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61524 Federal Register / Vol. 71, No.

201 / Wednesday, October 18, 2006 / Notices

public in accordance with the NYSE filed Amendment Nos. 1 and 2 to the then-prevailing offer price. The
provisions of 5 U.S.C. 552, will be the proposed rule change on April 5, specialist would then make a bid on
available for inspection and copying in 2006 4 and September 8, 2006,5 behalf of the market order to buy at a
the Commission’s Public Reference respectively. The Commission is price above the prevailing bid, for
Room. Copies of such filing also will be publishing this notice to solicit example, at 20.05. If a sell order trades
available for inspection and copying at comments on the proposed rule change, with this bid, the stopped order has
the principal office of NASD. All as amended, from interested persons. received price improvement (as has the
comments received will be posted sell order trading with it). If, however,
I. Self-Regulatory Organization’s
without change; the Commission does another buy order enters the market and
Statement of the Terms of Substance of
not edit personal identifying executes at the offer price of 20.10, the
the Proposed Rule Change
information from submissions. You stopped buy order will be executed at
should submit only information that In the proposed rule change, the that same price pursuant to the
you wish to make available publicly. All Exchange seeks to amend NYSE Rule specialist’s guarantee as evidenced by
submissions should refer to File 116 (‘‘Stop’’ Constitutes Guarantee) and the ‘‘stop.’’
Number SR–NASD–2006–115 and NYSE Rule 123B (Exchange Automated The current Hybrid MarketSM is the
should be submitted on or before Order Routing Systems) regarding a result of a series of initiatives, approved
November 8, 2006. specialist’s ability to ‘‘stop’’ stock and by the Commission, to implement
report such a transaction. The text of the changes to the operation of the
For the Commission, by the Division of proposed rule change is available on the
Market Regulation, pursuant to delegated
Exchange’s market to expand access to
authority.21 NYSE’s Web site (, at the automated trading while preserving the
NYSE’s Office of the Secretary, and at advantages of the agency auction
J. Lynn Taylor,
the Commission’s Public Reference market.6 Customers and other market
Assistant Secretary.
Room. participants will have greater
[FR Doc. E6–17319 Filed 10–17–06; 8:45 am]
II. Self-Regulatory Organization’s opportunities for speed and certainty of
Statement of the Purpose of, and execution through the enhanced
Statutory Basis for, the Proposed Rule electronic trading. Opportunities for
Change price improvement will continue to be
COMMISSION In its filing with the Commission, the NYSE Rule 116 generally provides for
[Release No. 34–54592; File No. SR–NYSE– NYSE included statements concerning the ability of a member to stop stock.
2006–04] the purpose of and basis for the Paragraph .30 in the Rule’s
proposed rule change and discussed any Supplementary Material provides three
Self-Regulatory Organizations; New comments it received on the proposed circumstances in which a specialist may
York Stock Exchange, Inc. (n/k/a New rule change. The text of these statements stop stock, including at the opening or
York Stock Exchange LLC); Notice of may be examined at the places specified reopening of trading in a stock, when a
Filing of Proposed Rule Change and in Item IV below. The Exchange has broker in the trading crowd is
Amendment Nos. 1 and 2 Thereto prepared summaries, set forth in representing another order at the stop
Relating to NYSE Rule 116 (‘‘Stop’’ Sections A, B, and C below, of the most price or when requested to by another
Constitutes Guarantee) and NYSE Rule significant aspects of such statements. member. In the latter circumstance, the
123B (Exchange Automated Order provisions of NYSE Rule 116.30 require
Routing Systems) A. Self-Regulatory Organization’s
Statement of the Purpose of, and that the quotation spread be not less
October 12, 2006. Statutory Basis for, the Proposed Rule than twice the minimum variation
Pursuant to Section 19(b)(1) of the Change (currently one cent), or, if the quotation
Securities Exchange Act of 1934 spread is the minimum variation, that
1. Purpose the quote conditions (i.e., an imbalance
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February The practice of stopping stock by in the amount of shares bid for or
9, 2006, the New York Stock Exchange, specialists on the Exchange refers to a offered) suggest the likelihood of price
Inc. (n/k/a New York Stock Exchange guarantee by the specialist that an order improvement, and that the order be
LLC) (‘‘NYSE’’ or ‘‘Exchange’’) filed he or she receives will be executed at no under 2,000 shares. The rule further
with the Securities and Exchange worse a price than the contra side price provides a limitation of a total of 5,000
Commission (‘‘Commission’’) the in the market at the time the order was shares for all stopped orders. A
proposed rule change as described in stopped, with the understanding that specialist may seek approval of a Floor
Items I, II and III below, which Items the order may in fact receive a better Official to override these conditions. In
have been prepared by the NYSE.3 The price. For example, the Exchange
6 See The Hybrid Market initiative proposed in
market in a stock is quoted at 20.00 bid,
SR–NYSE–2004–05 and Amendments Nos. 1, 2, 3,
21 17 CFR 200.30–3(a)(12). offered at 20.10, and the specialist 5, 6, 7 and 8 thereto approved on March 22, 2006.
1 15 U.S.C. 78s(b)(1). receives a market order to buy. If the See Securities Exchange Act Release No. 53539
2 17 CFR 240.19b–4.
specialist ‘‘stops’’ the buy order, the (March 22, 2006), 71 FR 16353 (March 31, 2006)
3 The Commission notes that the rule text (‘‘Hybrid Market Release’’). See also Securities
specialist is guaranteeing that the order
submitted by the Exchange contained minor, Exchange Act Release Nos. 52362 (August 30,
technical errors. Exchange staff has committed to
will receive no worse a price than 20.10, 2005), 70 FR 53701 (September 9, 2005) (SR–NYSE–
address these errors following publication of this 2005–57); 52954 (December 14, 2005), 70 FR 75519
4 In Amendment No. 1, the Exchange made
notice. In addition, certain technical corrections (December 20, 2005) (SR–NYSE–2005–87); 53014
and clarifications were made throughout the technical and clarifying changes to the rule text and (December 22, 2005), 70 FR 77228 (December 29,
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discussion of the proposed rule change pursuant to purpose section. 2005) (SR–NYSE–2005–89); 53359 (February 24,
a conversation with NYSE staff. Telephone 5 In Amendment No. 2, which replaced the 2006), 71 FR 10736 (March 2, 2006) (SR–NYSE–
conversation between Gillian Rowe, Principal Rule original filing in its entirety and incorporated 2006–09); 53487 (March 15, 2006), 71 FR 14278
Counsel, Office of the General Counsel, NYSE Amendment No. 1, the Exchange proposed (March 21, 2006) (SR–NYSE–2006–21); 53780 (May
Group, Inc., and Jennifer Colihan, Special Counsel, additional changes to NYSE Rule 116 regarding a 10, 2006), 71 FR 28398 (May 16, 2006) (SR–NYSE–
and Kate Robbins, Attorney, Division of Market specialist’s ability to stop stock in the NYSE’s 2006–24); and 53791 (May 11, 2006), 71 FR 28732
Regulation, Commission, on October 2, 2006. Hybrid Market. (May 17, 2006) (SR–NYSE–2006–33).

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Federal Register / Vol. 71, No. 201 / Wednesday, October 18, 2006 / Notices 61525

addition, a specialist must take specific Systems) to remove references to the Number SR–NYSE–2006–04 on the
actions to reduce the spread in the systemic reporting of executions of subject line.
quotation after the stop is granted, may stopped orders now that Exchange
Paper Comments
not reduce the size of the market systems no longer execute that function.
following the stop and must execute • Send paper comments in triplicate
2. Statutory Basis to Nancy M. Morris, Secretary,
orders on the book entitled to priority
against the stopped stock. The basis under the Act 11 for this Securities and Exchange Commission,
The Exchange generally believes that proposed rule change is the requirement 100 F Street, NE., Washington, DC
the practice of specialists stopping stock under Section 6(b)(5) 12 that an 20549–1090.
makes less sense in a hybrid market. Exchange have rules that are designed to All submissions should refer to File
This is primarily due to the dynamics of promote just and equitable principles of Number SR–NYSE–2006–04. This file
increased speed of trading and more trade, to remove impediments to and number should be included on the
effective functioning of the market perfect the mechanism of a free and subject line if e-mail is used. To help the
through initiatives such as sweeps,7 the open market and a national market Commission process and review your
discretionary e-QuotesSM 8 and the system and, in general, to protect comments more efficiently, please use
ability of Exchange specialists to investors and the public interest. only one method. The Commission will
provide electronic price improvement.9 post all comments on the Commission’s
B. Self-Regulatory Organization’s Internet Web site (
Given the availability of these other
Statement on Burden on Competition rules/sro.shtml). Copies of the
avenues for price improvement, the
Exchange believes that the procedures The Exchange does not believe that submission, all subsequent
in NYSE Rule 116.30(3) for granting the proposed rule change will impose amendments, all written statements
stops are a less attractive and efficient any burden on competition that is not with respect to the proposed rule
mechanism to seek price improvement necessary or appropriate in furtherance change that are filed with the
in faster markets due to the time of the purposes of the Act. Commission, and all written
required to perform the procedures. communications relating to the
C. Self-Regulatory Organization’s proposed rule change between the
The Exchange further believes that in Statement on Comments on the
manually stopping stock there is a Commission and any person, other than
Proposed Rule Change Received From those that may be withheld from the
substantial risk that a stopped order Members, Participants, or Others
would ‘‘miss the market’’ given the public in accordance with the
speed of automatic executions and the The Exchange has neither solicited provisions of 5 U.S.C. 552, will be
‘‘sweep’’ functionality. nor received written comments on the available for inspection and copying in
As a result, the Exchange seeks to proposed rule change. the Commission’s Public Reference
remove the provisions in NYSE Rule Room. Copies of such filing also will be
III. Date of Effectiveness of the available for inspection and copying at
116.30 that permit stopping stock by a Proposed Rule Change and Timing for
specialist in all situations. As explained the principal office of the NYSE. All
Commission Action comments received will be posted
above, the provisions for stopping stock
in situations related to the quote spread Within 35 days of the date of without change; the Commission does
and the procedures associated with publication of this notice in the Federal not edit personal identifying
these are not, in the Exchange’s view, Register or within such longer period (i) information from submissions. You
useful going forward in our Hybrid as the Commission may designate up to should submit only information that
MarketSM. Additionally, the Exchange 90 days of such date if it finds such you wish to make available publicly. All
longer period to be appropriate and submissions should refer to File
no longer systemically supports a
publishes its reasons for so finding or Number SR–NYSE–2006–04 and should
specialist’s stopping stock in any
(ii) as to which the NYSE consents, the be submitted on or before November 8,
situation,10 which requires a specialist
Commission will: 2006.
to execute stopped stock transactions
manually. The Exchange believes these (A) By order approve such proposed For the Commission, by the Division of
manual transactions are not conducive rule change, or Market Regulation, pursuant to delegated
(B) institute proceedings to determine authority.13
to efficient trading in our Hybrid
MarketSM. As such, the Exchange seeks whether the proposed rule change Jill M. Peterson,
to amend NYSE Rule 116.30 to should be disapproved. Assistant Secretary.
eliminate a specialist’s ability to stop [FR Doc. E6–17321 Filed 10–17–06; 8:45 am]
IV. Solicitation of Comments
stock. BILLING CODE 8011–01–P
The Exchange further seeks to amend Interested persons are invited to
subsection (b)(3) of NYSE Rule 123B submit written data, views and
(Exchange Automated Order Routing arguments concerning the foregoing, SECURITIES AND EXCHANGE
including whether the proposed rule COMMISSION
7 The ‘‘sweep’’ functionality will allow orders to change, as amended, is consistent with
[Release No. 34–54590; File No. SR–
automatically execute against contra side interest in the Act. Comments may be submitted by NYSEArca–2006–73]
the Display Book System at and outside the any of the following methods:
Exchange best bid or offer until the order is filled.
8 See Exchange Rule 70.25. Electronic Comments Self-Regulatory Organizations; NYSE
9 See Exchange Rules 104(b)(i)(H) and 104(e). Arca, Inc.; Notice of Filing of Proposed
These rules were approved as part of the Hybrid • Use the Commission’s Internet Rule Change To Create a Penny Pilot
Market initiative, see Hybrid Market Release, supra comment form ( Program for Options Trading
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note 6, and became operative on October 6, 2006. rules/sro.shtml); or

10 As of December 13, 2005 the Exchange
• Send an e-mail to rule- October 12, 2006.
eliminated the systemic support for the reporting of Pursuant to section 19(b)(1) of the
executions of stopped orders. The Exchange Please include File
continues to require manual reporting. See Member Securities Exchange Act of 1934
11 15 U.S.C. 78a.
Education Bulletin 2005–25 (December 13, 2005)
from the NYSE’s Division of Market Surveillance. 12 15 U.S.C. 78f(b)(5). 13 17 CFR 200.30–3(a)(12).

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