of Any Quotation, 
Execution or Communication System Owned or Operated by the Exchange, 
Including Those Executions That Occur in the Event of a System 
Disruption or System Malfunction

 March 16, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 9, 2009, New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I 
and II below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 extend until June 9, 2009, the operation 
of interim NYSE Rule 128 (``Clearly Erroneous Executions for NYSE 
Equities'') which permits the Exchange to cancel or adjust clearly 
erroneous executions if they arise out of the use or operation of any 
quotation, execution or communication system owned or operated by the 
Exchange, including those executions that occur in the event of a 
system disruption or system malfunction.

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. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to extend until June 9, 2009, the operation 
of interim NYSE Rule 128 (``Clearly Erroneous Executions for NYSE 
Equities'') which permits the Exchange to cancel or adjust clearly 
erroneous executions if they arise out of the use or operation of any 
quotation, execution or communication system owned or operated by the 
Exchange, including those executions that occur in the event of a 
system disruption or system malfunction.
    Prior to the implementation of NYSE Rule 128 on January 28, 
2008,\4\ the NYSE did not have a rule providing the Exchange with the 
authority to cancel or adjust clearly erroneous trades of securities 
executed on or through the systems and facilities of the NYSE.
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    \4\ See Securities Exchange Act Release No. 57323 (February 13, 
2008), 73 FR 9371 (February 20, 2008) (SR-NYSE-2008-09).
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    In order for the NYSE to be consistent with other national 
securities exchanges which have some version of a clearly erroneous 
execution rule, the Exchange is drafting an amended clearly erroneous 
rule which will accommodate such other exchanges but will be 
appropriate for the NYSE market model.
    The NYSE notes that the Commission approved an amended clearly 
erroneous execution rule for Nasdaq in May 2008.\5\ On July 28, 2008, 
the Exchange filed with the SEC a request to extend the operation of 
interim Rule 128 until October 1, 2008 \6\ in order to review the 
provisions of Nasdaq's clearly erroneous rule and to consider 
integrating similar standards into its own amendment to Rule 128. On 
October 1, 2008,\7\ the Exchange filed with the SEC a further request 
to extend the operation of interim Rule 128 until January 9, 2009 in 
order to consider integrating similar standards into the amendment to 
Rule

[[Page 12432]]

128. On January 9, 2009,\8\ the Exchange filed with the SEC a request 
to extend the operation of interim Rule 128 until March 9, 2009, 
indicating that the Exchange was still in the process of reviewing the 
Nasdaq rule with a view towards incorporating certain provisions into 
the amendment of interim Rule 128.
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    \5\ See Securities Exchange Act Release No. 57826 (May 15, 
2008), 73 FR 29802 (May 22, 2008) (SR-NASDAQ-2007-001).
    \6\ See Securities Exchange Act Release No. 58328 (August 8, 
2008), 73 FR 47247 (August 13, 2008) (SR-NYSE-2008-63).
    \7\ See Securities Exchange Act Release No. 58732 (October 3, 
2008), 73 FR 61183 (October 15, 2008) (SR-NYSE-2008-99).
    \8\ See Securities Exchange Act Release No. 59255 (January 15, 
2009), 74 FR 4496 (January 26, 2009) (SR-NYSE-2009-02).
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    On February 10, 2009, NYSE Arca submitted a proposal to the 
Commission to amend its clearly erroneous rule. The NYSE Arca proposed 
rule differs in certain respects from the Nasdaq clearly erroneous 
rule. Accordingly, the Exchange is presently in the process of 
finalizing its review of NYSE Arca's proposed amended CEE [sic] rule, 
which includes market wide CEE [sic] initiatives, to determine if it is 
appropriate to incorporate such provisions into the Rule 128 amendment. 
The Exchange is, therefore, requesting to extend the operation of 
interim Rule 128 until June 9, 2009. Prior to June 9, 2009, the 
Exchange intends to file a 19b-4 rule change amending interim Rule 128, 
which, if approved by the SEC, will be effective after June 9, 2009.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
\9\ for this proposed rule change is the requirement under Section 
6(b)(5)\10\ 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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    \9\ 15 U.S.C. 78f(a). [sic]
    \10\ 15 U.S.C. 78f(b)(5).
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    As articulated more fully above, the proposed rule would place the 
NYSE on equal footing with other national securities exchanges. This 
will promote the integrity of the market and protect the public 
interest, since it would permit all exchanges to cancel or adjust 
clearly erroneous trades when such trades occur, rather than canceling 
them on all other markets, but leaving them standing on only one 
market.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \11\ of the Act and Rule 19b-4(f)(6) \12\ thereunder. The 
proposed rule change effects a change that (A) does not significantly 
affect the protection of investors or the public interest; (B) does not 
impose any significant burden on competition; and (C) by its terms, 
does not become operative for 30 days after the date of the filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
self-regulatory organization has given 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    The Exchange believes that good cause, consistent with the 
provisions of Rule 19b-4(f)(6), exists to justify making the rule 
change immediately effective. Because the proposed rule is based on a 
rule that has been previously approved by the Commission, and because 
the proposed rule would in any event be operative only until a more 
robust and market-appropriate rule was implemented, the NYSE believes 
that the proposed rule is non-controversial. Moreover, the NYSE 
believes that the absence of such a rule in an automated and fast-paced 
trading environment poses a danger to the integrity of the markets and 
the public interest, and that this exigency justifies filing the rule 
for immediate effectiveness rather than using the regular Rule 19b-2 
process, which would require the Exchange to continue without the 
protection of the proposed rule until the expiration of the prescribed 
time periods for notice, comment and approval. In contrast, immediate 
effectiveness of the proposed rule will immediately and timely enable 
the NYSE to cancel or adjust clearly erroneous trades that may present 
a risk to the integrity of the equities markets and all related 
markets. The proposed rule will also allow the Exchange to protect 
customers and the public interest, and to continue to provide 
economically efficient execution of securities transactions.
    The NYSE also requests that the Commission waive the five-day 
period for notice of intent to file this proposed rule change, and the 
30-day period before the rule becomes operative, both of which are 
prescribed by Rule 19b-4(f)(6), but which may be waived pursuant to 
Rule 19b-4(f)(6)(iii) \13\ if such action is consistent with the 
protection of investors and public interest.\14\ The Exchange believes 
that waiver of these time periods so that the rule may be immediately 
operative are consistent with the protection of investors and the 
public interest for the reasons described above.
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ In fact, the Commission notes, under Rule 19b-4(f)(6)(iii), 
the ``consistent with the protection of investors and public 
interest'' standard applies only to the Commission's waiver of the 
30-day operative delay. Rule 19b-4(f)(6)(iii) requires a self-
regulatory organization to give the Commission written notice of its 
intent to file 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.
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    The Commission believes that waiving the 30-day operative delay 
will allow the Exchange to continue to immediately and timely cancel or 
adjust trades that it determines to be clearly erroneous under Rule 
128. The Commission believes that the extension of NYSE Rule 128 until 
June 9, 2009 will allow the Exchange to continue to apply the rule 
without interruption and is consistent with the protection of investors 
and the public interest. The Commission hereby designates the proposal 
as operative upon filing.\15\ The Commission has determined to waive 
the five-day prefiling period in this case.
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    \15\ For 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 the 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:

[[Page 12433]]

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-2009-26 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-NYSE-2009-26. 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, 100 F Street, 
NE., Washington, DC 20549, 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 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-2009-26 and should be 
submitted on or before April 14, 2009.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6397 Filed 3-23-09; 8:45 am]

BILLING CODE 8010-01-P