Document ID: SEC-2007-0592-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-04-24T04:00Z

[Federal Register: April 24, 2007 (Volume 72, Number 78)]
[Notices]               
[Page 20396-20399]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap07-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55641; File No. SR-NYSE-2007-39]

 
Self-Regulatory Organizations; New York Stock Exchange LLC, Inc.; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change, 
as Modified by Amendment No. 1 Thereto, Relating to Rule 103B 
(Specialist Stock Allocation)

April 17, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 13, 2007, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been substantially prepared by 
the Exchange. On April 17, 2007, the NYSE submitted Amendment No. 1 to 
the proposed rule change.\3\ The Exchange has designated the proposed 
rule change as ``non-controversial'' under Section 19(b)(3)(A)(iii) \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, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 makes clarifications to the purpose section 
of the proposed rule change and typographical corrections to the 
rule text.
    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \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 Rule 103B (Specialist Stock 
Allocation) to permit a listing company transferring from NYSE Arca, 
Inc. (``NYSE ArcaSM'' or ``NYSE Arca'') to waive the 
allocation process set forth in Exchange Rule 103B when the listing 
company was assigned a Lead Market Maker firm (``LMM firm''), which is 
also a registered specialist firm on the NYSE, and selects as its 
specialist firm on the NYSE that same NYSE Arca LMM firm. The proposed 
rule further provides for additional input from the listing company in 
the selection of its specialist firm should it choose to refer the 
matter to the Allocation Committee. Below is the text of the proposed 
rule change. Proposed new language is in italics.

[[Page 20397]]

Rule 103B Specialist Stock Allocation
* * * * *
IX. PROVISIONS FOR ALLOCATION OF SECURITIES ISSUED BY NYSE EURONEXT OR 
ITS AFFILIATES
* * * * *

X. Provisions For Allocation of Listing Companies Transferring From 
NYSE Arca, Inc. (``NYSE ArcaSM'') to the NYSE

    (a) If a listing company transferring from NYSE ArcaSM to the NYSE 
was assigned a NYSE Arca Lead Market Maker firm (``LMM firm''), which 
is also a registered specialist firm on the NYSE, then the listing 
company may waive the allocation process described above and select as 
its registered specialist firm the same firm that was previously 
assigned as the NYSE ArcaSM LMM firm. Alternatively, the listing 
company can choose to follow the regular allocation process and refer 
the matter to the Allocation Committee. If the listing company refers 
the matter to the Allocation committee, all specialist firms are 
invited to apply for such assignment.
    (b) If the listing company chooses to have its specialist firm 
selected by the Allocation Committee, and requests not to be allocated 
to the specialist firm that was its NYSE ArcaSM LMM firm the Allocation 
Committee shall honor this request.
    (c) If the listing company chooses to select its specialist firm 
from among a group of firms selected by the Allocation Committee, the 
Allocation Committee shall honor the listing company's request to 
include or exclude from the group the specialist firm that was its NYSE 
ArcaSM LMM firm.

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 Exchange 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 these statements may be examined at the places specified in 
Item IV below. NYSE has substantially 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 Exchange Rule 103B to permit a 
listing company transferring from NYSE Arca to the NYSE to waive the 
allocation process (``Allocation Process'') when the listing company 
was assigned a NYSE Arca LMM firm which is also a registered specialist 
firm on the NYSE. Additionally, the proposed rule further provides for 
additional input from said listing company in the selection of their 
specialist firm should they choose to refer the matter to the 
Allocation Committee.

Current Allocation Policy

    In accordance with existing Rule 103B, a listing company may obtain 
assignment of a specialist firm in the following ways: (1) The listing 
company may choose to have its specialist firm selected by the 
Allocation Committee which must exercise its expert professional 
judgment when making such a selection; or (2) the listing company may 
request the Allocation Committee to select a group of appropriate 
specialist firms to be interviewed by the listing company and the 
listing company then makes the final selection of the specialist firm 
from the group of specialist firms selected by the Allocation Committee 
pursuant to the provisions of Rule 103B.

Proposal To Waive the Allocation Process

    NYSE Arca, an affiliate of the NYSE, provides its listed companies 
with the opportunity to have a NYSE Arca LMM firm \6\ assigned to its 
primary listed equities. The LMM firm is the ``exclusive Designated 
Market Maker'' in such equity on NYSE Arca. The NYSE Arca LMM firm may 
also be a registered specialist firm on the NYSE.
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    \6\ A registered ``LMM firm'' is a firm that is registered with 
NYSE Arca and employs individuals that are registered LMMs pursuant 
to NYSE Arca Equities Rule 7.
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    The Exchange seeks to amend Rule 103B to allow a listing company 
that transfers from NYSE Arca to the NYSE to waive the Allocation 
Process in instances where the listing company's equity was assigned to 
a NYSE Arca LMM firm that is also a registered specialist firm on the 
NYSE and the listing company wishes to have as their registered 
specialist firm the same NYSE Arca LMM firm.\7\
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    \7\ A security may be listed on a national securities exchange 
upon effectiveness of a registration statement on Form 8-A of the 
listing company in relation to the listing and registration of the 
security on that exchange pursuant to Section 12(b) of the Act. The 
Act does not prohibit companies from having multiple effective Form 
8-As in relation to contemporaneous listings of a class of 
securities on different exchanges. When a company chooses to delist 
from a national securities exchange and transfer its listing to 
another exchange, it must do so by filing a Form 25 as required by 
Rule 12d2-2(c) under the Act. Rule 12d2-2(c) requires a company to 
give at least 10 days notice to the exchange from which it is 
delisting of its intention to file a Form 25 and to give 
contemporaneous public notice of that intent. In the absence of 
Commission action, the Form 25 becomes effective 10 days after its 
filing. SEC rules do not require companies to wait until the 
effectiveness of the Form 25 before commencing trading on a new 
exchange. However, the Exchange states that while SEC rules do not 
expressly prohibit the commencement of trading on the new market 
prior to filing of the Form 25, the general practice is for 
companies transferring their listing to wait to commence trading on 
the new market until immediately after filing of the Form 25. 
Generally, the market from which the company is transferring will 
suspend trading in the security on the first trading day after 
filing of the Form 25, so that for practical purposes the company 
will only have one trading market as of that date, although there 
will be two effective Form 8-As for the 10-day period prior to the 
effectiveness of the Form 25. The NYSE and NYSE Arca intend to 
follow the practice described in this paragraph in connection with 
companies transferring their listing from NYSE Arca to the NYSE. 
Upon filing of the Form 25 in relation to the delisting from NYSE 
Arca and the effectiveness of the Form 8-A in relation to the NYSE 
listing, the NYSE will commence trading in the securities and NYSE 
Arca will suspend trading on the same day.
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    Alternatively, the proposed rule would permit the listing company 
that transfers from NYSE Arca to the NYSE to choose to follow the 
regular Allocation Process set forth in Exchange Rule 103B and refer 
the matter to the Allocation Committee. If the listing company chooses 
to refer the matter to the Allocation Committee, all specialist firms 
would be invited to apply for such assignment.
    The proposed rule would also provide that if the listing company 
chooses to have its specialist firm selected by the Allocation 
Committee, and requests not to be allocated to the specialist firm that 
was its NYSE Arca LMM firm, the Allocation Committee shall honor this 
request.
    Additionally, the proposed rule provides that if the listing 
company chooses to select its specialist firm from among a group of 
firms selected by the Allocation Committee, the Allocation Committee 
shall honor the listing company's request to include or exclude from 
the group the specialist firm that was its NYSE Arca LMM firm.
    The Exchange notes that the proposed rule would apply to the 
registered LMM ``firm'' and specialist ``firm'' and not the individual 
employee acting on behalf of the LMM firm or specialist firm in such 
capacity.

[[Page 20398]]

    The proposed rule change would be similar to the procedure for 
spin-offs and related companies pursuant to Rule 103B.\8\ Specifically, 
pursuant to Rule 103B, if a listing company is a spin-off or company 
related to a listed company, the listing company may select the 
specialist firm registered in the related company as its specialist 
without going through the Allocation Process. Alternatively, it may opt 
to select another specialist by participating in the regular Allocation 
Process.
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    \8\ See Exchange Rule 103B.V; see also Securities Exchange Act 
Release No. 46579 (October 1, 2002), 67 FR 63004 (October 9, 2002) 
(SR-NYSE-2002-31).
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    The Exchange believes that the proposed rule change is consistent 
with the goals of the Allocation Policy to provide an incentive for 
ongoing enhancement of the relationship between the listing company and 
the specialist firm, to encourage continued high performance of the 
specialist firms by allowing them to use their experience and knowledge 
of the listing company's securities in a new market center and to 
provide the best possible match between the specialist firm and the 
security.
    The proposed rule change is limited to listing companies that are 
transferring from NYSE Arca to the NYSE. Since NYSE Arca and NYSE are 
affiliates of one another, NYSE Arca's listings program for the 
allocation of securities is designed to meet goals that are similar to 
those established for the NYSE Allocation Process.
    The proposed waiver of the Allocation Process would occur in very 
limited situations. It would affect only four firms that are currently 
both registered specialists firms on NYSE and registered LMM firms on 
NYSE Arca. These four firms are currently assigned to trade equities on 
both NYSE and NYSE Arca.\9\
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    \9\ The four firms that are presently registered LMM firms on 
NYSE Arca and registered specialist firms on NYSE are: (1) Banc of 
America; (2) Bear Wagner Specialists LLC; (3) Susquehanna, and (4) 
Van der Moolen Specialists USA. LaBranche and Company LLC 
(``LaBranche'') is presently a registered LMM firm on NYSE Arca and 
a registered specialist firm on NYSE but LaBranche is presently 
assigned to trade ETFs only on NYSE Arca and has no equities 
assigned to it. Consequently, LaBranche does not fit the criteria of 
the proposed rule at this time.
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    Furthermore, market makers that conduct business on NYSE and NYSE 
Arca are both subject to the regulatory oversight of NYSE Regulation 
Inc. (``NYSER''). LMM firms in good standing on NYSE Arca must meet all 
of the market making obligations as enforced by NYSER. If an LMM firm 
fails to meet its market making obligations, it would no longer be 
eligible to serve as the LMM firm for the listed security. As such, the 
NYSE believes that allowing listed companies to maintain the LMM firm 
that trades its security on NYSE Arca when such LMM firm is also a 
registered specialist firm on the NYSE, comports with the overall goal 
of the Allocation Process to provide a specialist firm that is most 
qualified to transact business in the listed security.
    Listing companies transferring from other market centers to the 
NYSE would not be eligible to waive the NYSE Allocation Process 
pursuant to the proposed rule change as the NYSE does not have control 
over other market center's established market making obligations. 
Neither does the NYSE have an understanding of the regulatory oversight 
related to the enforcement of the market making obligations of other 
market centers.
    Consequently, there is no assurance for the NYSE that a registered 
NYSE specialist firm operating as a market maker on another market 
center is transacting business in accordance with its market making 
obligations on such other market center and therefore the NYSE would 
require the listing company to participate fully in its Allocation 
Process as proscribed by Exchange Rule 103B.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, because it 
is designed 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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 has 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

    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 \12\ and subparagraph (f)(6) 
of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\14\ 
However, Rule 19b-4(f)(6)(iii) \15\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has satisfied the five-
day filing requirement. In addition, the Exchange has requested that 
the Commission waive the 30-day pre-operative delay and designate the 
proposed rule change to become operative upon filing. The Exchange 
represented that the proposed rule change is merely administrative in 
nature as it seeks to allow a listing company to waive the Allocation 
Process set forth in Exchange Rule 103B in those limited instances 
where the equity of the listing company was listed on NYSE Arca and the 
company's equity was assigned a LMM firm that is also a registered 
specialist firm on the NYSE, and when the listing company transfers 
from NYSE Arca to the NYSE, the listing company may waive the 
Allocation Process and select as its registered specialist firm the 
same NYSE Arca LMM as its specialist firm on the NYSE. The Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because it would allow 
the Exchange to immediately implement this proposal and efficiently 
administer the allocation of equities that are currently eligible and 
scheduled to transfer listing from NYSE Arca to NYSE on April 18, 2007. 
Therefore, the Commission designates the proposal, as amended, to 
become effective and operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ Id.
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the impact of the proposed rule on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[[Page 20399]]

    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 the furtherance of the purposes of the Act.\17\
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    \17\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, the 
Commission considers the period to commence on April 17, 2007, the 
date on which the Exchange filed Amendment No. 1.
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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-NYSEArca-2007-39 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-2007-39. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of 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-2007-39 and should be submitted on or before May 15, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-7712 Filed 4-23-07; 8:45 am]

BILLING CODE 8010-01-P