Document ID: SEC-2006-1264-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2006-09-29T04:00Z

[Federal Register: September 29, 2006 (Volume 71, Number 189)]
[Notices]               
[Page 57596-57598]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29se06-145]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54480; File No. SR-NYSE-2006-72]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Order Granting Accelerated Approval to Proposed 
Rule Change, as Amended, Relating to Exchange to Exchange Billing Under 
the Linkage Plan

September 21, 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 August 25, 2006, 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 and 
II below, which Items have been prepared by the Exchange. On September 
7, 2006, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons, and 
is approving the proposal, as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240. 19b-4.
    \3\ See Amendment No. 1 which replaced the original filing in 
its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to permit the Exchange to bill directly, and 
to accept direct billing from, other participants in the proposed 
``Plan for the Purpose of Creating and Operating an Intermarket 
Communications Linkage Pursuant to Section 11A(a)(3)(B) of the 
Securities Exchange Act of 1934'' (``Linkage Plan'') that are unable to 
implement Sponsoring Member billing, as described herein, on October 1, 
2006.
    This proposal does not require changes to the Exchange's 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 NYSE 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 III below. The NYSE has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such 
statements.\4\
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    \4\ The staff has made minor changes to the Exchange's summaries 
pursuant to the telephone conversation between Karen Lorentz, 
Managing Director, Competitive Analysis, NYSE, and Nataliya Cowen, 
Special Counsel, Division of Market Regulation, Commission, on 
September 15, 2006.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On July 17, 2006, the American Stock Exchange LLC, the Boston Stock 
Exchange, Inc., the Chicago Board Options Exchange, Incorporated, the 
Chicago Stock Exchange, Inc., The NASDAQ Stock Market LLC, the National 
Stock Exchange, the New York Stock Exchange LLC, and the NYSE Arca, 
Inc., executed and filed with the Commission the Linkage Plan. The 
Philadelphia Stock Exchange, Inc. (``Phlx'') subsequently executed the 
Linkage Plan on August 1, 2006.\5\ The Linkage Plan was filed with the 
Commission pursuant to Rule 608 of Regulation NMS under the Act.\6\ The 
purpose of the proposed Linkage Plan is to enable the Linkage Plan 
participants to act jointly in planning, developing, operating and 
regulating the NMS Linkage System (``Linkage'') that will 
electronically link the Linkage Plan Participant Markets to one 
another, as described in the Linkage Plan. The Linkage Plan 
participants have requested that the Commission approve the Linkage 
Plan by October 1, 2006. The Plan would run concurrently with the ITS 
Plan from October 1, 2006 until February 5, 2007.\7\ The Linkage Plan 
by its terms ends on June 30, 2007;

[[Page 57597]]

however, if the Linkage Plan participants wish to extend the term they 
could agree to do so, subject to Commission approval.\8\
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    \5\ See Securities Exchange Act Release No. 54239 (July 28, 
2006); 71 FR 44328 (August 4, 2006). A Linkage Plan, dated August 1, 
2006, reflecting Phlx's inclusion as a Linkage Plan participant, was 
sent to the Commission on August 8, 2006.
    \6\ 17 CFR 242.608.
    \7\ The Linkage Plan participants have requested that the 
Commission grant appropriate exemptions from the ITS Plan to 
accommodate this result. See letter to Nancy Morris, Secretary, 
Commission, from Robert Hill, Chairman, ITS Operating Committee, 
dated September 18, 2006.
    \8\ Upon implementation of Rule 611 on February 5, 2007, the ITS 
Plan Participants expect to have submitted an amendment to eliminate 
the ITS Plan.
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    The Linkage Plan provides that orders must be sent to a Participant 
Market through the auspices of a member of that Participant Market 
(``Sponsoring Member''). An order entered through the Linkage must 
specify the member of the destination market (either clearing member or 
default Sponsoring Member). Pursuant to the Linkage Plan, each market 
should maintain within the facilities of the Securities Industry 
Automation Corporation (``SIAC''), the facilities manager for the 
Linkage, a database of default Sponsoring Members for after-hours 
processing and billing for orders sent to a market where the 
originating firm is not a member of the market to which the order is 
sent for execution.
    Historically, ITS Plan Participants have not imposed transaction 
charges for executions of commitments delivered through ITS, although 
the ITS Plan does not prohibit such charges. Under the Linkage Plan, 
each participant would be accessed through its own members and could 
charge for orders executed in its market through the Linkage. The 
destination market would bill the clearing or Sponsoring Member for 
executions in that market, pursuant to that market's transaction fee 
schedule,\9\ based on the monthly reports provided by SIAC.\10\ Certain 
markets, however, may be unable to supply clearing or Sponsoring Member 
information on orders routed through the Linkage to other markets by 
October 1, 2006. In this case, the Linkage Plan participants have 
agreed to bill each other directly, based on data supplied by SIAC.\11\
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    \9\ The NYSE will bill for such executions on the NYSE in 
accordance with the NYSE's current transaction fee schedule. See 
Securities Exchange Act Release No. 54142 (July 13, 2006), 71 FR 
41493 (July 21, 2006) (SR-NYSE-2006-46).
    \10\ Under the Linkage Plan, the member of the destination 
market would be identified by a unique clearing number. If the 
clearing number provided by the originating Participant Market does 
not identify a member of the destination market, SIAC will identify 
the default Sponsoring Member of the originating market at the 
destination market for the security in question and that Sponsoring 
Member's identification information will be included on the order to 
the destination market on all reports sent to the destination 
market, including any report for billing purposes. The member 
identified on the order will be responsible for any fees in the 
destination market. SIAC will provide to Participants a key to match 
the clearing number to the member's name.
    \11\ The National Association of Securities Dealers, Inc. 
(``NASD'') is not a member of the Linkage Plan. In lieu of direct 
billing to or by the NASD, Linkage Plan participants expect to bill 
Alternative Display Facility (``ADF'') market participants directly 
and would be directly billed by ADF market participants, based upon 
data supplied by SIAC.
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    Example: A member of a self-regulatory organization (``SRO'') A 
that is not a member of SRO B sends an order through the Linkage to SRO 
B for execution. In routing the transaction through the Linkage, SRO A 
is unable to include Sponsoring Member information on the report. The 
transaction will be included in a monthly report provided to SRO B by 
SIAC (without identifying Sponsoring Member information), and SRO B may 
bill SRO A directly for the transaction in accordance with SRO B's 
transaction fee schedule applicable to the Linkage.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\13\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
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 comments on this 
proposal.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2006-72 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-2006-72. 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 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-2006-72 and should be submitted on or before October 20, 2006.

IV. Commission's Findings and Order Granting Accelerated Approval of a 
Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder, applicable to a national 
securities exchange.\14\ In particular, the Commission finds that the 
proposal, as amended, is consistent with the

[[Page 57598]]

provisions of Section 6(b)(5),\15\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, 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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    \14\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 
U.S.C. 78c(f).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Linkage Plan, the purpose of which is to enable its 
participants to act jointly in planning, developing, operating and 
regulating the NMS Linkage System electronically linking the Linkage 
Plan Participant Markets to one another, is expected to become 
operative on October 1, 2006. The Linkage Plan provides for a mechanism 
for charging for orders executed in each Participant Market using the 
information about a clearing or Sponsoring Member. Certain markets have 
indicated that they may be unable to supply clearing or Sponsoring 
Member information on orders routed through the Linkage to other 
markets, thus under the proposed rule change, which the Commission 
understands will be adopted by each of the Linkage Plan participants, 
the participants have agreed to bill each other directly, based on data 
supplied by SIAC.
    The Exchange has requested that the Commission approve the proposed 
rule change, as amended, on an accelerated basis. The Exchange notes 
that the Linkage Plan participants expect the Linkage Plan to become 
operative on October 1, 2006, and that accelerated approval would 
permit the Exchange to implement exchange to exchange billing 
procedures at the start of the Linkage Plan's operation, allowing 
Linkage Plan participants who do not have a Sponsoring Member at each 
destination market, to use the Linkage Plan and pay fees directly to 
the other Linkage Plan participant.\16\
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    \16\ The Commission understands that each of the Linkage Plan 
participants will file a proposed rule change similar to this one. 
To date, the Amex and the Phlx have done so. See file nos. SR-Amex-
2006-85 and SR-Phlx-2006-58.
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    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\17\ for approving the proposed rule change, as amended, prior 
to the thirtieth day after the date of publication of notice in the 
Federal Register. Granting accelerated approval would permit the 
Exchange to implement exchange to exchange billing procedures at the 
start of the Linkage Plan's operation enabling Linkage Plan 
participants who were not able to find a Sponsoring Member at each of 
the destination markets, to use the Linkage Plan and pay fees directly 
to another Linkage Plan participant.
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    \17\ See id.
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    Accordingly, the Commission finds that there is good cause, 
consistent with Section 19(b)(2) of the Act,\18\ to approve the 
proposed rule change, as amended, on an accelerated basis.
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    \18\ See id.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change, as amended, (SR-NYSE-2006-72) 
is hereby approved on an accelerated basis.
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    \19\ See id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-15986 Filed 9-28-06; 8:45 am]

BILLING CODE 8010-01-P