Document ID: SEC-2008-0611-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2008-04-24T04:00Z

[Federal Register: April 24, 2008 (Volume 73, Number 80)]
[Notices]               
[Page 22193-22194]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24ap08-90]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57682; File No. SR-NYSE-2008-29]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to NYSE Rule 92(c)(3)

April 17, 2008.
    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 April 11, 2008, the New York Stock Exchange LLC (``NYSE'' 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 substantially prepared by the 
Exchange. The Exchange has designated the proposed rule change as a 
``non-controversial'' rule change pursuant to section 19(b)(3)(A) of 
the Act \3\ and Rule 19b-4(f)(6) 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).
    \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 Exchange proposes to extend the operative date of NYSE Rule 
92(c)(3) from May 14, 2008 to March 31, 2009. There is no new rule 
text.

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 is proposing to extend the delayed operative date of 
NYSE Rule 92(c)(3) from May 14, 2008 to March 31, 2009. The Exchange 
believes that this extension is necessary to allow it, and the 
Financial Industry Regulatory Authority, Inc. (``FINRA''), sufficient 
time to assess their respective rules concerning trading ahead, for the 
purpose of harmonizing these rules, and to make any necessary changes 
to achieve a standardized industry practice.
Background
    On July 5, 2007, the Commission approved amendments to NYSE Rule 92 
to permit riskless principal trading at the Exchange.\5\ These 
amendments were filed, in part, to begin the process of harmonizing 
NYSE Rule 92 and FINRA's so-called ``Manning Rule.'' \6\ In connection 
with these amendments, the Exchange implemented NYSE Rule 92(c)(3), 
which permits Exchange member organizations to submit riskless 
principal orders to the Exchange, but requires them to submit a report 
of the execution of the facilitated order to a designated Exchange 
database. Exchange member organizations must also submit to the same 
database, within such time frame and in such format as the Exchange may 
from time to time require, an electronic report containing data 
elements sufficient to provide an electronic link of the execution of 
the facilitated order to all of the underlying orders.
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    \5\ See Securities Exchange Act Release No. 56017 (July 5, 
2007), 72 FR 38110 (July 12, 2007) (SR-NYSE-2007-21).
    \6\ See NASD Rule 2111 and IM-2110-2.
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    For purposes of NYSE Rule 92(c)(3), the Exchange informed its 
member organizations that when executing riskless principal 
transactions, they must submit order execution reports to the 
Exchange's Front End Systemic Capture (``FESC'') database, linking the 
execution of the riskless principal order on the Exchange to the 
specific underlying orders. The information provided must be sufficient 
for both member firms and the Exchange to reconstruct in a time-
sequenced manner all orders, including allocations to the underlying 
orders, with respect to which a member organization is claiming the 
riskless principal exception.
    Because the rule change required both the Exchange and its member 
organizations to make certain changes to their trading and order 
management systems, the NYSE filed for immediate effectiveness to delay 
to May 14, 2008 the operative date of the NYSE Rule 92(c)(3) 
requirements, including submitting end-of-day allocation reports for 
riskless principal transactions and using the riskless principal 
account type indicator.\7\
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    \7\ See Securities Exchange Act Release No. 56968 (December 14, 
2007), 72 FR 72432 (December 20, 2007) (SR-NYSE-2007-114).
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Request for Extension
    The Exchange has been working diligently to develop its FESC 
database to accept riskless principal order types and the underlying 
batch orders. As part of this process, the Exchange has been in contact 
with its member organizations regarding how to program their respective 
systems to meet the new reporting requirements. It has become evident, 
however, that the differences between the NYSE and FINRA reporting 
systems for riskless principal transactions is causing member 
organizations that trade at the Exchange and in other markets to have 
to make challenging programming changes in order to comply with 
disparate reporting requirements.
    For example, Exchange member organizations have informed the 
Exchange that they often do not know to which market center an order 
will be routed until the time of entry, and that determination is often 
made electronically. These firms have advised the NYSE that it is not 
possible for them to implement by May 14, 2008 the required changes 
that will enable them to choose among multiple market centers for 
routing a riskless principal order and yet also meet the differing 
reporting standards.
    Because the Exchange and FINRA are in the process of fully 
harmonizing their respective rules, including reviewing the 
possibilities for a uniform reporting standard for riskless principal 
transactions, the Exchange believes that at this stage, it would be 
premature to require firms to meet the FESC reporting requirements.
    Accordingly, to provide the Exchange and FINRA the time necessary 
to review their respective rules and to develop a harmonized rule set 
that would apply

[[Page 22194]]

across their respective marketplaces, the Exchange is proposing to 
delay the operative date for NYSE Rule 92(c)(3) from May 14, 2008 to 
March 31, 2009.
    Pending the harmonization of the two rules, the Exchange will 
continue to require that, as of the date each Exchange member 
organization implements its riskless principal routing, the Exchange 
member organization must have in place systems and controls that allow 
it to easily match and tie riskless principal execution on the Exchange 
to the underlying orders, and that it be able to provide this 
information to the Exchange upon request. Moreover, the Exchange will 
coordinate with FINRA to examine for compliance with the rule 
requirements.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with section 6(b) of the Act,\8\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\9\ in particular, insofar as 
it is designed to prevent fraudulent and manipulative acts and 
practices, 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 believes the proposed extension will 
provide the Exchange and FINRA the time necessary to develop a 
harmonized rule concerning trading ahead that will enable Exchange 
member organizations to participate in the national market system 
without unnecessary impediments.
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    \8\ 15 U.S.C. 78f(b).
    \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

    No written comments were solicited or received with respect to 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\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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 Exchange has requested and the Commission has determined to 
waive this five-day pre-filing notice requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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 Number SR-NYSE-2008-29 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-2008-29. 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, on official business 
days between the hours of 10 a.m. and 3 p.m. 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 Number SR-
NYSE-2008-29 and should be submitted on or before May 15, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E8-8873 Filed 4-23-08; 8:45 am]

BILLING CODE 8010-01-P