Document ID: SEC-2006-0678-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.
Posted Date: 2006-05-25T04:00Z

[Federal Register: May 25, 2006 (Volume 71, Number 101)]
[Notices]               
[Page 30211-30213]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25my06-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53826; File No. SR-NYSE-2005-90]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 To Allow 
Certain Institutional Customers To Elect Not To Receive Account 
Statements

May 18, 2006.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Exchange Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is 
hereby given that on December 21, 2005, the New York Stock Exchange, 
Inc. (``NYSE'' or the ``Exchange'') filed with the Securities and 
Exchange Commission (``SEC'' or the ``Commission'') the proposed change 
to NYSE Rule 409 (Statements of Accounts to Customers) as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. On March 28, 2006, the NYSE filed Amendment No. 1 to the 
proposed rule change.\4\ 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 et seq.
    \3\ 17 CFR 240.19b-4.
    \4\ In Amendment No. 1, a partial amendment, the NYSE proposed 
additional changes to the text of proposed amended Rule 409, which 
are incorporated in the proposed rule text below.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend NYSE Rule 409 to allow 
institutional customers conducting a Delivery versus Payment and 
Receive versus Payment (``DVP/RVP'') business to elect not to receive 
account statements.
    The text of the proposed rule change is set forth below. Italics 
indicate new text that would be added to the current text of NYSE Rule 
409.

Rule 409.

Statements of Accounts to Customers
    (a) Except with the permission of the Exchange, or as otherwise 
provided by this paragraph, member organizations shall send to their 
customers statements of account showing security and money positions 
and entries at least quarterly to all accounts having an entry, money 
or security position during the preceding quarter. Quarterly statements 
need not be sent to a customer pursuant to Rule 409(a) if:
    (1) The customer's account is carried solely for the purpose of 
execution on a Delivery versus Payment/Receive versus Payment basis 
(DVP/RVP);
    (2) All transactions effected for the account are done on a DVP/RVP 
basis in conformity with Rule 387;
    (3) The account does not show security or money positions at the 
end of the quarter;
    (4) The customer consents to the suspension of such statements in 
writing. Such consents must be maintained by the member organization in 
a manner consistent with Exchange Rule 440 and Rule 17a-4 under the 
Securities Exchange Act of 1934;
    (5) The member organization undertakes to provide any particular 
statement or statements to the customer promptly upon request; and
    (6) The member organization undertakes to promptly reinstate the 
delivery of such statements to the customer upon request.
    Nothing in this rule shall be seen to qualify or condition the 
obligations of a member organization under SEC Rule 15c3-2 concerning 
quarterly notices of free credit balances on statements.
    For purposes of this rule, a DVP/RVP account is an arrangement 
whereby payment for securities purchased is to be made to the selling 
customer's agent and/or delivery of securities sold is to be made to 
the buying customer's agent in exchange for payment at time of 
settlement, usually in the form of cash.
    (b) through (g)--No change.
    Supplementary Material--No change.

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

    In filing the proposed rule change and Amendment No. 1 with the 
Commission, the Exchange included statements concerning the purpose of, 
and basis for, the proposed rule change, as amended. The text of these 
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.

[[Page 30212]]

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

(1) Purpose
    Waiving of Customer Statements for Institutional DVP/RVP Accounts. 
NYSE Rule 409, in pertinent part, specifies the obligations of member 
organizations with respect to customer statements, including frequency 
of delivery and elements of content.
    NYSE Rule 409(a) requires that, except with the permission of the 
Exchange, members and member organizations shall send statements at 
least quarterly to customers for accounts showing security and money 
positions and entries during the preceding quarter. The Exchange 
proposes amendments to the Rule that would provide relief from this 
requirement for customer accounts that are carried solely for the 
purpose of DVP/RVP transactions. A DVP/RVP account is an arrangement 
whereby delivery of securities sold is made to the buying customer's 
bank in exchange for payment, usually in cash, at settlement. Such 
accounts must comply with the requirements outlined in NYSE Rule 387 
(COD Orders).\5\
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    \5\ NYSE Rule 387 sets out specific prerequisites for the 
acceptance of such orders:
    (1) The member or member organization must have previously 
received the name and address of the agent, together with its 
customer number;
    (2) The order must note the payment on delivery or collect on 
delivery nature of the trade;
    (3) The member or member organization must deliver to the 
customer a confirmation in the specified form; and
    (4) The member organization must have obtained an agreement from 
the customer regarding the furnishing of appropriate instructions 
for the settlement of the trade.
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    Due to the nature of DVP/RVP accounts, their statements do not 
generally reflect any cash balance or security position at the end of a 
quarter. Consequently, DVP/RVP customers (chiefly institutional 
customers) generally rely on confirmations (issued pursuant to SEC Rule 
10b-10) or trade runs for transaction-related information. Such records 
provide critical transactional information (such as security name and 
price, commission or markup, trade date, settlement date, etc.) in a 
timely fashion (trade date +1). According to the NYSE, such records are 
preferred by institutional investors, who have no desire to receive 
voluminous quarterly statements.
    Accordingly, the Exchange proposes amendments to Rule 409 that 
would relieve member organizations of the obligation to send quarterly 
statements to customers with such accounts if: (1) The customer's 
account is carried solely for the purpose of execution on a DVP/RVP 
basis; (2) all transactions effected for the account are done on a DVP/
RVP basis in conformity with Rule 387; (3) the account does not show 
security or money positions at the end of the quarter; (4) the customer 
consents to the suspension of such statements in writing and such 
consents are maintained by the member organization in a manner 
consistent with Exchange Rule 440 and Rule 17a-4 under the Exchange 
Act; (5) the member organization undertakes to provide any particular 
statement or statements to the customer promptly upon request; and (6) 
the member organization undertakes to promptly reinstate the delivery 
of such statements to the customer upon request.
    Nothing in the proposed amended rule would be seen to qualify or 
condition the obligations of a member organization under SEC Rule 15c3-
2 concerning quarterly notices of free credit balances on statements. 
For purposes of the proposed amended rule, a DVP/RVP account is an 
arrangement whereby payment for securities purchased is to be made to 
the selling customer's agent and/or delivery of securities sold is to 
be made to the buying customer's agent in exchange for payment at time 
of settlement, usually in the form of cash.
    By requiring affirmative consent, the ability of the customer to 
receive quarterly statements is preserved, and the member organization 
is precluded from unilaterally terminating delivery of such statements. 
The customer would also retain the right to reinstate the delivery of 
statements at any time, and to resume receipt of statements promptly 
upon request.
    In sum, the Exchange believes that the proposed amended rule would 
provide reasonable regulatory flexibility by allowing customers to 
decline delivery of statements that are of little or no use to them. 
Correspondingly, the proposed amended rule would result in substantial 
cost savings to member organizations in that they would no longer be 
required to produce and deliver unwanted and unnecessary records.\6\
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    \6\ In correspondence dated October 26, 2004, and May 22, 2003, 
that the NYSE received from Mr. Lawrence Morillo, Chairman of the 
Securities Industry Association STP Legal and Regulatory 
Subcommittee, it was estimated that it would not be unreasonable to 
expect a firm to realize savings of $100,000 per year in statement 
production and mailing costs.
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(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Exchange Act and the rules and regulations 
thereunder applicable to a national securities exchange, and in 
particular, with the requirements of section 6(b)(5) of the Exchange 
Act.\7\ Section 6(b)(5) requires, among other things, that the rules of 
an exchange be 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 the proposed 
rule change is designed to promote just and equitable principles of 
trade, perfect the mechanism of a free an open market, and protect 
investors by permitting DVP/RVP customers to avoid receiving unwanted, 
voluminous quarterly account statements.
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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 believes that the proposed rule change would not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange neither solicited nor received written comments on 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 self-regulatory organization consents, the Commission will:
    (a) By order approve such 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, as amended, is consistent with the Exchange Act. Comments may 
be submitted by any of the following methods:

[[Page 30213]]

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-2005-90 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2005-90. 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 Section, 100 F Street, 
NE., Washington, DC 20549. 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-2005-90 and should be 
submitted on or before June 15, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-8053 Filed 5-24-06; 8:45 am]

BILLING CODE 8010-01-P