Document ID: SEC-2006-0523-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: National Stock Exchange
Posted Date: 2006-04-24T04:00Z

[Federal Register: April 24, 2006 (Volume 71, Number 78)]
[Notices]               
[Page 21063-21064]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap06-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53663; File No. SR-NSX-2006-05]

 
Self-Regulatory Organizations; National Stock Exchange; Notice of 
Filing of Proposed Rule Change To Prohibit Tape Shredding

April 17, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, as amended, (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is 
hereby given that on April 4, 2006, National Stock Exchange 
SM (``NSX'' or ``Exchange'') 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. 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

    The Exchange is proposing to add an interpretation to Rule 3.1, 
which identifies the splitting of any order into multiple smaller 
orders (``tape shredding'') for any purpose other than best execution 
as contrary to the high standards of commercial honor and just and 
equitable principles of trade. The text of the proposed rule change is 
below. Proposed new language is in italic.
RULES OF NATIONAL STOCK EXCHANGE
* * * * *

[[Page 21064]]

CHAPTER III.
Rules of Fair Practice
Rule 3.1. Business Conduct of Members
    A member, in the conduct of his business, shall observe high 
standards of commercial honor and just and equitable principles of 
trade
    Interpretations and Policies:
    01. A member may not split any order into multiple smaller orders 
for any purpose other than seeking the best execution for the entire 
order.
* * * * *

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 NSX 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 Commission has expressed concern that participants in the 
United States securities markets may be engaging in the practice of 
``tape shredding,'' the practice of unbundling customer orders into 
multiple smaller orders for the primary purpose of maximizing payments 
to the participant or participant firms. Accordingly, the Commission 
has requested self-regulatory organizations to adopt rules to prohibit 
the practice.
    The Exchange strongly believes that the practice of tape shredding 
is inappropriate and should be prohibited. Further, it believes that 
tape shredding constitutes conduct that is inconsistent with the high 
standard of commercial honor and just and equitable principles of 
trade. Accordingly, the Exchange is adding an interpretation and policy 
to its Rule 3.1 to explicitly prohibit NSX members from splitting large 
orders into multiple smaller orders for any purpose other than best 
execution.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\3\ in general, and furthers the objectives of Section 6(b)(5) of 
the Act,\4\ in particular, in that 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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    \3\ 15 U.S.C. 78f(b).
    \4\ 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 inappropriate burden on competition.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-NSX-2006-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NSX-2006-05. 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 offices of NSX. 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-NSX-2006-05 and should be submitted on or before May 15, 2006.
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    \5\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
Nancy M. Morris,
Secretary.
[FR Doc. E6-6067 Filed 4-21-06; 8:45 am]

BILLING CODE 8010-01-P