Document ID: SEC-2006-0358-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange, LLC
Posted Date: 2006-03-17T05:00Z

[Federal Register: March 17, 2006 (Volume 71, Number 52)]
[Notices]               
[Page 13882-13884]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17mr06-127]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53472; File No. SR-NYSE-2006-18]

 
Self-Regulatory Organizations; New York Stock Exchange, LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Rule 104, Dealings by Specialists

March 13, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 8, 2006, the New York Stock Exchange, LLC (``NYSE'' or 
the ``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. The Exchange 
filed the proposal 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\ 
upon filing with the Commission.\5\ 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).
    \5\ The NYSE has asked the Commission to waive the 5-day pre-
filing notice requirement and the 30-day operative delay. See 
Section 19(b)(3)(A) of the Act, and Rule 19b-4(f)(6)(iii) 
thereunder. 15 U.S.C. 78s(b)(1), 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Rules 104.12 and .13 concerning 
investment accounts and investment positions in specialty securities 
for securities issued by the Exchange. The text of the proposed rule 
change is available on NYSE's Web site, http://www.nyse.com, at NYSE's 

principal office, and at the Commission's Public Reference Room.

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
    NYSE Rule 104 (Dealings by Specialists) governs specialists' 
dealings in their specialty securities. Trades conducted by a 
specialist in specialty securities are effected in the specialist's 
dealer account. Under NYSE Rule 104.12, a specialist may assign part of 
his or her dealer account position to an investment account, provided 
that such assignment does not create a short position in the 
specialist's dealer account.
    Additionally, NYSE Rule 104.12 prohibits the assignment to the 
investment account of any position or part thereof that was purchased 
on nonstabilizing ticks, i.e., a ``plus'' tick (at a price higher than 
the last trade) or ``zero plus tick'' (higher than the last different 
trade). In order to assign a position to an investment account, a 
specialist's purchases in that security must be at least 75% 
stabilizing for that day and the calendar week encompassing the 
purchase of that security.
    Similarly, positions in the dealer account are netted with 
positions in an investment account. Thus, if the specialist is short in 
the dealer account, but has a long position in the investment account 
that exceeds the short dealer position, the specialist is considered to 
be net long. In that situation, a specialist may not liquidate the 
short dealer account position by purchasing on a plus tick; nor may the 
specialist purchase on a zero plus tick more than 50% of the stock that 
is being offered in the market at that time, and, in no event may the 
specialist purchase the final 100 shares offered.
    NYSE Rule 104.13 requires that transactions effected in specialty 
stocks for the accounts of specified persons affiliated with or related 
to a specialist must be for investment purposes and executed in 
accordance with certain restrictions relating to the price at which 
transactions may take place, known as ``tick'' restrictions. The 
accounts specified in the rule include accounts of employees or parties 
active in the business of the specialist, the spouse or children 
residing in the same household as a specialist or person active in the 
specialist business, and any approved person (individual or entity in a 
control relationship) of the specialist, other than an approved person 
entitled to an exemption pursuant to NYSE Rule 98 (Restrictions on an 
Approved Person Associated with a Specialist's Member Organization).
    NYSE-Archipelago Merger. The merger of NYSE and Archipelago 
Holdings, Inc. has received Commission approval and was completed on 
March 7, 2006.\6\ Trading in the common stock of the newly-formed, 
publicly-traded holding company NYSE Group, Inc. on the Exchange will 
commence on March 8, 2006, under the symbol ``NYX.''
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    \6\ See Securities Exchange Act Release No. 53382 (February 27, 
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77).
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    Under the terms of the merger, members of the Exchange, i.e., 
seatholders on the NYSE, will receive shares of NYX stock in exchange 
for their membership interests. In certain circumstances, where the 
purchase of an Exchange membership was the subject of a financing 
arrangement with the member organization a seat holder was associated 
with, the member organization will be eligible to receive the NYX 
shares being exchanged for a membership. These NYX shares will be held 
in a special account separate from the specialist's dealer and 
investment accounts.
    The NYX shares received as a result of this exchange will be 
subject to transfer restrictions set forth in the amended and restated 
Certificate of Incorporation of NYSE Group, Inc. These transfer 
restrictions prohibit any direct or indirect assignment, sale, 
exchange, transfer, tender or any other disposition of NYX shares. 
Except as otherwise provided in Article IV,

[[Page 13883]]

Section 4 of the amended and restated Certificate of Incorporation, 
these restrictions are scheduled to expire after 12, 24, and 36 months 
subsequent to the issuance date of the shares, for one-third of the 
total shares after each such 12-month interval. The specialist 
organization will be informed by the transfer agent as to the specific 
date the restrictions will be lifted for each tranche. It is only when 
the restrictions are removed that these shares will be transferred to 
the specialist's dealer or investment account and will be fully subject 
to NYSE Rule 104.
    Among those who will receive restricted NYX shares will be 
seatholders who are associated with the member organization which is 
registered as the specialist in NYX stock, and that specialist member 
organization itself.
    Proposed Rule Change. The Exchange proposes to amend NYSE Rules 
104.12 and .13 to exempt from these provisions any positions held by a 
specialist or his or her organization in a specialty security issued by 
NYSE Group, Inc. and listed on the NYSE which is restricted as to sale 
or transfer. This exemption will last during the pendency of such 
restriction as to sale or transfer. The Exchange believes that given 
that these shares cannot be used in the specialist's normal market 
making activities, the application of NYSE Rules 104.12 and .13 to 
these positions does not serve any useful purpose.
    The provisions of NYSE Rule 104.12 are designed to permit 
specialists to establish investment positions in specialty securities 
while recognizing that all trading activity and positions in such 
specialty securities must be available for use in the specialist's 
dealer activities. The restrictions contained in NYSE Rule 104.13 help 
ensure that associated persons of specialists do not trade in a 
destabilizing manner any NYSE security in which the related specialist 
organization is registered. Since the shares of NYX that are to be 
received by the specialists, the specialist member organization and any 
associated parties in exchange for their membership interests will be, 
for all practical purposes, unable to be used in any manner until the 
restrictions described above are removed, the Exchange believes that it 
would be inappropriate to include them within the purview of NYSE Rules 
104.12 and .13.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \7\ that an Exchange have rules that 
are designed 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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    \7\ 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

    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 rule does not (i) significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
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 
Exchange 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 \8\ and Rule 19b-
4(f)(6) thereunder.\9\ Accordingly, a proposed rule change filed under 
Rule 19b-4(f)(6) under the Act \10\ normally may not become operative 
prior to 30 days after the date of filing. However, Rule 19b-
4(f)(6)(iii) \11\ permits the Commission to designate a shorter time if 
such action is consistent with the protection of investors and the 
public interest.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
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    The NYSE has requested that the Commission waive the 5-day pre-
filing notice requirement and the 30-day operative delay, which would 
make the rule change effective and operative upon filing. The 
Commission believes that waiver of the 5-day pre-filing notice and the 
30-day operative delay is consistent with the protection of investors 
and the public interest, because it allows the NYSE to implement this 
proposal as soon as possible upon the commencement of trading of NYX 
stock on March 8, 2006, and thereby accommodates the receipt and 
retention of restricted NYX shares by the specialist in a special 
account separate and apart from the specialist's dealer or investment 
accounts and addresses the treatment of such shares under NYSE Rule 
104. For these reasons, the Commission designates the proposal to be 
effective and operative upon filing with the Commission.\12\
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    \12\ For the 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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    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.\13\
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    \13\ See 15 U.S.C. 78s(b)(3)(C).
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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, 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-2006-18 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-2006-18. 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

[[Page 13884]]

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 the filing will also 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-2006-18 and should be 
submitted by April 7, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
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    \14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-3898 Filed 3-16-06; 8:45 am]

BILLING CODE 8010-01-P