Document ID: SEC-2008-1151-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-08-19T04:00Z

[Federal Register: August 19, 2008 (Volume 73, Number 161)]
[Notices]               
[Page 48416-48418]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19au08-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58351; File No. SR-NYSE-2008-73]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Amending NYSE Rule 104(b) To Provide for an Automated Opening Message 
That Will Be Effectuated Through the Specialist Application Programmed 
Interface To Allow Specialists To Automatically Open a Security on a 
Trade

August 13, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 5, 2008, 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. NYSE has filed the proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) 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)(iii).
    \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 proposes to amend NYSE Rule 104(b) to provide for an 
automated opening message that will be effectuated through the 
Specialist Application Programmed Interface (``Specialist API\SM\'' or 
``SAPI'') to allow specialists to automatically open a security on a 
trade. The text of the proposed rule change is available at 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 parts 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 is proposing to amend NYSE Rule 104(b) to provide for 
an automated opening message that will be effectuated through the SAPI 
to allow specialists to automatically open a security on a trade.
Background
    Pursuant to NYSE Rule 104, Exchange specialists, in their capacity 
as dealers for their assigned securities, maintain systems that use 
proprietary algorithms, based on predetermined parameters, to 
electronically participate in the Exchange market (``Specialist 
Algorithm''). The Specialist Algorithm communicates with the NYSE 
Display Book[supreg] system \5\ via the SAPI. The Specialist Algorithm 
is intended to replicate electronically some of the activities 
specialists are permitted to engage in on the Floor in the auction 
market and to facilitate the specialists' ability to fulfill their 
obligation to maintain a fair and orderly market.
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    \5\ The Display Book[supreg] system is an order management and 
execution facility. The Display Book system receives and displays 
orders to the specialists, contains the Book, and provides a 
mechanism to execute and report transactions and publish the results 
to the Consolidated Tape. The Display Book system is connected to a 
number 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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    Specialists on the Exchange are responsible for initiating trading 
(the ``opening'') in their assigned securities. Pursuant to NYSE Rule 
123D, it ``is the responsibility of each specialist to ensure that 
registered stocks open as close to the opening bell as possible, while 
at the same time not unduly hasty, particularly when at a price 
disparity from the prior close.'' Specialist Algorithms may generate 
quoting and trading messages as prescribed by NYSE Rule 104(b)(i). 
Specialists may either open trading in their assigned securities with a 
manual transaction or, pursuant to NYSE Rule 104(b), with an automated 
quote.\6\
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    \6\ See Securities Exchange Release No. 56588 (October 1, 2007), 
72 FR 57366 (October 9, 2007) (SR-NYSE-2007-92).

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[[Page 48417]]

Proposed Automated Open on a Trade

    Through this filing, the Exchange seeks to amend NYSE Rule 104(b) 
to allow a specialist to automatically open his or her assigned 
security with an automated trade. Specifically, the Exchange seeks to 
amend NYSE Rule 104(b) to add an automated opening message provision 
which will allow the SAPI to generate a message to open the security 
with an automated transaction. In so doing the Exchange seeks merely to 
automate a currently approved specialist function.
    Because opening securities in a timely, fair, and orderly manner is 
consistent with the specialist's obligations under NYSE Rules 104 and 
123D, the Exchange believes it is important to provide the specialists 
with the ability to have the SAPI generate an automated message that 
will assist the specialists in opening their assigned securities with a 
transaction.
    The Exchange estimates that the implementation of an automated 
message through the SAPI to open a security on a trade would allow for 
approximately 30% of the securities traded on the Exchange to be opened 
algorithmically on a trade or a quote.
    The Exchange notes that specialists must still comply with all NYSE 
rules when utilizing the open on trade technology, including but not 
limited to, NYSE rules relating to depth and continuity, mandatory 
indications, Rule 79A regarding Floor Official Approval for 1 and 2 
points price movements, and any other rule that might require Floor 
Official consultation in connection with an open. Specialists are not 
exempt from requirements regarding the open by using an automated means 
for effecting an opening.
    The Exchange believes that providing the specialists with this 
ability will continue to promote the efficient operation of the NYSE 
market and provide customers with continued speed of execution at the 
opening. Relying solely on manual trade openings limits the efficiency 
of the specialists. By allowing specialists to automatically open 
securities with a transaction through the SAPI will promote timelier 
openings of securities on the Exchange. Moreover, providing specialists 
with the ability to automatically open securities with an automated 
transaction will allow specialists to focus their attention on those 
securities that require the expertise of specialists to facilitate 
price discovery and cushion volatility in securities that may have news 
that may impact trading, ultimately benefiting Exchange customers.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
and furthers the objectives of Section 6(b)(5) \7\ of the Act, in that 
it is designed to prevent fraudulent and manipulative practices, to 
promote just and equitable principles of trade, to remove impediments 
to, and perfect the mechanisms 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 is designed to support the 
principles of Section 11A(a)(1) of the Act \8\ in that it seeks to 
assure economically efficient execution of securities transactions by 
making it easier for specialists to open securities in which they are 
registered on a quote in a timely fashion by providing an automated 
trading message that is effectuated through the SAPI. Automating this 
trading message will promote greater efficiency on the Floor and will 
also promote timelier openings of securities.
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 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

    Because the proposed rule change 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 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 \9\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 prior to the 30th day after the date of 
filing.\11\ However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest.\13\ The Exchange has 
requested that the Commission waive the 30-day operative delay. Waiver 
of this period would allow the Exchange to immediately provide 
specialists with the ability to facilitate openings of securities 
through the Specialist Algorithm. This should allow a specialist to 
focus his or her attention on those securities that require the 
expertise of a specialist to facilitate price discovery and cushion 
volatility. The Commission also notes that specialists' 
responsibilities and obligations with respect to openings remain 
unchanged, whether a specialist utilizes its SAPI to open a security or 
not. For these reasons, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Accordingly, the Commission hereby designates the 
proposal as operative upon filing.\14\
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    \11\ See 17 CFR 240.19b-4(f)(6)(iii).
    \12\ Id.
    \13\ In addition, Rule 19b-4(f)(6)(iii) requires the self-
regulatory organization to give 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. The 
Exchange has satisfied this requirement.
    \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 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:

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-2008-73 on the subject line.

[[Page 48418]]

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-2008-73. 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-2008-73 and should be 
submitted on or before September 9, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Acting Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-19130 Filed 8-18-08; 8:45 am]

BILLING CODE 8010-01-P