Skip to Content

Notice

Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 17

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble October 2, 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 28, 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 proposal 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 is proposing to add Rule 17T (“Exchange Designated Default Sponsoring Member”) in order to establish an Exchange designated default sponsoring member broker/dealer for use when routing orders to the best bids and offers on other market centers in accordance with Exchange rules and SEC Regulation NMS.

The text of the proposed rule change is available on the NYSE's Web site (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 NYSE 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 the Statutory Basis for, the Proposed Rule Change

1. Purpose

Since 1978, the Exchange has routed orders (as commitments to trade) to other market centers and received them through the Intermarket Trading System (“ITS”).[5] Current anticipated changes to ITS, in addition to the adoption of Regulation National Market System (“Regulation NMS”) [6] to modernize and strengthen the regulatory structure of the National Market System, result in the Exchange's need to establish a Start Printed Page 60207designated default sponsoring member broker/dealer in the destination market (hereinafter “default Sponsoring Member”) in order to ensure that customer orders sent to the Exchange for execution are able to access better prices on other markets.

On July 17, 2006, the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., 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 a “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”).[7] Pursuant to the Linkage Plan the Securities Industry Automation Corporation (“SIAC”) will serve as the facilities manager for the data processing hardware, software and communications network (the “System”) that links electronically the market participants. SIAC will further be responsible for the operation and maintenance of the System. The current ITS hardware will remain in use until June 30, 2007.

Under the Linkage Plan, member access is provided to each market participant through the clearing member on the order or through the mechanism of a default Sponsoring Member. Upon the effective date of the Linkage Plan (October 1, 2006), through the end of June 2007, the Exchange intends to provide member access to the other market center participants in the Linkage Plan by utilizing the identifier of the default Sponsoring Member.

Specifically, the System will automatically substitute the identifier of all member organizations' orders that are routed to other market centers with the identifier of the default Sponsoring Member prior to the routing of the orders to the appropriate destination market.

The Linkage Plan allows participants to charge for orders executed in their market through the Linkage Plan. The destination market may bill the default Sponsoring Member for executions in that market, pursuant to such market's transaction fee schedule, based on the monthly reports provided by SIAC. As a result, the Exchange anticipates charging a fee for the services of the default Sponsoring Member. Charges related to the services of the default Sponsoring Member will be the subject of a separate fee filing.

In addition, pursuant to the proposed rule change, neither the Exchange nor the default Sponsoring Member shall be liable for any damages sustained by an allied member or member organization as a result of the services provided by the default Sponsoring Member, except as stated in Exchange Rules.

The interim establishment of the default Sponsoring Member serves only to provide member access to other destination market(s) for execution of orders at more favorable prices.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act [8] in general and furthers the objectives of Section 6(b)(5) [9] in particular, in that 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.

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 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, if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act [10] and Rule 19b-4(f)(6) thereunder.[11] As required under Rule 19b-4(f)(6)(iii) under the Act,[12] the Exchange provided the Commission with 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 the filing of the proposed rule change.

A proposed rule change filed under 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing.[13] However, Rule 19b-4(f)(6)(iii) [14] permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay and render the proposed rule change to become operative immediately. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Linkage Plan is expected to become operative on October 2, 2006, and waiving the 30-day operative period would enable the Exchange to implement the default Sponsoring Member mechanism at the start of the Linkage Plan's operation. For the reasons stated above, the Commission therefore designates the proposal to become operative upon filing with the Commission.[15]

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.

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-2006-74. 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-2006-74 and should be submitted on or before November 2, 2006.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[16]

Nancy M. Morris,

Secretary.

End Signature End Preamble

Footnotes

5.  ITS facilitates trades between members located in different markets. Through ITS, a member in any participating market may send orders, as commitments to trade, at the bid or offer on any other participating market. The ITS Plan is administered by the participating markets, and is filed with and approved by the Securities and Exchange Commission in accordance with Section 11A of the Securities Exchange Act of 1934.

Back to Citation

6.  See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005).

Back to Citation

7.  The Commission approved the NMS Linkage Plan on September 29, 2006. See Securities Exchange Act Release No. 54551 (Sept. 29, 2006). It should be noted that the Philadelphia Stock Exchange, Inc. (“Phlx”) executed the Linkage Plan on August 1, 2006.

Back to Citation

12.  17 CFR 240.19b-4(f)(6)(iii).

Back to Citation

15.  For purposes of waiving the operative date of this proposal only, the Commission has considered the impact of the proposed rule on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

Back to Citation

[FR Doc. E6-16847 Filed 10-11-06; 8:45 am]

BILLING CODE 8011-01-P