[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Notices]
[Pages 72260-72261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30670]



[[Page 72260]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46906; File No. SR-NYSE-2002-47]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by 
the New York Stock Exchange, Inc. Extending the NYSE Direct+ Pilot 
Program Through December 23, 2003

November 25, 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 8, 2002, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to 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. On 
November 1, 2002, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The Exchange filed the proposed rule change pursuant to 
section 19(b)(3)(A) of the Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ 
which renders the proposed rule change effective upon filing with the 
Commission.\6\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Nancy J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated October 31, 2002 (``Amendment No. 
1''). In Amendment No. 1, the Exchange requested a waiver of the 5-
day pre-filing requirement under Rule 19b-4(f)(6)(iii), withdrew its 
request for a waiver of the 30-day operative period under the same 
rule, and clarified that it would implement proposed changes to NYSE 
Direct+ that the NYSE has submitted in other proposed rule changes 
as they are approved by the Commission.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ For purposes of calculating the 30-day delayed operative 
date and the 60-day abrogation period, the Commission considers the 
proposed rule change to have been filed on November 1, 2002, when 
Amendment No. 1 was filed.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend through December 23, 2003\7\ the 
effectiveness of a pilot program for NYSE Direct+ (``Pilot''). A 
current extension of the Pilot ends December 23, 2002.\8\
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    \7\ Telephone conversation among Jeffrey Rosenstrock, Senior 
Special Counsel, Market Surveillance, NYSE and Terri Evans, 
Assistant Director and Steven Johnston, Special Counsel, Division, 
Commission, on November 5, 2002 (clarifying date of proposed 
extension of the pilot).
    \8\ See Securities Exchange Act Release No. 45331 (January 24, 
2002), 67 FR 5024 (February 1, 2002)(File No. SR-NYSE-2001-
50)(notice of filing and immediate effectiveness of proposal to 
extend NYSE Direct+ until December 23, 2002). The Pilot is 
implemented through a series of rules, NYSE Rules 1000 through 1005, 
and NYSE Rule 13. In addition, the Exchange previously submitted for 
Commission approval interpretations of certain rules, as well as a 
no action or interpretive position which the Exchange requested the 
Commission adopt under its short sale rule, Rule 10a-1 under the 
Act. See Securities Exchange Act Release No. 45331 (January 24, 
2002), 67 FR 5024 (February 1, 2002). The Exchange proposes that 
these exemptions and interpretations be extended for an additional 
year concurrent with the extension of the NYSE Direct+ Pilot through 
December 23, 2003. Telephone conversation between Jeffrey 
Rosenstrock, Senior Special Counsel, Market Surveillance, NYSE and 
Terri Evans, Assistant Director, Division, Commission on November 
25, 2002.
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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. No changes to previously approved rule language are being 
proposed.

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

1. Purpose
    NYSE Direct+ was originally filed as a one-year pilot, ending on 
December 21, 2001.\9\ The Exchange then extended the Pilot for an 
additional one-year period, ending December 23, 2002.\10\
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    \9\ See Securities Exchange Act Release No. 43767 (December 22, 
2000), 66 FR 834 (January 4, 2001) (File No. SR-NYSE-00-18) (order 
approving amended proposed rule change establishing NYSE Direct+ 
pilot program).
    \10\ See supra, note 7.
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    The Pilot provides for the automatic execution of orders of 1099 
shares or less (``auto ex'' orders) against trading interest reflected 
in the Exchange's published quotation. It is not mandatory that all 
limit orders of 1099 shares be entered as auto ex orders; rather, the 
member organization entering the order, or its customer if enabled by 
the member organization, can choose to enter an auto ex order when such 
member organization (or customer) believes that the speed and certainty 
of an execution at the Exchange's published bid or offer price is in 
its customer's best interest.
    The Exchange proposes to extend the Pilot for an additional year 
(from December 24, 2002 until December 23, 2003). The Exchange notes, 
however, that there are two other proposed rule changes concerning NYSE 
Direct+ which have also been filed with the Commission during the 
current Pilot. These include (a) a proposal to amend NYSE Rule 1000 to 
provide that NYSE Direct+ executions will not be available if the 
resulting trade would be more than five cents away from the last 
sale;\11\ and (b) a proposal to (i) amend NYSE Rule 13 to establish a 
one-year pilot program that would expand Direct+ order size eligibility 
for Exchange-Traded Funds (``ETFs'') and Holding Company Depositary 
Receipts (``HOLDRs''); (ii) amend NYSE Rule 1002 to include ETFs and 
HOLDRs and provide that ETFs trade until 4:15 p.m.; and (iii) amend 
NYSE Rule 1005 to reflect that the rule applies to ETFs and HOLDRs. 
\12\
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    \11\ See File No. SR-NYSE-2002-44.
    \12\ See Securities Exchange Act Release No. 46527 (September 
20, 2002), 67 FR 61368 (September 30, 2002)(noticing SR-NYSE-2002-
37).
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    The Exchange proposes that the above-mentioned proposed filings 
amending NYSE Direct+ will become incorporated into the Pilot upon 
their respective approvals by the Commission.\13\
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    \13\ See Amendment No. 1, supra note 3.
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2. Statutory Basis
    The Exchange represents that the proposed rule change, as amended, 
is consistent with section 6(b)(5) of the Act \14\ in that it is 
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. The Exchange further represents that the proposed rule 
change, as amended, is designed to support the principles of Section 
11A(a)(1) of the Act \15\ in that it seeks to assure economically 
efficient execution of securities transactions, make it practicable for 
brokers to execute investors' orders in the best market, and provide an 
opportunity for investors' orders to be executed without the 
participation of a dealer.
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    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78k-1(a)(1).

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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 rule change has become effective upon filing pursuant 
to section 19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) \17\ 
thereunder because the 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 the proposed rule change was filed, or 
such shorter time as the Commission may designate. 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.\18\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ For purposes of calculating the 30-day delayed operative 
date and the 60-day abrogation period, the Commission considers the 
proposed rule change to have been filed on November 1, 2002, when 
Amendment No. 1 was filed.
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    The Exchange has requested that the Commission waive the pre-filing 
notice requirement. The Commission has determined to waive the five-day 
pre-filing notice requirement, given that the Exchange filed the 
original proposed rule change on October 8, 2002.

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. 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 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-2002-47 and should be submitted by December 26, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30670 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P