Document ID: SEC-2006-1596-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, LLC
Posted Date: 2006-12-08T05:00Z

[Federal Register: December 8, 2006 (Volume 71, Number 236)]
[Notices]               
[Page 71215-71217]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de06-145]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54856; File No. SR-NYSE-2006-106]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend the Fees Charged to Member Organizations for Transactions in 
Equity Securities

December 1, 2006.
    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 November 30, 2006, the New York Stock Exchange LLC (``Exchange'' or 
``NYSE'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. NYSE has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by NYSE under Section 19(b)(3)(A)(ii) of the Act 
\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposed rule 
change effective upon filing with 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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise the fees it charges to its member 
organizations for transactions in equity securities by eliminating the 
$750,000 monthly fee cap and establishing a flat fee of $0.000275 per 
share. The Exchange will also begin charging the standard Exchange 
Traded Fund (``ETF'') fee of $0.0030 per share on transactions in ETFs 
traded on an unlisted trading privilege basis. The Exchange also is 
eliminating the specialist trading privilege fee and the specialist 
allocation fee. In addition, simultaneously with the implementation of 
the revised trading fees, the Exchange intends, by means of a separate 
filing (the ``Commission Elimination Filing''), to eliminate specialist 
commissions.\5\ The proposed rule changes will take effect as of 
December 1, 2006.
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    \5\ See Securities Exchange Act Release No. 54850 (November 30, 
2006) (notice of filing and immediate effectiveness of SR-NYSE-2006-
105).
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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.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.nyse.com), at the Exchange's Office of the 

Secretary, and at the Commission's Public Reference Room.

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

1. Purpose
    The Exchange proposes to revise the fees it charges to its member 
organizations for transactions in equity securities by eliminating the 
$750,000 monthly fee cap and establishing a flat fee of $0.000275 per 
share. The Exchange will also begin charging the standard ETF fee of 
$0.0030 per share on transactions in ETFs traded on an unlisted trading 
privileges basis. In addition, simultaneously with the implementation 
of the revised trading fees, the Exchange proposes in the Commission 
Elimination Filing to eliminate specialist commissions. The proposed 
fee changes will take effect as of December 1, 2006. The Exchange has 
requested that the Commission make the

[[Page 71216]]

effectiveness of the Commission Elimination Filing operative on 
December 1, 2006, the same day the changes contained in this filing 
take effect.
    The Exchange currently charges a fee of $0.00025 per share on 
equity transactions, subject to a monthly fee cap of $750,000 per 
member organization. The Exchange proposes to eliminate the monthly fee 
cap and raise the equity transaction fee to $0.000275 per share. Under 
the current fee structure, the member organizations with the highest 
trading volume on the Exchange benefit from a lower effective fee level 
than member organizations sending smaller volumes to the Exchange, 
because they benefit from the monthly cap. After the elimination of the 
monthly cap, the effective fee rate will be the same for all member 
organizations regardless of how much volume they send to the 
Exchange.\6\ Moreover, while the transaction fee is increasing from 
$0.00025 to $0.000275, the prohibition of specialist commissions 
referenced above will lead to a lower effective trading cost when 
compared to the combined costs of transaction fees and specialist 
commissions under the current structure. As such, the Exchange believes 
that the combined effect of the fee change and the prohibition of 
specialist commissions will be to make its pricing structure more 
competitive, more equitable, more transparent and easier to understand.
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    \6\ The Exchange's $80 per transaction cap on fees will continue 
to be applied.
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    Unlike transactions in listed ETFs, on which the Exchange charges a 
$0.0030 per share fee, the Exchange does not currently charge fees on 
transactions in ETFs traded on an unlisted trading privileges basis. As 
of December 1, 2006, the Exchange proposes to charge the same fee on 
transactions in ETF securities traded on a UTP basis as it charges on 
listed ETFs.
    In order to partially offset the specialists' loss of commissions, 
the Exchange is eliminating the specialist trading privilege fee and 
the specialist allocation fee. The specialist allocation fee is charged 
to the specialist allocated a new equity listing and for any specific 
allocation the fee payable is an amount equal to the difference between 
the initial listing fee the company is required to pay subject to the 
Exchange's $250,000 cap on initial listing fees and the amount the 
company would have to pay if the listing fee cap was $500,000.\7\ 
Initial listing fees payable by companies will continue to be capped at 
$250,000, notwithstanding the elimination of the specialist allocation 
fee.
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    \7\ See Exchange Act Release No. 34-43700 (December 11, 2000); 
65 FR 79147 (December 18, 2000) (SR-NYSE-00-48).
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    The Exchange is also instituting a program of revenue sharing with 
Exchange specialists. Revenue sharing payments to specialists will be 
made from the Exchange's general revenues and will not be limited to a 
particular revenue source. Given the uncertainties faced by specialists 
in light of the complete implementation of the Exchange's hybrid market 
initiative over the next several months coupled with the loss of 
commission income, in order to provide to the specialist firms a source 
of payments in lieu of commissions for a transitional period, the 
Exchange will distribute a fixed amount of $53 million among the 
specialists with respect to the six-month period commencing on December 
1, 2006. This fixed amount will be allocated among the specialist firms 
based on their performance in October 2006, and will be allocated in 
proportion to the rebates each of the specialist firms would be 
entitled to under the formulas set forth in items (2) and (3) (but not 
item (1)) of the next paragraph. The transitional rebate will be paid 
in six equal monthly installments.
    Commencing June 1, 2007, the Exchange intends to institute a 
revenue sharing program that will provide variable payments to the 
specialist firms depending on performance. The Exchange will file a 
rule filing with the Commission pursuant to the Act and the rules 
thereunder in relation to such revenue sharing program prior to its 
implementation. While the nature of the revenue sharing program that 
the Exchange will ultimately propose may change depending on market 
conditions in the intervening period, it is currently anticipated that 
the revenue sharing program will have the following three components:
    (1) Specialists would receive a rebate (calculated on a monthly 
basis) of $0.000275 per share for each share of their specialty 
securities they either buy or sell on the Exchange.
    (2) Specialists would receive a rebate each month relating to their 
absolute market share in each of their specialty stocks if that market 
share exceeds 35%. A market share in a stock that is equal to or 
exceeds 35% would entitle a specialist to a rebate of (i) $15 for each 
percentage point above or equal to 35% up to and including 50%, (ii) 
$25 for each percentage point above 50% up to and including 65%, (iii) 
$35 for each percentage point above 65% up to and including 80%, and 
(iv) $45 for each percentage point above 80%. The following are 
examples of how this rebate would be paid:
     If Specialist X trades XYZ stock in which the Exchange has 
a 50% market share, it would receive $225 per month, which is 15% 
multiplied by $15.
     If Specialist X trades XYZ stock in which the Exchange has 
a 65% market share, it would receive $600 per month, which is 15% 
multiplied by $15, plus 15% multiplied by $25.
    (3) Specialists would receive a volume-weighted rebate each month 
for every share traded in a stock in which the Exchange has a greater 
than 35% market share. If the Exchange has a market share:
     Equal to or greater than 35% up to and including 50%, the 
rebate would be $0.00013 per share.
     Greater than 50% up to and including 65%, the rebate would 
be $0.00014 per share.
     Greater than 65% up to and including 80%, the rebate would 
be $0.00015 per share.
     Greater than 80% the rebate would be $0.00016 per share.
    The following are examples of how the volume-weighted rebate would 
be paid:
     If Specialist X trades XYZ stock in which the Exchange has 
a 50% market share, it would receive a rebate of $0.00013 for every 
share traded above the 35% market share threshold.
     If Specialist X trades XYZ stock in which the Exchange has 
a 65% market share, it would receive a rebate of $0.00013 per share for 
every share traded above the 35% market share threshold up to and 
including a 50% market share, and then would receive $0.00014 for every 
share above the 50% level.
    The Exchange may alter the provisions of the revenue sharing 
program in the future in response to its experience with its 
application over time, in particular in light of the Exchange's full 
implementation of its hybrid market initiative.\8\
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    \8\ The Exchange will file a rule filing with the Commission 
pursuant to the Act and the rules thereunder in relation to any such 
changes prior to their implementation.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act \9\ in general and furthers 
the objectives of

[[Page 71217]]

Section 6(b)(4) \10\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees and other charges 
among its members and other persons using its facilities.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(2) 
\12\ thereunder because it establishes or changes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 19b-4(f)(2).
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    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 furtherance of the purposes of the Act.

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 No. SR-NYSE-2006-106 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-2006-106. 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 Commissions 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 
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-2006-106 and should be submitted on or before December 29, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-20872 Filed 12-7-06; 8:45 am]

BILLING CODE 8011-01-P