[Federal Register Volume 68, Number 111 (Tuesday, June 10, 2003)]
[Notices]
[Pages 34691-34692]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-14491]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47965; File No. SR-NYSE-2003-20]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by the New York Stock Exchange, 
Inc. Extending the Pilot Program To Disengage NYSE Direct+[reg] in Five 
Actively Traded Stocks

June 2, 2003.
    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 May 28, 2003, the New York Stock Exchange, Inc. (``NYSE'' or the 
``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 NYSE. The Exchange has 
filed the proposal as a ``non-controversial'' rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Exchange Act,\3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission.\5\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
    \5\ The NYSE asked the Commission to waive the 30-day operative 
delay. See Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE is proposing to extend its pilot to disengage NYSE 
Direct+\6\ in five actively-traded stocks to assess the impact of 
autoquoting \7\ of bids and offers in connection with the Exchange's 
initiative to disseminate NYSE LiquidityQuote.\8\ NYSE also proposes to 
amend the language in NYSE Rule 1000, which originally restricted the 
pilot to a one-week period. Below is the text of the proposed rule 
change. Proposed new language is italicized; proposed deletions are 
bracketed.
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    \6\ NYSE Rules 1000-1005 provide for the automatic execution of 
limit orders of 1,099 shares or less against the Exchange's 
disseminated bid or offer. NYSE Direct+ was originally filed as a 
one-year pilot. See Securities Exchange Act Release No. 43767 (Dec. 
22, 2000), 66 FR 834 (January 4, 2001) (SR-NYSE-00-18). The Direct+ 
pilot was subsequently extended for an additional year by Securities 
Exchange Act Release No. 45331 (January 24, 2002), 67 FR 5024 
(February 1, 2002) (SR-NYSE-2001-50), and recently extended for an 
additional year by Securities Exchange Act Release No. 46906 
(November 25, 2002), 67 FR 72260 (December 4, 2002) (SR-NYSE-2002-
47).
    \7\ The Exchange will autoquote or automatically update the 
NYSE's highest bid or lowest offer whenever a limit order is 
transmitted to the specialist's book at a price higher (lower) than 
the previously disseminated highest (lowest) bid (offer).
    \8\ For further details on LiquidityQuote, see Securities 
Exchange Act Release No. 47614 (April 2, 2003), 68 FR 17140 (April 
8, 2003) (SR-NYSE-2002-55).
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* * * * *

Rule 1000

Automatic Execution of Limit Orders Against Orders Reflected in NYSE 
Published Quotation

    Only straight limit orders without tick restrictions are eligible 
for entry as auto ex orders. Auto ex orders to buy shall be priced at 
or above the price of the published NYSE offer. Auto ex orders to sell 
shall be priced at or below the price of the NYSE bid. An auto ex order 
shall receive an immediate, automatic execution against orders 
reflected in the Exchange's published quotation and shall be 
immediately reported as NYSE transactions, unless:
    (i)-(vi) No change.
    Auto ex orders that cannot be immediately executed shall be 
displayed as limit orders in the auction market. An auto ex order equal 
to or greater than the size of the NYSE's published bid or offer shall 
trade against the entire published bid or offer, and a new bid or offer 
shall be published pursuant to Rule 60(e). The unfilled balance of the 
auto ex order shall be displayed as a limit order in the auction 
market.
    During a [one-week] pilot program in 2003, NYSE Direct+ shall not 
be available in the following five stocks: American Express (AXP), 
Pfizer (PFE), International Business Machines (IBM), Goldman Sachs 
(GS), and Citigroup (C). The Exchange will announce in advance to its 
membership the time [week] the pilot will run.
* * * * *

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 NYSE included statements 
concerning the purpose of, and basis for, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In SR-NYSE-2003-10, the Commission approved the Exchange's proposed 
rule change to conduct a one-week pilot to disengage NYSE Direct+ in 
five actively-traded stocks.\9\ The purpose of the pilot was to assess 
the impact of autoquoting bids and offers in connection with the 
Exchange's initiative to disseminate NYSE LiquidityQuote.\10\ According 
to the NYSE, the pilot was initially scheduled to run from May 21, 2003 
until May 28, 2003, and NYSE LiquidityQuote was initially scheduled to 
begin on May 21, 2003. However, the Commission issued an order granting 
an interim stay on the implementation of NYSE LiquidityQuote until June 
6, 2003.\11\
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    \9\ See Securities Exchange Act Release No. 47793 (May 2, 2003), 
68 FR 25071 (May 9, 2003). The stocks are American Express (AXP), 
Pfizer (PFE), International Business Machines (IBM), Goldman Sachs 
(GS), and Citigroup (C).
    \10\ See supra note 7.
    \11\ See In the Matter of the Application of Bloomberg L. P., 
Securities Exchange Act Release No. 47891 (May 20, 2003).
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    To assess the impact of autoquoting bids and offers in connection 
with the liquidity quote initiative, the NYSE is proposing to extend 
the pilot until June 20, 2003. The NYSE believes that continuing the 
pilot will provide continuity and avoid starting and stopping the 
disengagement of NYSE Direct+. According to the NYSE, this continuity 
should aid in the learning process for NYSE Floor personnel.

[[Page 34692]]

Further, NYSE proposes to amend NYSE Rule 1000 to reflect that the 
pilot is not limited to a one-week period.
2. Statutory Basis
    The NYSE believes that the basis under the Act for this proposed 
rule change is Section 6(b)(5) of the Act,\12\ 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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    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change would not 
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 
regarding the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days (or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest) after the date of the filing, the proposed rule change has 
become effective pursuant to section 19(b)(3)(A) of the Act \13\ and 
Rule 19b-4(f)(6) thereunder.\14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    The NYSE has requested a waiver of the five-day written notice and 
the 30-day operative delay requirements. The Commission believes that 
waiving the five day pre-filing requirement and the 30-day operative 
delay will allow the NYSE to continue, without undue interruption, to 
assess the impact on the autoquoting of bids and offers in connection 
with the LiquidityQuote initiative in five actively-traded stocks 
without the impact of NYSE Direct+.\15\
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    \15\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 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 in 450 Fifth Street, NW., 
Washington, DC 20549-0609. Copies of such filing will also be available 
for inspection and copying at the principal office of the NYSE.
    All submissions should refer to SR-NYSE-2003-20 and should be 
submitted by July 1, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-14491 Filed 6-9-03; 8:45 am]
BILLING CODE 8010-01-P