Document ID: SEC-2008-1639-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-12-03T05:00Z

[Federal Register: December 3, 2008 (Volume 73, Number 233)]
[Notices]               
[Page 73679-73681]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03de08-42]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59025; File No. SR-NYSE-2008-123]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by New York Stock Exchange LLC To 
Establish the Minimum Price Variation of $0.0001 for Orders and 
Quotations in Equity Securities That Are Priced Below $1.00 per Share

November 26, 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 November 26, 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. 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.
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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 Exchange Rule 62 (Variations) to 
establish the minimum price variation of $0.0001 for orders and 
quotations in equity securities that are priced below $1.00 per share, 
which will enable the Exchange to accept orders in sub-penny increments 
for those securities.
    The text of the proposed rule change is available at http://
www.nyse.com, NYSE's principal office, and the Commission's Public 
Reference Room.

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 seeks to amend Exchange Rule 62 (Variations) to 
establish the minimum price variation of $0.0001 for orders and 
quotations in equity securities that are priced below $1.00 per share, 
which will enable the Exchange to accept orders in sub-penny increments 
\3\ for those securities.
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    \3\ The Exchange is currently modifying its systems to enable it 
to quote and trade in sub-penny increments and will file a separate 
proposal with the Commission at a later date.
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Background
    On August 28, 2000, the Exchange began trading in decimals.\4\ At 
that time, the Exchange amended NYSE Rule 62 to provide that bids and 
offers in securities traded on the NYSE would be at a minimum price 
variation set by the NYSE.\5\ At the initiation of decimal trading, the 
NYSE announced that the minimum price variation for all stocks trading 
on the Exchange would be one cent ($.01).\6\ Rule 62 was subsequently 
amended to establish a minimum price variation of $.10 (ten cents) for 
securities trading on the Exchange priced at $100,000 and above.\7\
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    \4\ See Securities Exchange Act Release No. 42914 (June 8, 
2000), 65 FR 38010 (June 19, 2000).
    \5\ See Securities Exchange Act Release No. 43230 (August 30, 
2000), 65 54589 (September 8, 2000) (SR-NYSE-00-22).
    \6\ Id.
    \7\ See Securities Exchange Act Release No. 49374 (March 8, 
2004), 69 FR 11923 (March 12, 2004) (SR-NYSE-2004-10).
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    On April 6, 2005, the SEC adopted Regulation NMS, which is a series 
of initiatives designed to modernize and improve the national market 
system for trading equity securities. Rule 612 of Regulation NMS \8\ 
permits markets to accept, rank and display orders priced less than 
$1.00 per share in a minimum pricing increment of $0.0001.
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    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005) 17 CFR 242.612.
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    Currently the Exchange systems do not accept orders in sub-penny 
increments for securities priced below $1.00; however, Exchange systems 
recognize protected quotations with a sub-penny component in its round-
lot \9\

[[Page 73680]]

market and accommodate away market executions in sub-pennies, in 
compliance with SEC Rules 611 and 612.
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    \9\ The Exchange system enhancements that will enable 
recognition of sub-penny quotations for pricing of odd-lots in the 
odd-lot system are contained in the technology associated with Phase 
2 implementation of the New Market Model. See Securities Exchange 
Act Release No. 58845 (October 24, 2008), 73 FR 64379 (October 29, 
2008) (SR-NYSE-2008-46). Until the conclusion of the second Phase of 
implementation, which is scheduled to be completed no longer than 
ten weeks after October 24, 2008, those odd-lot orders that would 
receive an execution price based on the NBBO as set forth in NYSE 
Rule 124 will be priced at the last NBBO that did not contain a sub-
penny price.
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Proposed Amendment to NYSE Rule 62
    The Exchange proposes to amend its Rule 62 to conform to the 
provisions of SEC Rule 612 by establishing that the minimum price 
variation for orders and quotations in equity securities on the 
Exchange below a $1.00 will be $0.0001. Specifically, the Exchange 
proposes to amend .10 under Supplementary Material of Rule 62 to 
provide the following table:

------------------------------------------------------------------------
                                                                Minimum
                 Price of order or interest                      price
                                                               variation
------------------------------------------------------------------------
Less than $1.00.............................................      $.0001
$1.00-99,999.99.............................................       .01
$100,000 and greater........................................       .10
------------------------------------------------------------------------

    When an order is received on the NYSE that contains a sub-penny 
component, the Exchange will round down any bid price down to the next 
round penny and round any offer price up to the next round penny. The 
order will be sent to NYSE trading systems and the Consolidated 
Quotation System \10\ with the rounded price. The Exchange therefore 
proposes to replace .20 under Supplementary Material with language to 
indicate that for securities whose MPV is $.0001, the Exchange will 
round the bid price down to the next whole penny or round the offer 
price up to the next whole penny when transmitting the bid or offer to 
the Consolidated Quotation System. The rounded price assigned to the 
order or quotation is used for all order handling purposes including 
routing and execution.
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    \10\ This practice is currently done on NYSE Arca Exchange. 
Commentary .04 NYSE Arca Rule 7.6(a) provides:
    The minimum price variation (``MPV'') for quoting and entry of 
orders in equity securities traded on the NYSE Arca Marketplace is 
$0.01, with the exception of securities that are priced less than 
$1.00 for which the MPV for order entry is $0.0001, provided, 
however, that the Corporation shall round the bid down to the next 
whole penny or the offer up to the next whole penny and display the 
rounded bid or offer in the consolidated quotation system.
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    The Exchange intends to initiate the systemic operation related to 
the above rule change on November 28, 2008. Commencing operation on 
that date will enable the Exchange, on a traditionally moderate trading 
day, to ensure the optimal efficiency of its software prior to 
resumption of normal trading on December 1, 2008.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
\11\ for this proposed rule change is the requirement under Section 
6(b)(5) \12\ that an Exchange have rules that are designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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 proposed rule change 
also is designed to support the principles of Section 11A(a)(1) \13\ in 
that it seeks to assure economically efficient execution of securities 
transactions, make it practicable for brokers to execute investors' 
orders in the best market and provide an opportunity for investors' 
orders to be executed without the participation of a dealer. The 
Exchange believes that the instant proposal is in keeping with these 
principles in that it seeks to amend NYSE Rule 62 to conform to the 
provisions of SEC Rule 612 by establishing that the minimum price 
variation for securities trading on the Exchange below a $1.00 will be 
$0.0001.
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    \11\ 15 U.S.C. 78a.
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 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 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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). 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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    NYSE requested that the Commission waive the 30-day operative 
delay, which would make the rule change operative as of November 28, 
2008. The Commission hereby grants the Exchange's request and believes 
this action is consistent with the protection of investors and the 
public interest.\16\ The Exchange's proposed rule is based on that of 
another exchange \17\ and does not appear to raise any novel or 
significant issues. Accordingly, the Commission designates the proposed 
rule change operative as of November 28, 2008.
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    \16\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ See supra note 10.
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    At any time within 60 days of the filing of such 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.\18\
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    \18\ 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. 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-2008-123 on the subject line.

[[Page 73681]]

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-2008-123. 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-2008-123 and should be 
submitted on or before December 24, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E8-28662 Filed 12-2-08; 8:45 am]

BILLING CODE 8011-01-P