Document ID: SEC-2008-0264-0001
Agency: sec
Document Type: Notice
Title: The Exchange proposes to amend NYSE Rule 104 Supplementary Material .10 to provide that when a specialist has completed but not yet reported a transaction as principal with an order in the book or in the crowd, the specialist must yield to any order received through SuperDOT[supreg]that could take the specialists place in the unreported principal transaction. The Exchange proposes to amend NYSE Ru
Posted Date: 2008-02-19T05:00Z

[Federal Register: February 19, 2008 (Volume 73, Number 33)]
[Notices]               
[Page 9151-9155]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19fe08-95]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57312; File No. SR-NYSE-2004-70]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Amendments No. 2, 3, and 5 and Order Granting 
Accelerated Approval to a Proposed Rule Change, as Modified by 
Amendments No. 2, 3, and 5, To Amend Rule 104 To Require Specialists To 
Yield Proprietary Trades to Later-Arriving System Orders

February 12, 2008.

I. Introduction

    On December 13, 2004, the New York Stock Exchange LLC \1\ (``NYSE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ a 
proposed rule change to amend NYSE Rule 104 to require that in 
transactions between a specialist and a contra order that have been 
agreed to but not yet reported, the specialist must yield to any system 
orders that enter the specialist's book and can take the specialist's 
position in such transaction except if the specialist's transaction 
meets a specified exception. On January 7, 2005, the Exchange filed 
Amendment No. 1 to the proposed rule change. The proposed rule change, 
as modified by Amendment No. 1, was published for public comment in the 
Federal Register on January 28, 2005.\4\ The Exchange filed Amendments 
No. 2,\5\ 3,\6\ 4,\7\ and 5 \8\ to the proposed rule change on August 
11, 2005, October 14, 2005, September 15, 2006, and February 8, 2008, 
respectively. The Commission received five comment letters from a 
single commenter opposing the proposed rule change.\9\ On June 7, 2005 
and November 18, 2005, the Exchange submitted responses to the 
comments.\10\ This order

[[Page 9152]]

provides notice of filing of Amendments No. 2, 3, and 5 to the proposed 
rule change, and grants accelerated approval to the proposed rule 
change, as modified by Amendments No. 2, 3, and 5.
---------------------------------------------------------------------------

    \1\ Formerly known as the New York Stock Exchange, Inc.
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
    \4\ Securities Exchange Act Release No. 51048 (Jan. 18, 2005), 
70 FR 4171 (``Notice'').
    \5\ Amendment No. 2 superseded the original filing and Amendment 
No. 1 in their entirety and included (i) clarifying changes to the 
descriptions of the exceptions to the rule, (ii) the addition of 
system orders to the exception relating to non-regular way 
transactions, and (iii) the addition of convert and parity orders 
(``CAP orders'') to the exception relating to electing transactions.
    \6\ In Amendment No. 3, the Exchange revised the purpose section 
of the filing to clarify the discussion of the exception relating to 
non-regular way transactions. Amendment No. 3 also makes certain 
technical changes to the proposed rule change.
    \7\ Amendment No. 4 was withdrawn on February 8, 2008, by 
Amendment No. 5.
    \8\ In Amendment No. 5, the Exchange: (i) Withdraws Amendment 
No. 4; (ii) makes certain technical corrections to the proposed rule 
change; (iii) clarifies that NYSE Rule 123B(d) does not apply to 
transactions handled pursuant to proposed NYSE Rule 104.10(10); (iv) 
eliminates references to the election of stop orders by specialists, 
as this functionality is now automated; (v) eliminates references to 
the Intermarket Trading System, which has been decommissioned; (vi) 
amends Item 5 of Amendment No. 2 to clarify that the Exchange had 
received comments on the proposal; and (vii) corrects a 
typographical error in Amendment No. 3.
    \9\ See letters from George Rutherfurd, Consultant 
(``Rutherfurd''), to the Commission, dated February 18, 2005 
(``February 18th Rutherfurd Letter''), April 8, 2005, June 15, 2005 
(``June 15th Rutherfurd Letter''), October 20, 2005 (``October 20th 
Rutherfurd Letter''), and November 27, 2005 (``November 27th 
Rutherfurd Letter'') (together, the ``Rutherfurd Letters'').
    \10\ See letters from Mary Yaeger, Assistant Secretary, NYSE, to 
Jonathan G. Katz, Secretary, Commission, dated June 7, 2005 (``June 
7th NYSE Letter'') and November 18, 2005 (``November 18th NYSE 
Letter'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rule 104 Supplementary Material 
.10 to provide that when a specialist has completed but not yet 
reported a transaction as principal with an order in the book or in the 
crowd, the specialist must yield to any order received through 
SuperDOT[supreg] that could take the specialist's place in the 
unreported principal transaction. The Exchange proposes to amend NYSE 
Rule 104 Supplementary Material .10 to add new section (10) to require 
that, notwithstanding the ability of a specialist to trade as principal 
with either a system order or a broker in the crowd, if a marketable 
order arrives on the book before the reporting of the specialist's 
trade as principal is complete, the specialist must yield to such 
order. Where the specialist is required to yield, the customer whose 
order entered the book would be reported as the contra party for the 
trade instead of the specialist.
    The proposed rule would provide the following six exceptions to 
this requirement.
    1. Correction of a Bona Fide Specialist Error in a Previously 
Reported Transaction. These are cases where a specialist has to issue 
corrected reports that include dealer participation via the Display 
Book[supreg] to correct a previously executed and reported transaction. 
Such corrections could involve the price, volume, or names involved on 
a transaction. If an executable system order is on the same side as the 
dealer participation necessary to correct the error, this would trigger 
the Display Book's[supreg] ``P'' indicator (preventing the specialist 
from participating as dealer ahead of executable system orders). In 
this situation, the specialist would be permitted to use the override 
feature, provided that the specialist places an ``Error'' notation in 
the Display Book's[supreg] free form comment field. The specialist 
would be required to adequately document the error on the firm's books 
and records.
    2. Trading in Satisfaction of the Specialist's Obligation to Give 
Up a Trade to an Agency Order. These are cases where Exchange policy 
permits the specialist to give up a trade to an agency order after the 
initial trade has been reported and the specialist cannot substitute 
the agency customer's name, such as where a customer requests to 
participate on a trade previously executed by the specialist as 
principal on a non-regular way basis. When reporting such substituted 
trades, the specialist would have to participate as dealer in order to 
unwind his own participation in the initial transaction. If an 
executable system order is on the same side as the dealer participation 
necessary to effect the substitution, this would trigger the Display 
Book's[supreg] ``P'' indicator. In this situation, the specialist would 
be permitted to use the override feature to complete the substitute 
transaction. The specialist would be required to document the 
substitution trade in the Display Book's[supreg] free form comment 
field.
    3. Report of Non-Regular-Way Principal to Customer Transaction. 
These are cases where a member firm represents a non-regular-way 
settlement order (e.g., cash basis, next day, and seller's option) and 
the specialist is willing to trade with that order at a price at which 
there are regular-way settlement customer orders on the same side on 
the Display Book[supreg] at the same or a better price.\11\ The 
override feature may be used by the specialist to effect the non-
regular way transactions, provided, however, that the specialist may be 
required to give up the trade to an agency order if the customer 
indicates its willingness to participate on the same terms as the 
specialist.
---------------------------------------------------------------------------

    \11\ Non-regular-way orders may be represented by a broker in 
the crowd or may be entered through the SuperDOT[supreg] system.
---------------------------------------------------------------------------

    4. Principal Participation in CAP Order Electing Transaction.\12\ 
These are cases where the specialist chooses to execute the elected 
portions of CAP orders at the same price as the electing sale.\13\ In 
these cases, the specialist bases the price on the total volume of the 
electing orders and the CAP orders, and then effects both the electing 
transaction and the CAP transaction contemporaneously and at the same 
price. NYSE Rule 123A.30 requires the specialist to report the 
transaction that elects the CAP orders independently from the 
transaction that fills the elected CAP orders. Orders may arrive on the 
Display Book[supreg] between the time the specialist reports the 
electing trade and the fill for the CAP transaction, which would 
trigger the ``P'' indicator. In connection with the transaction filling 
the CAP order, the specialist would be permitted to use the override 
feature. The specialist would be required to document the dealer 
participation by placing an applicable comment in the Display 
Book's[supreg] free form comment field.
---------------------------------------------------------------------------

    \12\ In Amendment No. 5, the Exchange omitted stop orders from 
exceptions 4 and 5 because stop order execution is now automated. 
See Securities Exchange Act Release No. 54820 (November 27, 2006), 
71 FR 70824 (December 6, 2006) (SR-NYSE-2006-65). Since specialists 
no longer handle stop orders manually, the exception from the 
proposed rule is no longer necessary.
    \13\ See NYSE Rule 123A.30. CAP orders are orders in which the 
specialist may convert all or part of an unelected portion of a 
percentage order, and may trade on parity with the elected or 
converted portions of the order, as long as the specialist is not 
holding orders at the same price that do not grant parity. Even 
though the specialist is not obligated to guarantee an execution to 
CAP orders at the same price as the electing sale, he may choose to 
do so. The Exchange stated that it inadvertently omitted references 
to CAP orders in exception 4, although they were specifically 
referred to in an analogous situation in exception 5. Accordingly, 
in Amendment No. 2, the Exchange added CAP orders to exception 4.
---------------------------------------------------------------------------

    5. Principal Participation in Connection with CAP Order Executed as 
Part of the Opening of Trading.\14\ These are cases where the 
specialist participates as dealer in connection with CAP orders. In 
these situations, the CAP orders are included in the specialist's 
calculation of the opening price, are elected by the opening trade, and 
are executed contemporaneously and consecutively with the opening 
transaction at the opening price, but are reported separately from the 
report of the opening transaction. Orders may arrive on the Display 
Book[supreg] between the time the specialist reports the opening trade 
and the fill for the converted portion of the CAP orders, which would 
trigger the ``P'' indicator. In connection with the transaction filling 
the converted portion of CAP orders, the specialist would be permitted 
to use the override feature. The specialist would be required to 
document the dealer participation by placing the required comment in 
the Display Book's[supreg] free form comment field.
---------------------------------------------------------------------------

    \14\ Regarding elimination of stop orders from exception 5, see 
supra note 12.
---------------------------------------------------------------------------

    6. Closing Transactions to Offset Market-at-the-Close (``MOC'') 
and/or Limit-at-the-Close (``LOC'') Order Imbalances. These are cases 
where the specialist participates on the closing transaction to offset 
a MOC and/or LOC order imbalance. The situation may arise if unexecuted 
market orders entered just prior to the close are assigned to the 
paired-off portion of the closing trades. When the specialist reports 
dealer participation to offset an imbalance on the first print of the 
closing (as required by Exchange Rule 123C(3)(A)) and there are market 
orders on the same side assigned to the paired off portion, which is 
the second print of the close, the ``P'' indicator would be triggered. 
In this instance, the specialist would be permitted to use the override 
feature. The specialist would be

[[Page 9153]]

required to document the dealer participation by indicating ``MOC'' in 
the Display Book's[supreg] free form comment field.

III. Discussion

    The Commission finds that the proposed rule change, as amended, is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange. In 
particular, the Commission finds that the proposed rule change, as 
amended, is consistent with Section 6(b)(5) of the Act \15\ which 
requires, among other things, an exchange to 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 
a national market system, and, in general, to protect investors and the 
public interest.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b)(5).
    \16\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The Commission notes that the proposed rule change should help 
ensure that system orders entered into the Exchange's Display Book 
through an Exchange order delivery system such as SuperDOT[supreg] 
receive executions in the Exchange market to the greatest extent 
possible, and should help to minimize the risk of improper trading 
ahead of SuperDOT[supreg] orders by the specialist. The Commission also 
believes that the exceptions to the proposed rule are sufficiently 
limited and represent situations in which it would continue to be 
appropriate for the specialist to act as principal, notwithstanding the 
presence of a new customer order on the book.
    In his comments, Rutherfurd states that the proposal ``attempts to 
codify a truly bizarre notion'' whereby ``an order must participate in 
trade even though the order was not even in the marketplace when the 
trade took place * * *.'' \17\ Rutherfurd states that the Exchange's 
technological limitations (whether reporting or surveillance) seem to 
have given rise to this rule.\18\
---------------------------------------------------------------------------

    \17\ February 18th Rutherfurd Letter, supra note 9, at 1. See 
also June 15th Rutherfurd Letter, supra note 9, at 1; and October 
20th Rutherfurd Letter, supra note 9, at 2.
    \18\ February 18th Rutherfurd Letter, supra note 9, at 4. See 
also June 15th Rutherfurd Letter, supra note 9, at 2; October 20th 
Rutherfurd Letter, supra note 9, at 2; and November 27th Rutherfurd 
Letter, supra note 9, at 5.
---------------------------------------------------------------------------

    Rutherfurd also states that the proposal conflicts with existing 
Exchange rules and that the Exchange fails to address such conflict. 
For example, Rutherfurd believes that the proposed rule change is 
inconsistent with Rule 76's crossing/price improvement procedure, in 
that it would assign a price to a subsequent SuperDOT[supreg] market 
order without giving it an opportunity to receive a better price.\19\ 
In addition, Rutherfurd also states ``[t]he fact that the specialist 
may have followed the crossing procedure (or not, as in a floor broker 
trade) in a prior trade has no relevance whatsoever to a specialist's 
responsibility to expose the subsequently arriving [SuperDOT[supreg]] 
order to market interest existing at the time the order is 
received.''\20\
---------------------------------------------------------------------------

    \19\ February 18th Rutherfurd Letter, supra note 9, at 5. See 
also June 15th Rutherfurd Letter, supra note 9, at 5-7; and October 
20th Rutherfurd Letter, supra note 9, at 1.
    \20\ June 15th Rutherfurd Letter, supra note 9, at 6. In 
addition, Rutherfurd states that scenario 1, which was provided by 
the Exchange to illustrate the operation of NYSE Rules 76 and 91, 
would require a specialist ``to try to buy stock when all he or she 
wants to do is sell'' and to ``do so in a manner that `penny jumps' 
a public limit order they are representing as agent.'' Id. at 9. The 
Exchange subsequently corrected scenario 1. See November 18th NYSE 
Letter, supra note 10, at 1-2. Rutherfurd states that the revised 
scenario 1 is ``still deeply flawed.'' See November 27th Rutherfurd 
Letter, supra note 9, at 3.
---------------------------------------------------------------------------

    Furthermore, Rutherfurd states the Exchange's proposal would not 
allow for the possibility of price improvement and that a 
SuperDOT[supreg] order arriving after a specialist has consummated a 
trade could suffer economic harm. In addition, Rutherfurd states that 
under the proposal, a specialist could participate in a better-priced 
transaction that should have gone to a later-arriving SuperDOT[supreg] 
order if, as the specialist is in the process of substituting the 
subsequent SuperDOT[supreg] order for its own interest in a consummated 
but not yet reported transaction, the Exchange's autoquote publishes an 
improved price.\21\ Rutherfurd also contends that the Exchange has used 
the term ``yield'' incorrectly and should instead have used the phrase 
``substitution of principals,'' arguing that the Exchange's use of the 
term ``yield'' will create confusion because of its traditional use in 
the securities context (as in, for example, Section 11(a)(1)(G) under 
the Act \22\).\23\
---------------------------------------------------------------------------

    \21\ February 18th Rutherfurd Letter, supra note 9, at 6. See 
also June 15th Rutherfurd Letter, supra note 9, at 10.
    \22\ 15 U.S.C. 78k(a)(1)(G) (regarding an exchange member 
``yield[ing] priority, parity, and precedence in execution'' to non-
member orders).
    \23\ February 18th Rutherfurd Letter, supra note 9, at 5. See 
also June 15th Rutherfurd Letter, supra note 9, at 2-5; and November 
27th Rutherfurd Letter, supra note 9, at 5. In addition, the 
Rutherford Letters discuss a number of Exchange proposed rule 
changes, rules and other matters unrelated to this proposed rule 
change.
---------------------------------------------------------------------------

    The Exchange believes that Rutherfurd's comments are misplaced and 
should be disregarded.\24\ Specifically, the Exchange states that 
``Exchange Rules 76 and 91 require that before purchasing (selling) for 
his own account, a specialist must offer (bid for) the security at a 
price that is lower (higher), by the minimum variation, than the 
specialist's bid (offer) for his own account'' to ensure ``there is no 
other buy (sell) interest in the market that is willing to trade at the 
better price.'' \25\ The Exchange believes that ``this procedure 
ensures that the specialist's bid (offer) is the best available price 
at the time that the dealer trade is orally consummated, [and that] any 
later-arriving DOT order(s) to which the specialist must yield under 
proposed Rule 104.10[(10)] would, by definition, also be receiving the 
best available price in the market at the moment that that order 
arrived on the book.'' \26\ The Commission believes that this is a 
reasonable interpretation of the Exchange's rules.\27\
---------------------------------------------------------------------------

    \24\ See June 7th NYSE Letter, supra note 10.
    \25\ Id. at 2.
    \26\ Id.
    \27\ The Commission also notes that the Exchange amended Rule 
123B to clarify that a specialist executing systems order in 
accordance with proposed Rule 104.10(10)(i) is not required to 
expose such orders to buying and selling interest in the trading 
crowd. See Amendment No. 5, supra note 8.
---------------------------------------------------------------------------

    In addition, the Exchange states that the proposal does not permit 
specialists to trade at the expense of subsequent SuperDOT[supreg] 
orders.\28\ Specifically, the Exchange states that Rutherfurd's example 
is based on a flawed assumption that the later-arriving sell order was 
entitled to trade with the even-later-arriving buy order and that the 
fact that a better price is subsequently received is irrelevant.\29\ 
The Exchange acknowledges that under the proposal the specialist might 
be able to trade with even-later-arriving order at the improved 
price.\30\ Although this may appear unfair to the later-arriving order, 
the Exchange notes that ``it is not a foregone conclusion that the 
specialist will be the contra party to the even-later-arriving'' order, 
and believes that Rutherfurd ignores the fact the ``the specialist 
continues to bear the market risk of yielding to the later-arriving 
sell order.'' \31\ The Commission agrees with

[[Page 9154]]

the Exchange that it is not a forgone conclusion that the specialist 
will be the contra party to the even-later-arriving order. The 
Commission notes that, while the specialist may at times receive the 
benefit of trading with the even later arriving order at an improved 
price, the specialist is subject to market risk and the even-later-
arriving order could just as easily be at an inferior price.
---------------------------------------------------------------------------

    \28\ See June 7th NYSE Letter, supra note 10, at 3-4.
    \29\ Id. at 4.
    \30\ Id.
    \31\ Id.
---------------------------------------------------------------------------

    Finally, the Exchange disagrees with Rutherfurd that it misused the 
term ``yield'' and his belief that use of the term would be confusing 
and should be changed.\32\ The Commission acknowledges the commenter's 
view that the Exchange's use differs from its use in some other 
contexts; at the same time, the Commission believes that the use of the 
term ``yield'' is appropriately within the Exchange's discretion.
---------------------------------------------------------------------------

    \32\ Id. at 2.
---------------------------------------------------------------------------

    Rutherfurd responded to the Exchange by reiterating his prior 
comments and added that the solution to the inability of the Exchange 
surveillance systems to ``distinguish between proper versus improper 
specialist principal trading'' is ``enhanced surveillance, not bizarre, 
radical new law.'' \33\ Although Rutherfurd does not agree with the 
approach taken by the Exchange, the Commission believes that proposal 
constitutes an appropriate exercise of the Exchange's business 
judgment.
---------------------------------------------------------------------------

    \33\ June 15th Rutherfurd Letter, supra note 9, at 2. See also 
November 27th Rutherfurd Letter, supra note 9, at 1.
---------------------------------------------------------------------------

    Rutherfurd further states that the Exchange does not provide 
sufficient rationale for the proposed rule or the exceptions 
thereto.\34\ He also states that the Exchange did not comply with the 
requirements of Form 19b-4 with respect to Amendment No. 2.\35\ The 
Commission believes that the proposed rule change, as amended, is 
sufficient to comply with the requirements of Form 19b-4.
---------------------------------------------------------------------------

    \34\ See October 20th Rutherfurd Letter, supra note 9, at 2. See 
also November 27th Rutherfurd Letter, supra note 9, at 1.
    \35\ October 20th Rutherfurd Letter, supra note 9, at 1. 
Specifically, Rutherfurd noted that in Item 1(b) the NYSE stated it 
``does not believe the proposal will have any direct effect, or any 
significant indirect effect, on any other Exchange rule in effect at 
the time of this filing.'' Rutherfurd states ``[i]t is inconceivable 
that the NYSE can make this statement in good faith'' and that the 
``NYSE is proposing a procedure that is absolutely at odds with Rule 
76/91.'' Id. As stated above, the Commission believes that the 
Exchange's interpretation of Rules 76 and 91 is reasonable. Also, as 
noted below, the Exchange amended NYSE Rule 123B to clarify that 
when a specialist is executing a system order pursuant to proposed 
NYSE Rule 104.10(10), the specialist is not required to expose the 
order to buying and selling interest in the crowd. In addition, 
Rutherfurd contends that the NYSE should have referenced his 
comments in Item 5 of Amendment No. 2 (regarding whether the 
Exchange has solicited or received comments). Id.
---------------------------------------------------------------------------

IV. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\36\ for accelerating approval of Amendments No. 2, 3, and 5 to 
the proposed rule change prior to the thirtieth day after publication 
in the Federal Register.\37\
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(2). Pursuant to Section 19s(b)(2) of the 
Act, the Commission may not approve any proposed rule change, or 
amendment thereto, prior to the thirtieth day after the date of 
publication of the notice thereof, unless the Commission finds good 
cause for so doing.
    \37\ In Amendment No. 5, the Exchange withdrew Amendment No. 4. 
See supra note 8.
---------------------------------------------------------------------------

    In Amendment No. 2, the Exchange made clarifying changes to the 
proposed rules that raise no new or novel issues. The Exchange also 
revised the exception relating to non-regular way principal 
transactions to specify that such non-regular-way orders are 
``principal to customer'' orders to capture orders represented by a 
broker in the crowd or entered through the SuperDOT[supreg] system. 
Previously, the Exchange inadvertently omitted system orders from the 
description of orders covered by this exception. In Amendment No. 3, 
the Exchange modified the discussion of this exception to reflect the 
corresponding change in the rule text in Amendment No. 2.\38\ The 
Commission finds that the addition of system orders to this exception 
presents no new or novel issues.
---------------------------------------------------------------------------

    \38\ In addition, the Amendment No. 3 made technical changes to 
the proposed rule change. The Commission believes that Amendment No. 
3 does not raise any new issues.
---------------------------------------------------------------------------

    In Amendment No. 2, the Exchange also amended the exception 
relating to principal participation in electing transactions to add CAP 
orders to the exception. In the case of CAP orders, the specialist 
bases the price on the total volume of the electing orders and the CAP 
orders, and then effects both the electing transaction and the CAP 
transaction contemporaneously and at the same price. NYSE Rule 123A.30 
(CAP orders) requires the specialist to report the transaction that 
elects the CAP orders independently from the transaction that fills the 
elected CAP orders. As a result, orders may arrive on the Display 
Book[supreg] between the time the specialist reports the electing trade 
and the fill for the CAP transaction. Although adding CAP orders to the 
exception may expand the number of instances in which a specialist may 
trade notwithstanding a later-arriving system order, the Exchange 
believes that the addition of CAP orders to the exception does not 
raise new issues. The Commission agrees with the Exchange that the 
addition of CAP orders to the exception does not raise any new issues.
    In Amendment No. 5, the Exchange amended NYSE Rule 123B to clarify 
that, when a specialist is executing a system order pursuant to 
proposed NYSE Rule 104.10(10), the specialist is not required to expose 
the order to buying and selling interest in the crowd. The Commission 
believes that this amendment helps to address inconsistencies between 
proposed Rule 104.10(10) and other Exchange rules. Amendment No. 5 also 
eliminates references to the election of stop orders by specialists, as 
this functionality is now automated, and eliminates references to the 
Intermarket Trading System, which has been decommissioned. In addition, 
Amendment No. 5 makes technical and clarifying changes.\39\ The 
Commission believes that Amendment No. 5 presents no new or novel 
issues.
---------------------------------------------------------------------------

    \39\ See, e.g., discussion in note 35, supra and accompanying 
text.
---------------------------------------------------------------------------

    Accordingly, the Commission finds that good cause exists, 
consistent with Sections 6(b)(5) of the Act,\40\ and Section 19(b) of 
the Act \41\ to approve the proposed rule change, as modified by 
Amendments No. 2, 3, and 5, on an accelerated basis.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b)(5).
    \41\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendments No. 2, 3, and 5, including whether 
Amendments No. 2, 3, and 5 are 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-2004-70 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-2004-70. 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/

[[Page 9155]]

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 Exchange. 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-2004-70 and should be 
submitted on or before March 11, 2008.

VI. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as amended, is consistent with the Act and the rules and 
regulations thereunder applicable to a national securities exchange.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\42\ that the proposed rule change (SR-NYSE-2004-70), as modified 
by Amendments No. 2, 3, and 5, be, and it hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
Florence E. Harmon,
Deputy Secretary.
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. E8-2981 Filed 2-15-08; 8:45 am]

BILLING CODE 8011-01-P