Document ID: SEC-2009-0388-0001
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 12417-12420]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr09-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59592; File No. SR-NYSE-2009-29]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC 
Amending the NYSE Rule Book To Delete References to Specific Exchange 
Systems and To Remove the Requirement That Opening Transactions Receive 
Specific Designations Pursuant to NYSE Rules 79A and 115A

March 17, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the

[[Page 12418]]

``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, 
on March 13, 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 amend the NYSE Rule Book to delete 
references to specific Exchange systems and to remove the requirement 
that opening transactions receive specific designations pursuant to 
NYSE Rules 79A and 115A.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Through this filing, the Exchange proposes to amend its rule book 
to delete references to specific Exchange systems. The Exchange seeks 
to replace references to ``DOT'', ``SuperDot'', ``Limit Order System'' 
and ``Opening Automated Report Service'' (``OARS'') with ``Exchange 
systems''. In addition, the Exchange seeks to remove the requirement 
that certain opening transactions be designated ``OPD'', ``OPN'' 
pursuant to NYSE Rule 79A (Miscellaneous Requirements on Stock Market 
Procedures) and Rule 115A (Orders at Opening or in Unusual 
Situations).\4\
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    \4\ The Exchange notes that a companion filing is being made by 
NYSE Alternext LLC to amend similar rules of that self-regulatory 
organization. See SR-NYSE Alternext-2009-28 (to be filed March 13, 
2009).
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Background

Exchange Systems

    On March 1, 1976, the Exchange commenced the operation of its 
Designated Order Turnaround (``DOT'') system. It was re-designated 
``SuperDot'' (or sometimes cited as ``SuperDOT'') in 1984. Today, 
SuperDot[supreg] is an electronic order-routing system used by NYSE 
member organizations to send market and limit orders directly to the 
trading post where the security is traded. The system provides members 
and member organizations the ability to enter and manage their order 
flow on the Exchange electronically. After the orders have been 
executed, SuperDot uses the same electronic circuit to send post-trade 
reports back to member firms.
    At one time, the Exchange's Limit Order System electronically filed 
orders to be executed when and if the specific limit price of an order 
is reached and electronically updates the Display Book. Good 'til 
Cancelled orders not executed on the day of submission are 
automatically stored in this system until executed or cancelled.
    When first introduced in 1980,\5\ OARS was designed to facilitate 
more efficient and accurate processing of orders received by the 
Exchange prior to the opening, a critical point in the trading day. It 
provided automation of certain clerical functions carried out at the 
trading post, issued reports on executions and substantially reduced 
the number of potential unmatched trades since processing was done 
electronically.
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    \5\ See Securities Exchange Act Release No. 16649 (March 13, 
1980) 45 FR 18541 approving SR-NYSE-80-09 and Securities Exchange 
Act Release No. 17132 (September 8, 1980) 45 FR 60526 (September 12, 
1980), approving SR-NYSE-80-25.
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    OARS accepts member organizations' pre-opening market orders for 
execution at the opening. OARS automatically pairs buy and sell orders 
and presents the imbalance to the DMM up to the time of the opening to 
assist the DMM in determining the opening price. Once that price is 
determined and transmitted by the DMM, the OARS system assigns the 
price to the orders it holds and issues reports back to the entering 
firms and brokers immediately.

Opening Report ``OPD'' Opened Designation

    NYSE Rule 79A.20 requires a Designated Market Maker to obtain prior 
Floor Official approval if a security is going to open at one or more 
dollars away from the closing price at the Exchange when the closing 
price was under $20 a share, or two dollars or more away from the 
closing price at the Exchange when the closing price was $20 per share 
or more. Under (c) of Rule 79A.20, when such a transaction is an 
opening trade, the symbol ``OPD'', which means opened, will appear next 
to the transaction when published to the Consolidated Tape.
    The ``OPD'' designation traces back to when executions were 
manually entered to be reported to the Consolidated Tape. The ``OPD'' 
designation served two functions. First, because getting Floor Official 
approval required time, securities that were opening at one or more 
dollars away from the closing price usually had delayed openings. The 
``OPD'' designation provided notice that the stock had in fact 
commenced trading. In addition, ``OPD'' provided a validation to the 
individual charged with manually entering the opening transaction 
information that the price associated with the opening transaction 
being reported was valid as the transaction would be a dollar or more 
away from the closing price.
    NYSE Rule 115A.30 provides that orders stored in OARS will receive 
``OPN'' or ``such other universal contra as the Exchange may 
designate'' to identify that the trade took place in Exchange systems 
at the opening. ``OPN'' is used as an omnibus account designation to 
identify market orders executed through OARS to the member or member 
organization receiving the report of execution of the trade.

Proposed Amendments

Exchange Systems

    The Exchange is enhancing its systems to create a strong platform 
for technological growth that offers its customers the most 
comprehensive set of trading technology solutions to meet their needs 
and expectations. In order to attain this goal, the Exchange is 
continually upgrading its systems that accept, manage and report 
orders. In this process, legacy systems that once performed the 
functions governed by certain NYSE Rules may be upgraded or replaced in 
their entirety. In order to keep pace with the enhancements to its 
technology, the Exchange seeks to replace references to specific 
systems that perform a function and replace it with the phrase 
``Exchange systems''.
    The Exchange therefore proposes to amend NYSE Rules 123C (Market on 
The Close Policy And Expiration Procedures), 123D (Openings and Halts 
in Trading), 130 (Overnight Comparison of Exchange Transactions) and 
132B (Order Tracking Requirements) to replace any references to 
``Designated

[[Page 12419]]

Order Turnaround'', ``Limit Order System'', ``DOT'', ``SuperDot'' or 
``SuperDOT'' with ``Exchange systems''.
    The OARS system functioning will be carried out through similar 
functioning in the Display Book[supreg],\6\ and as a result, there will 
no longer be a separate system for processing openings. As a result, 
the Exchange seeks to remove the references to ``Opening Automated 
Report Service'' from .30 in the Supplementary Material to Rule 91 
(Taking or Supplying Securities Named in Order), from various 
references in .30 of Rule 115A (Orders at Opening or in Unusual 
Situations) and in .10 under Supplementary Material to Rule 134 
(Differences and Omissions--Cleared Transactions). The Exchange seeks 
to insert the phrase ``Exchange systems'' in Rules 91.10, 115A.30 and 
134 to replace the references to the ``Opening Automated Report 
Service'' or ``the Service''. In addition, the Exchange proposes to 
substitute the phrase ``securities on the Exchange'' and similar 
wording to replace the phrase ``designated stock'', ``designated 
stocks'' or ``stocks''. In practice, the instant rules apply to all 
instruments traded on the Exchange, which include structured products 
such as capital trusts and warrants. As such, the broader term 
``securities'' more accurately reflects the types of instruments traded 
on the Exchange than the narrower term ``stock''. Finally, the Exchange 
proposes to remove the specific references to ``OPN and OARS'' as 
contras in Rule 115A and proposes to add language to the Rule to 
indicate that the designation by the Exchange of universal contras for 
orders stored in Exchange systems will not be deemed inconsistent with 
Exchange Rules 121.10 and 138. Both these rules allow that a substitute 
name may be used with respect to trade reports and the use of universal 
contras designated by the Exchange is deemed consistent with those 
requirements.
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    \6\ Display Book[supreg] is an order management and execution 
facility that receives and displays orders to the DMM and provides a 
mechanism to execute and report transactions and publish the results 
to the Consolidated Tape. In addition, the Display Book is connected 
to a variety of other Exchange systems for the purposes of 
comparison, surveillance, and reporting information to customers and 
other market data and national market systems.
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``OPD'' and ``OPN'' Designations

    These enhancements to Exchange systems have also negated the need 
for the ``OPD'' and ``OPN'' designations. Currently Exchange systems 
process orders, allocate the executed shares to the various 
participants, and publish reports of executions automatically. Given 
this change from how interest was processed in the manual environment, 
``OPD'' no longer serves the purpose of validating the transaction 
price and is therefore no longer necessary, as the opening price is 
systemically validated. As such, the Exchange seeks through this filing 
to eliminate the requirement pursuant to Rule 79A.20(c) that opening 
transactions at one or more dollars away from the closing price ``be 
accompanied when published on tape by the symbol `OPD' ''. In addition, 
as explained above, the Exchange also seeks to remove the reference to 
``OPN'' in Rule 115A since, with the transference of the functions of 
OARS to the NYSE Display Book, the universal contra of ``OPN'' will no 
longer be used.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirement under Section 6(b)(5) \7\ of the Act 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 national market system, and, in general, 
to protect investors and the public interest. The Exchange believes 
that the rescission of the references to outdated systems and processes 
promotes just and equitable principles of trade and protects investors 
and the public interest because it allows the Exchange to upgrade its 
systems in a timely manner thus providing customers the most 
comprehensive and all-encompassing set of trading technology solutions 
and mechanisms for efficient executions.
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    \7\ 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

    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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms, does not become operative for 30 days after the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing.\10\ However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requested that the Commission waive 
the 30-day operative delay.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission 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 this requirement.
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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. By 
waiving the operative delay, the proposed rule change may take effect 
on or about March 16, 2009, when the Exchange expects to install these 
technological changes. A waiver of the 30-day operative delay will also 
allow timely removal of outdated language in Exchange rules and avoid 
any potential confusion, and it will ensure that Exchange rule text is 
more accurate. For these reasons, the Commission designates the 
proposed rule change as operative upon filing.\11\
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    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's effect 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.\12\
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    \12\ 15 U.S.C. 78s(b)(3)(C).
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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.

[[Page 12420]]

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-2009-29 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-2009-29. 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 the filing will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2009-29 and should be submitted on or before April 14, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6354 Filed 3-23-09; 8:45 am]

BILLING CODE 8010-01-P