[Federal Register Volume 67, Number 221 (Friday, November 15, 2002)]
[Notices]
[Pages 69281-69283]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46781; File No. SR-NYSE-2002-54]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the New York Stock Exchange, 
Inc. Amending NYSE Rule 60 to Eliminate Depth Indications and Depth 
Conditions

November 7, 2002.
    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 October 22, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to delete Supplementary Material .30 of NYSE 
Rule 60 (``Dissemination of Quotations'') relating to the dissemination 
of depth indications and depth conditions that reflect market interest 
in a security below the current published bid and above the current 
published offer. The text of the proposed rule change is available at 
the NYSE or at the Commission.

[[Page 69282]]

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 and is set forth in Sections A, B, and C below.

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

1. Purpose
    In March 2001, the Exchange amended NYSE Rule 60 to permit an 
Exchange specialist to indicate that there is additional market 
interest in a security not shown in the published quotation (i.e., 
interest to buy below the current published bid, or interest to sell 
above the current published offer).\3\ The additional market interest 
reflected in the depth indication and depth condition could include the 
specialist's proprietary interest, orders the specialist has on his or 
her book, and other orders, such as percentage orders, which the 
specialist is representing as agent.
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    \3\ See Securities Exchange Act Release No. 44084 (March 16, 
2001), 66 FR 16307 (March 23, 2001) (SR-NYSE-01-06).
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    The dissemination of a depth indication or depth condition by a 
specialist is made on a ``best efforts basis.'' The specialist is 
allowed to use his or her professional judgment to determine whether 
disseminating additional market interest would be useful with respect 
to current conditions in the security or the market in general. Depth 
indications and depth conditions are purely informational in nature 
and, therefore, do not themselves constitute a ``firm'' quotation for 
purposes of NYSE Rule 60 or Rule 11Ac1-1 under the Act.\4\
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    \4\ 17 CFR 240.11Ac1-1.
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    The Exchange now proposes to discontinue the use of depth 
indications and depth conditions. Since the initiation of depth 
indication and depth condition, the Exchange has undertaken the 
development of other means to provide market participants with current 
and useful market information to provide greater transparency with 
respect to the actual depth of the market below the best bid and above 
the best offer. One such initiative is NYSE OpenBookTM, 
which was launched on January 24, 2002.\5\ OpenBook provides a 
comprehensive view of NYSE limit order books for all Exchange-traded 
securities, enabling market participants to see aggregate limit order 
interest at price levels outside the displayed Exchange quotation.
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    \5\ For further details on NYSE OpenBookTM, see 
Securities Exchange Act Release No. 45138 (December 18, 2001), 66 FR 
66491 (December 26, 2001) (order approving the establishment of 
Exchange fees for NYSE OpenBookTM).
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    The Exchange is currently developing another mechanism to provide 
greater transparency with respect to the existence of additional 
interest in Exchange-traded securities, which will consist of the 
display of a ``liquidity quote'' along with the best quote.\6\ In the 
Liquidity Quote Proposal, the Exchange will be proposing to have 
liquidity quotes reflect aggregated trading interest at a specific 
price interval below the best bid or above the best offer. In addition, 
in the Liquidity Quote Proposal, the Exchange will be proposing that 
liquidity quotes are ``firm'' quotes for the purposes of NYSE and 
Commission rules. The Exchange therefore believes that the 
discontinuance of depth indications and depth conditions will allow the 
Exchange to utilize system capacity currently dedicated to depth 
conditions and depth indications to facilitate the development and 
testing of liquidity quotes.\7\
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    \6\ On October 28, 2002, the NYSE filed with the Commission a 
proposed rule change to amend its rules to display additional 
quotations showing the depth of market. See File No. SR-NYSE-2002-55 
(``Liquidity Quote Proposal'').
    \7\ The Exchange intends to provide notice before discontinuing 
dissemination of the depth condition and depth indicator to members 
via a floor memorandum, subscribers via e-mail, and vendors by 
telephone. Telephone conversation between Donald Siemer, Director, 
Market Surveillance, NYSE, and Kelly Riley, Senior Special Counsel, 
Division of Market Regulation, Commission, dated November 5, 2002.
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2. Statutory Basis
    The Exchange believes that the statutory basis for this proposed 
rule change is Section 6(b)(5) of the Act,\8\ which requires that an 
exchange have rules that are designed 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.
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    \8\ 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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\ 
because the proposal: (1) Does not significantly affect the protection 
of investors or the public interest; (2) does not impose any 
significant burden on competition; and (3) does not become operative 
for 30 days from the date of filing, provided that the NYSE has given 
the Commission written notice of its intent to file the proposed rule 
change at least five business days prior to the filing date of the 
proposed rule change or such shorter time as designated by the 
Commission.\11\ 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ The NYSE has requested and the Commission has agreed to 
waive the five-day pre-filing notice requirement.
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    The Exchange believes that the advent of the OpenBook service and 
the Exchange's plan to introduce liquidity quote information will 
adequately replace information provided by depth indications and 
conditions and, therefore, the proposal is non-controversial.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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

[[Page 69283]]

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 will also be available for 
inspection and copying at the principal office of the NYSE.
    All submissions should refer to File No. SR-NYSE-2002-54 and should 
be submitted by December 6, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-28994 Filed 11-14-02; 8:45 am]
BILLING CODE 8010-01-P