Document ID: SEC-2008-1493-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-10-31T04:00Z

[Federal Register: October 31, 2008 (Volume 73, Number 212)]
[Notices]               
[Page 64998-65000]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc08-115]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58850; File No. SR-NYSE-2008-107]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Amending NYSE Rule 17 To Rescind the Provisions of Paragraph (b) 
Governing Vendor Liability

October 24, 2008.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on October 20, 2008, New York Stock Exchange LLC (``NYSE'' or 
``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 Exchange filed the proposed rule change pursuant to 
Section 19(b)(3)(A) \4\ of the Act and Rule 19b-4(f)(6) thereunder,\5\ 
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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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 amend NYSE 17 to rescind the provisions of 
paragraph (b) governing vendor liability. The text of the proposed rule 
change is available at the principal office of the Exchange, 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 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 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 amend NYSE Rule 17 to rescind the 
provisions of paragraph (b) governing vendor liability.
Current Vendor Liability Provisions
    On July 10, 2008, the Exchange amended NYSE Rule 17 to provide, 
among other things, that its vendors and/or its subcontractors of 
electronic systems, services or facilities not be liable for any loss 
sustained by a member or member organization arising from use of the 
vendor and/or subcontractor systems, services or facilities.\6\ The 
Rule further required members and member organizations to indemnify the 
Exchange and its vendors and/or subcontractors. It further set forth 
certain provisions that the Exchange may include in contracts connected 
to a member or member organization's use of any electronic systems, 
services or facilities provided by the Exchange.
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    \6\ See Securities Exchange Release No. 58137 (July 10, 2008), 
73 FR 41145 (July 17, 2008) (SR-NYSE-2008-55). The amendments to 
NYSE Rule 17 were based on American Stock Exchange (``Amex'') Rule 
60 and were part of the process to reconcile the differences in NYSE 
and Amex rules. NYSE completed its acquisition of the Amex on 
October 1, 2008. See Securities Exchange Release No. 58673 
(September 29, 2008), 73 FR 57707 (October 3, 2008) (SR-AMEX-2008-62 
and SR-NYSE-2008-60).
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Rescission of Vendor Liability Provisions
    The Exchange adopted the vendor liability provisions of NYSE Rule 
17 to address concerns about vendors being exposed to great risk of 
liability from exchange members when such vendors provide facilities 
and services directly to an exchange and not directly to actual users, 
i.e., exchange members. The possibility of liability to end-users with 
whom vendors have no contractual relationship could result in vendors 
being unwilling to enter into agreement to provide their services to 
exchanges. In order for the Exchange to maintain its ability to deliver 
faster and more efficient trading tools to market participants, the 
Exchange adopted the vendor liability provisions of NYSE Rule 17 to 
address the risk of liability concerns.
    In reviewing the current rule with NYSE constituency, it is clear 
that the NYSE must also consider the possible risk presented to members 
and member organizations with regard to requiring

[[Page 64999]]

members and member organizations to indemnify the Exchange vendors and 
its subcontractors. The Exchange therefore seeks to rescind the vendor 
liability provisions of NYSE 17, i.e., paragraph (b) of the current 
rule, thereby reverting the rule to its original content prior to the 
effectiveness of SR-NYSE-55 [sic].\7\ The Exchange will work with its 
constituency and vendors to create a proposed rule that addresses all 
of the aforementioned concerns at which time the Exchange will formally 
submit its proposal to the Commission pursuant to Section 19b of the 
Securities Exchange Act of 1934 (the ``Act'').
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    \7\ The Exchange notes that a minor stylistic change that was 
part of this amendment is not being rescinded.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\9\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, 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 Exchange 
believes that the rescission of the liability provisions promotes just 
and equitable principles of trade and protects investors and the public 
interest because it removes potential risks to its members and member 
organizations until the Exchange can create a mechanism that adequately 
addresses issues of liability for all parties concerned.
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    \8\ 15 U.S.C. 78f(b).
    \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 would 
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 received feedback from its constituents raising 
concerns about the possible risk presented to members and member 
organizations with regard to the provisions of NYSE Rule 17 that 
require members and member organizations to indemnify Exchange vendors 
and the subcontractors of vendors.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has designated the 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) by its terms, 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. Therefore, the foregoing proposed rule change 
has become effective pursuant to Section 19(b)(3)(A) of the Exchange 
Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ A proposed rule change 
filed under Rule 19b-4(f)(6) normally does not become operative until 
30 days after the date of filing.\12\ However, Rule 19b-4(f)(6)(iii) 
\13\ permits the Commission to designate a shorter time if such action 
is consistent with the protection of investors and the public interest. 
The Exchange requests that the Commission waive the 30-day delayed 
operative date, so that the proposed rule change may become immediately 
operative pursuant to Section 19(b)(3)(A) and Rule 19b-4(f)(6) 
thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ Id. In addition, 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. The Exchange has 
satisfied this requirement.
    \13\ 17 CFR 240.19b-4(f)(6).
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    The Exchange believes that good cause exists to justify waiver of 
the operative delay in order to immediately remove potential risks to 
its members and member organizations. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. The Commission therefore grants the 
Exchange's request and designates the proposal to be operative upon 
filing.\14\
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    \14\ 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 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 Exchange 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-2008-107 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2008-107. 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 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-2008-107 and should be 
submitted on or before November 21, 2008.

[[Page 65000]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-25861 Filed 10-30-08; 8:45 am]

BILLING CODE 8011-01-P