Document ID: SEC-2005-0469-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, Inc.
Posted Date: 2005-12-29T05:00Z

[Federal Register: December 29, 2005 (Volume 70, Number 249)]
[Notices]               
[Page 77228-77230]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de05-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53014; File No. SR-NYSE-2005-89]

 
Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Pilot for NYSE Direct+[reg] Until December 23, 2006

December 22, 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 December 13, 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 NYSE. 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

    This proposal is to extend until December 23, 2006, the 
effectiveness of the pilot (the ``Pilot'') for NYSE Direct+[supreg] 
(``Direct +''). The Pilot was approved initially on a one-year basis 
and extended for several additional years, and now expires on December 
23, 2005.

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. 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
    In light of the fact that the Commission is still considering the 
Exchange's filing on proposed enhancements to NYSE Direct+[supreg] (the 
NYSE HYBRID MARKETS SM--``Hybrid Market'') as described in 
SR-NYSE-2004-05 and subsequent amendments thereto \3\, the Exchange 
hereby is filing to renew its Pilot, as it currently operates, for an 
additional year.
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    \3\ See Securities Exchange Act Release No. 50173 (August 10, 
2004), 69 FR 50407 (August 16, 2004) (Amendment No. 1 to SR-NYSE-
2004-05); Securities Exchange Act Release No. 50667 (November 15, 
2004), 69 FR 67980 (November 22, 2004) (Amendment Nos. 2 and 3 to 
SR-NYSE-2004-05); (The Exchange withdrew Amendment No. 4 and 
replaced it with Amendment No. 5); Securities Exchange Act Release 
No. 51906 (June 22, 2005), 70 FR 37463 (June 29, 2005) (Amendment 
No. 5 to SR-NYSE-2004-05). See also Amendment No. 6 to SR-NYSE-2004-
05 (September 16, 2005) and Amendment No. 7 to SR-NYSE-2004-05 
(October 11, 2005).
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Background
    NYSE Direct+[supreg] was originally approved as a one-year pilot in 
SR-NYSE-2000-18,\4\ ending on December 21, 2001. The Exchange then 
extended the Pilot for an additional one-year, ending December 23, 
2002.\5\ The Pilot was subsequently extended for an additional one-
year, ending December 23, 2003.\6\ It was again extended for two 
additional one-year periods and now expires on December 23, 2005.\7\
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    \4\ See Securities Exchange Act Release No. 43767 (December 22, 
2000), 66 FR 834 (January 4, 2001) (SR-NYSE-2000-18).
    \5\ See Securities Exchange Act Release No. 45331 (January 24, 
2002), 67 FR 5024 (February 1, 2002) (SR-NYSE-2001-50).
    \6\ See Securities Exchange Act Release No. 46906 (November 25, 
2002), 67 FR 72260 (December 4, 2002) (SR-NYSE-2002-47).
    \7\ See Securities Exchange Act Release No. 48772 (November 12, 
2003), 68 FR 65756 (November 21, 2003) (SR-NYSE-2003-30). See 
Securities Exchange Act Release No. 50828 (December 9, 2004), 69 FR 
75579 (December 17, 2004) (SR-NYSE-2004-66).
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    The NYSE Direct+[supreg] pilot provides for the automatic execution 
of limit orders of 1,099 shares or less (``auto ex'' orders) against 
trading interest reflected in the Exchange's published quotation. It is

[[Page 77229]]

not mandatory that all limit orders of 1,099 shares be entered as auto 
ex orders; rather, the member organization entering the order, or its 
customer if enabled by the member organization, can choose to enter an 
auto ex order when such member organization (or customer) believes that 
the speed and certainty of an execution at the Exchange's published bid 
or offer price is in its customer's best interest.
    The Exchange proposes to extend this Pilot for an additional year 
(from December 24, 2005 until December 23, 2006). Five filings which 
impact NYSE Direct+[supreg] have been filed with or approved by the 
Commission during the current Pilot are now part of the Pilot.\8\ These 
include:
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    \8\ See telephone conversation between Steve L. Kuan, Special 
Counsel, Division of Market Regulation (``Divison''), Commission, 
and Jeffrey Rosenstrock, Principal Rule Counsel, NYSE, on December 
21, 2005. In addition, SR-NYSE-2003-20 proposed to disengage NYSE 
Direct+[supreg] in five-actively traded stocks. However, this pilot 
expired on June 20, 2003 and therefore, does not impact the Pilot as 
proposed to be extended. See Securities Exchange Act Release No. 
47965 (June 2, 2003), 68 FR 34691 (June 10, 2003) (SR-NYSE-2003-20).
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    (a) A filing which amended Rule 1000 to provide that NYSE 
Direct+[supreg] executions will not be available if the resulting trade 
would be more than five cents away from the last sale.\9\ The amendment 
also provided that during the process for completing Rule 127 
transactions, the specialist should publish a bid and/or offer that is 
more than five cents away from the last reported transaction price in 
the subject security on the Exchange.
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    \9\ See Securities Exchange Act Release No. 47463 (March 7, 
2003), 68 FR 12122 (March 13, 2003) (SR-NYSE-2002-44).
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    (b) A filing which amended Exchange Rules 13 and 1005 in order to 
eliminate size and frequency restrictions for orders entered through 
NYSE Direct+[reg] (``Direct +'') in Investment Company Units, as 
defined in paragraph 703.16 of the Listed Company Manual, Trust Issued 
Receipts (such as HOLDRs), as defined in Rule 1200, and 
streetTRACKS[reg] Gold Shares, as defined in Rule 1300, (collectively 
``ETFs'').\10\
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    \10\ See Securities Exchange Act Release No. 52160 (July 28, 
2005), 70 FR 44963 (August 4, 2005) (SR-NYSE-2005-49).
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    (c) A filing which amended Rule 1002 to include ETFs and HOLDRs and 
provide that ETFs trade until 4:15 p.m. and amended Rule 1005 to 
reflect that the rule applies to ETFs and HOLDRs.\11\
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    \11\ See Securities Exchange Act Release No. 47024 (December 18, 
2002), 67 FR 79217 (December 27, 2002) (SR-NYSE-2002-37). The 
expansion of the Direct+ order size eligibility described in this 
filing (for up to 10,000 shares) was superseded by SR-NYSE-2005-49.
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    (d) A filing which amended Rule 1005 to permit entry of limit 
orders up to 1,099 shares within 30 seconds for an account in which the 
same person has an interest, provided that the orders are entered from 
different terminals and that the member or member organization 
responsible for the entry of the orders to the trading floor 
(``Floor'') has procedures to monitor compliance with the separate 
terminal requirement.\12\
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    \12\ See Securities Exchange Act Release No. 47353 (February 12, 
2003), 68 FR 8318 (February 20, 2003) (SR-NYSE-2002-58).
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    (e) A filing which amended Rules 1000 and 1001 in connection with 
the NYSE LiquidityQuoteSM initiative.\13\ In conjunction 
with autoquoting of bids and offers, Rule 1000 has been amended to 
provide that a NYSE Direct+[supreg] order equal to or greater than the 
size of the published bid/offer exhausts the entire bid/offer, rather 
than decreases it to 100 shares.\14\ Rule 1001(c) provided that if 
executions of auto ex orders have traded with all trading interest 
reflected in the Exchange's published bid or offer, the Exchange will 
disseminate a bid or offer at that price of 100 shares until the 
specialist requotes that market. Rule 1001(c) has been deleted.
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    \13\ See Securities Exchange Act Release No. 47614 (April 2, 
2003), 68 FR 17140 (April 8, 2003) (SR-NYSE-2002-55).
    \14\ See telephone conversation between Steve L. Kuan, Special 
Counsel, Division, Commission, and Jeffrey Rosenstrock, Principal 
Rule Counsel, NYSE, on December 21, 2005.
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    The above-mentioned filings became part of the NYSE Direct+[supreg] 
rules and were incorporated into the Pilot upon their respective filing 
or approval by the Commission.\15\ Therefore, they are extended as part 
of the Pilot.
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    \15\ See id.
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    If, however, the Commission approves the Hybrid Market proposal 
during the extension of the Pilot period (December 24, 2005-December 
23, 2006), the Hybrid Market proposal would supersede this filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \16\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \17\ 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. The Exchange also believes that the 
proposed rule change is designed to support the principles of Section 
11A(a)(1) of the Act \18\ in that it seeks to assure economically 
efficient execution of securities transactions, makes it practicable 
for brokers to execute investors' orders in the best market and 
provides an opportunity for investors' orders to be executed without 
the participation of a dealer.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 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

    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 foregoing proposed rule 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 from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file 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, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\ 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.\21\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ 15 U.S.C. 78s(b)(3)(C).
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    The Exchange requests that the Commission waive the five business 
days pre-filing requirement and the 30-day operative delay under Rule 
19b-4(f)(6)(iii).\22\ The Exchange believes that the continuation of 
the Pilot is in the public interest as it will avoid

[[Page 77230]]

inconvenience and interruption to the public.
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    \22\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30 day operative delay 
is consistent with the protection of investors and the public 
interest,\23\ because it will allow the Exchange to continue, without 
interruption, the existing operation of the Pilot for an additional 
year, while the Commission considers the Hybrid Market. Accordingly, 
the Commission designates that the proposal shall become operative as 
of the date of this notice.
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    \23\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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-2005-89 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-2005-89. 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 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-2005-89 and should be submitted on or before 
January 19, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-8066 Filed 12-28-05; 8:45 am]

BILLING CODE 8010-01-P