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Notice

Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Definition of Crowd and To Clarify the Requirements of Exchange Rule 70.20(f)

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Start Preamble September 12, 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 September 1, 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. The Exchange filed 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 proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend Exchange Rule 70.30, which sets forth the definition of Crowd, and to clarify the requirements of Exchange Rule 70.20(f). The text of the proposed rule change is available on the NYSE's Web site at http://www.nyse.com, at the NYSE's Office of the Secretary, 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 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.

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

1. Purpose

The Exchange's Hybrid Market[SM] integrates the auction market with automated trading. Essential to the auction market is the interaction among members on the Floor and between Floor brokers and orders in the Display Book® System, that creates opportunities for price improvement, provides information about changing market conditions, and serves as a catalyst to trading.[5] Exchange Rule 70.30 defines a Crowd as “* * * five contiguous panels at any one post where securities are traded.” [6] Exchange Rule 70.30 further requires that Floor brokers be in the Crowd in order to represent orders that the Floor broker has in his Start Printed Page 54863or her agency interest files (i.e., in order to “e-Quote”). Pursuant to Exchange Rule 70.30, a Floor broker may only have agency interest files or e-Quote in one Crowd at a time.

As the Exchange continues its implementation of the Hybrid MarketSM it has gained experience operating in the Hybrid MarketSM environment. Based on this experience, the Exchange seeks to amend the definition of Crowd in order to better facilitate the critical interaction among members on the Floor.

In practice, the five contiguous panel definition has proven too rigid a concept. The Exchange Floor is made up of five trading rooms. Trading rooms have large, in some instances rounded, posts that each contain distinct panels at which designated securities are traded. The post configuration on the Floor is such that, in certain instances, individuals standing at two separate posts are closer to each other than individuals standing at the first and fifth contiguous panels of the same post. For example, a Floor broker standing in the Crowd at Post 1 Panel B is easily able to see and hear the members located at Post 2 Panel L because they are located directly across from each other. In contrast, a Floor broker at Post 1 Panel B cannot easily see or hear the members located at Post 1 Panel G, which is exactly five contiguous panels away. Specifically, Panel B is on the opposite side of Post 1 from Panel G and thus the Floor broker must walk partly around Post 1 in order to effectively interact with the members at Post 1 Panel G. Nevertheless, under the current rule, the Floor broker standing at Post 1 Panel B is considered part of the Crowd that includes Post 1 Panel G. Further, pursuant to the current rule, in order for the Floor broker at Post 1 Panel B to represent an order in a security traded at Post 2 Panel L, the Floor broker would first have to withdraw his or her agency interest or e-Quote from the Post 1 Panels B-G Crowd.

In this filing, the Exchange proposes to amend the definition of the Crowd in order to reflect more accurately the areas which most efficiently facilitate the beneficial interaction among the members on the Floor. The Exchange believes that the best way to facilitate this interaction is to re-define the concept of Crowd from strictly contiguous panels to encompass an area that enables members to more efficiently conduct business. Essentially, this is the area in which members can see and hear the business conducted at a group of panels. These panels may be at one or more posts. To accomplish this, the Exchange proposes to divide each trading room of the Floor into specific areas, which will be identified on the Floor in a recognizable way. Each area will serve to delineate the boundaries of the Crowd. The Crowds will be created in such a way that when a Floor broker is standing in a Crowd, the Floor broker generally will be able to see and hear the business conducted at each post/panel within that Crowd. Similarly, the specialists in panels included in a Crowd will be able to see and hear the Floor brokers who are representing agency interests or e-Quotes in that Crowd. In addition to physically identifying each Crowd on the Floor in a unique manner, the Exchange will disseminate to its members a notice identifying the specific post(s) and panels comprising each Crowd.

As is the case today, once in a Crowd, a Floor broker is able to e-Quote in all securities located in that Crowd. If the Floor broker leaves one Crowd in order to work in another, the Floor broker is required to withdraw his or her agency interest from the Crowd he or she is leaving. However, a Floor broker may obtain “market looks” in a securities located in other Crowds without canceling his or her e-Quotes. In this filing, the Exchange further seeks to amend Rule 70.20(f) to reflect this concept.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act in general,[7] and furthers the objectives of Section 6(b)(5) of the Act in particular,[8] 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system.

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 proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act [9] and Rule 19b-4(f)(6) thereunder.[10]

A proposed rule change filed under Rule 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing.[11] However, Rule 19b-4(f)(6)(iii) [12] permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange provided the Commission with written notice of its intent to file this proposed rule change at least five business days prior to the date of filing of the proposed rule change. In addition, the Exchange has requested that the Commission waive the 30-day operative delay to allow the Exchange to implement the proposed rule change and avoid any undue confusion. The Exchange believes that the proposed rule change merely seeks to reflect more accurately the areas which most efficiently facilitate the beneficial interaction among the trading professionals on the Floor of the Exchange. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it would allow the Exchange to immediately implement the revised definition of Crowd without undue delay and clarify in Exchange Rule 70.20(f) a Floor broker's ability to obtain “market look” information while in a Crowd. For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission.[13]

Start Printed Page 54864

At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such proposed 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

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-2006-58. 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 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-2006-58 and should be submitted on or before October 10, 2006.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[14]

Nancy M. Morris,

Secretary.

End Signature End Preamble

Footnotes

5.  See Securities Exchange Act Release No. 53539 (March 22, 2006), 71 FR 16353 (March 31, 2006).

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6.  Telephone conversation between Deanna Logan, Director, Office of the General Counsel, NYSE, and Cyndi Rodriguez, Special Counsel, Division of Market Regulation, Commission, on September 7, 2006.

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12.  17 CFR 240.19b-4(f)(6)(iii).

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13.  For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

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[FR Doc. E6-15499 Filed 9-18-06; 8:45 am]

BILLING CODE 8010-01-P