[Federal Register Volume 68, Number 225 (Friday, November 21, 2003)]
[Notices]
[Pages 65756-65758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29152]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48772; File No. SR-NYSE-2003-30]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Relating to Extension of the Pilot for the Exchange's Automatic 
Execution Facility for Certain Limit Orders (NYSE Direct+)

November 12, 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 October 8, 2003, 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 NYSE. 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 NYSE proposes to extend until December 23, 2004, the 
effectiveness of the pilot for NYSE Direct+ (the

[[Page 65757]]

``Pilot'').\3\ The Pilot was initially approved on a one-year basis and 
was twice extended for additional one-year periods, for a total of two 
years ending December 23, 2003.
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    \3\ See NYSE Rules 1000-1005, 13, and 476A.
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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 NYSE 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 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
    NYSE Direct+ was originally approved as a one-year pilot ending on 
December 21, 2001.\4\ The Exchange then extended the Pilot for an 
additional one-year period, ending December 23, 2002.\5\ The Pilot was 
subsequently extended for an additional one-year period, ending 
December 23, 2003.\6\
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    \4\ See Securities Exchange Act Release No. 43767 (December 22, 
2000), 66 FR 834 (January 4, 2001) (SR-NYSE-2000-18).
    \5\ See Securities Exchange Act Release No. 45331 (January 24, 
2002), 67 FR 5024 (February 1, 2002) (SR-NYSE-2001-50).
    \6\ See Securities Exchange Act Release No. 46906 (November 25, 
2002), 67 FR 72260 (December 4, 2002) (SR-NYSE-2002-47).
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    The NYSE Direct+ pilot provides for the automatic execution of 
limit 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 
until December 23, 2004. Four filings that impact NYSE Direct+ have 
been approved by the Commission during the current Pilot and are now 
part of the Pilot.\7\ These include:
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    \7\ In addition, SR-NYSE-2003-20 proposed to disengage NYSE 
Direct+ in five-actively traded stocks. However, this pilot expired 
on June 20, 2003 and therefore, does not impact the Pilot as 
proposed to be extended. See Securities Exchange Act Release No. 
47965 (June 2, 2003), 68 FR 34691 (June 10, 2003) (SR-NYSE-2003-20).
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    (a) A filing that (i) amended 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; and (ii) provided that 
during the process for completing NYSE Rule 127 transactions, the 
specialist should publish a bid and/or offer that is more than five 
cents away from the last reported transaction price in the subject 
security on the Exchange;\8\
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    \8\ See Securities Exchange Act Release No. 47463 (March 7, 
2003), 68 FR 12122 (March 13, 2003) (SR-NYSE-2002-44).
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    (b) A filing that (i) amended NYSE Rule 13 to provide for a one-
year pilot program (also expiring on December 23, 2003) to expand 
Direct+ order size eligibility (for up to 5,000 shares) for Exchange-
Traded Funds (``ETFs'') and Holding Company Depositary Receipts 
(``HOLDRs''); (ii) amended NYSE Rule 1002 to include ETFs and HOLDRs 
and provide that ETFs trade until 4:15 p.m.; and (iii) amended NYSE 
Rule 1005 to reflect that the rule applies to ETFs and HOLDRs;\9\
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    \9\ See Securities Exchange Act Release No. 47024 (December 18, 
2002), 67 FR 79217 (December 27, 2002) (SR-NYSE-2002-37).
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    (c) A filing that amended NYSE Rule 1005 to permit entry of limit 
orders up to 1,099 shares within 30 seconds for an account in which the 
same person has an interest, provided that the orders are entered from 
different terminals and that the member or member organization 
responsible for the entry of the orders to the trading floor has 
procedures to monitor compliance with the separate terminal 
requirement;\10\ and
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    \10\ See Securities Exchange Act Release No. 47353 (February 12, 
2003), 68 FR 8318 (February 20, 2003) (SR-NYSE-2002-58).
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    (d) A filing that amended NYSE Rules 1000 and 1001 in connection 
with the NYSE LiquidityQuote initiative.\11\ In conjunction with 
autoquoting of bids and offers, NYSE Rule 1000 has been amended to 
provide that an NYSE Direct+ order equal to or greater than the size of 
the published bid/offer exhausts the entire bid/offer, rather than 
decreasing it to 100 shares as was the case initially under the pilot. 
NYSE Rule 1001(c) provided that if executions of auto ex orders have 
traded with all trading interest reflected in the Exchange's published 
bid or offer, the Exchange will disseminate a bid or offer at that 
price of 100 shares until the specialist requotes that market. NYSE 
Rule 1001(c) has been deleted.
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    \11\ See Securities Exchange Act Release No. 47614 (April 2, 
2003), 68 FR 17140 (April 8, 2003) (SR-NYSE-2002-55).
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    The above-mentioned filings became part of the NYSE Direct+ rules 
and were incorporated into the Pilot upon their respective approvals by 
the Commission. Therefore, if the Commission approves the extension of 
the Pilot for an additional year, they are extended as part of the 
Pilot.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under section 6(b)(5) \12\ 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. The proposed rule change also is 
designed to support the principles of section 11A(a)(1) \13\ 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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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 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

    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; (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate; and the Exchange has 
given the Commission written notice of its intention to file the 
proposed rule change at least five

[[Page 65758]]

business days prior to filing, or such shorter time as designated by 
the Commission, it has become effective pursuant to section 19(b)(3)(A) 
of the Act \14\ and Rule 19b-4(f)(6) \15\ thereunder. 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). The Exchange requested and the 
Commission agreed to waive the five-day pre-filing period.
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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 proposal 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-2003-30 and should be 
submitted by December 12, 2003.

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

    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-29152 Filed 11-20-03; 8:45 am]
BILLING CODE 8010-01-P