Document ID: SEC-2005-0162-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.
Posted Date: 2005-10-28T04:00Z

[Federal Register: October 28, 2005 (Volume 70, Number 208)]
[Notices]               
[Page 62155-62156]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28oc05-81]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52648; File No. SR-NYSE-2005-63]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Exchange's Proposal To Place an Immediate Moratorium on 
the Qualification and Registration of New Competitive Traders and 
Registered Competitive Market Makers

October 21, 2005.
    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 September 22, 2005, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated the proposed rule change as constituting a ``non-
controversial'' rule change under Section 19(b)(3)(A)(iii) of the 
Act,\3\ and paragraph (f)(6) of Rule 19b-4 under the Act,\4\ which 
renders the proposal effective upon receipt of this filing by 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 proposed rule change is an Information Memo announcing a 
moratorium on the qualification and registration of new Competitive 
Traders (``CTs'') and Registered Competitive Market Makers (``RCMMs'') 
covered in Rules 110 and 107A, respectively. The text of the proposed 
rule change is available on the NYSE's Web site (http://www.nyse.com), 

at the NYSE's Office of the Secretary, and at 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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change. 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.

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

1. Purpose
    The Exchange has decided to study the future viability of CTs and 
RCMMs in light of the new Hybrid Market environment. While the Exchange 
conducts this study, it considers it appropriate to place a moratorium 
on the qualification and registration of new CTs and RCMMs.
    CTs and RCMMs were first authorized by the Commission in 1964 \5\ 
and 1978,\6\ respectively, to generate competition to specialists, add 
depth and liquidity to the market and create supplemental market making 
traders on the Exchange. NYSE Rules 110 and 111 govern CTs, and NYSE 
Rule 107A governs RCMMs. CTs and RCMMs can both conduct proprietary 
trading under the market maker exemption found in paragraph (1)(A) of 
Section 11(a) of the Act.\7\ CTs' trading must be at least 75% 
stabilizing, and RCMMs must be ready to enter the market with one round 
lot if called upon by a floor official or broker to narrow the 
quotation spread or add liquidity to the market.
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    \5\ NYSE Rule 110 (amended May 21, 1964 and July 16, 1964, 
effective August 3, 1964).
    \6\ Securities and Exchange Act Release No. 14718 (May 1, 1978), 
43 FR 19738 (May 8, 1978) (SR-NYSE-78-24).
    \7\ 15 U.S.C. 78k(a)(1)(A).
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    The Exchange's rules require that members must be registered by the 
Exchange before they are able to conduct business as a CT or RCMM, and 
in order to be registered must, besides

[[Page 62156]]

meeting other requirements, pass an examination prescribed by the 
Exchange.
    The volume and speed of the market has increased dramatically since 
CTs and RCMMs were first created, and significant changes have occurred 
with respect to market dynamics. The Exchange believes that these 
changes coupled with the Exchange's move to a Hybrid Market makes this 
review timely and appropriate. Currently there are only 11 active 
RCMMs, and the sole CT has not been active for several years. As part 
of this review, the Exchange will consider the diminished impact and 
usage of RCMMs and the effective non-usage of the CT status, the 
resources required to surveil their trading, and the significant market 
timing and informational advantage that they enjoy. The Exchange will 
also examine any regulatory requirements needed to increase market 
maker liquidity obligations.
    The Exchange will issue an Information Memo announcing the 
moratorium. The Exchange notes that the proposed moratorium will not 
impact those members currently registered as CTs and RCMMs. 
Accordingly, during the period that the moratorium is in place, NYSE 
Rules 110 and 111 and NYSE Rule 107A will continue to govern the 
actions of current CTs and RCMMs, respectively.\8\ The Exchange will 
promptly file for approval with the Commission any changes to the 
existing rules that the Exchange determines are warranted upon 
completion of its review.
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    \8\ Telephone conversation between Donald Siemer, Director, 
Market Surveillance, NYSE and Ronesha Butler, Special Counsel, and 
Sara Gillis, Attorney, Division of Market Regulation, Commission on 
October 6, 2005.
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2. Statutory Basis
    The Exchange believes that the basis under the Act for this 
proposed rule change is the requirement under Section 6(b)(5) \9\ 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.
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    \9\ 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 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

    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: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the 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 \10\ and 
Rule 19b-4(f)(6) thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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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-2005-63 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-NYSE-2005-63. 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 the 
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 No. SR-NYSE-2005-63 and should be submitted on or before November 
18, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority. \12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-5975 Filed 10-27-05; 8:45 am]

BILLING CODE 8010-01-P