[Federal Register Volume 69, Number 87 (Wednesday, May 5, 2004)]
[Notices]
[Pages 25160-25162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-10152]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49625; File No. SR-NYSE-2004-11]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendments No. 1 and No. 2 Thereto by the New York Stock 
Exchange, Inc. To Amend Its Rule 122 Concerning Orders With More Than 
One Broker

April 28, 2004.
    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 February 20, 2004, 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. On April 
5, 2004, the NYSE filed an amendment to the proposed rule change.\3\ On 
April 20, 2004, the NYSE filed another amendment to the proposed rule 
change.\4\ The Commission is publishing this notice, as amended, 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\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE, 
to Nancy J. Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated April 2, 2004 (``Amendment No. 
1''). Amendment No. 1 replaced and superseded the Exchange's 
original filing in its entirety.
    \4\ See letter from Mary Yeager, Assistant Secretary, NYSE, to 
Nancy J. Sanow, Division, Commission, dated April 19, 2004 
(``Amendment No. 2''). In Amendment No. 2, NYSE clarified and 
expanded its rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend NYSE Rule 122 to provide that a 
Floor broker may send a portion of an order to a specialist either 
manually or via a hand-held terminal while retaining a portion of the 
same order. The text of the proposed rule change appears below. New 
text is in italic. Deleted text is in brackets.
* * * * *

Orders With More Than One Broker

    Rule 122 Except as provided herein, [N]no member, member 
organization or any allied member therein, or subsidiary of such 
organization within the meaning of Rule 321, shall maintain with more 
than one broker, for execution on the Exchange, market orders or orders 
at the same price for the purchase or sale of

[[Page 25161]]

the same security with knowledge that such orders are for the account 
of the same principal, unless specific permission has been obtained 
from a Floor Official. However, a Floor broker may transmit an order 
manually or from a hand-held terminal to the specialist's display book, 
for representation by the specialist, a portion of an order, while 
retaining the balance of the order. In any instance where a Floor 
broker has given the specialist a portion of an order for execution and 
retained the balance of such order, the Floor broker may not make a bid 
(offer) on behalf of the retained order, or execute any part of the 
retained order, at a price at which the portion of the order with the 
specialist may also be represented in a bid (offer) or executed until 
the portion of the order sent to the specialist has been executed or 
cancelled.
* * * * *

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.

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

1. Purpose
    NYSE Rule 122 (Orders with More than One Broker) prohibits a member 
from having orders on the Exchange with more than one broker executable 
at the same price in the same stock on the same side of the market for 
the account of the same principal. According to the Exchange, NYSE Rule 
122 is intended to negate the possibility that the same customer could 
have an unequal representation in the auction in parity situations. The 
Exchange also believes that NYSE Rule 122 provides a deterrent to any 
attempt to create the appearance that there is greater trading interest 
in a stock than may be actually present by limiting the representation 
of agency orders in the market for the same customer to a single agent.
    Currently, Floor brokers are able to manually give a portion of an 
order to the specialist for execution, while retaining the remainder of 
such order. Pending technological advances will enable Floor brokers to 
have the ability to send orders from their hand-held devices directly 
to the specialist's limit order book. According to the Exchange, this 
ability will improve a broker's efficiency by allowing greater order 
management capabilities. As is the case today, brokers may desire to 
send part of a large order for representation by the specialist while 
retaining the balance of the order for execution by the broker. For 
example, a broker with a 100,000 share market ``not held'' order may 
determine to electronically ``book'' (e.g., send to the specialist) 
20,000 shares of that order at a limit price of $20.20, while retaining 
the 80,000 share balance of the order.
    The Exchange proposes to amend NYSE Rule 122 to provide that a 
Floor broker may send a portion of an order to a specialist either 
manually or via a hand-held terminal while retaining a portion of the 
same order as long as the broker does not bid (offer) or execute the 
retained portion of the order at a price at which the booked order may 
also be represented in a bid (offer) or executed. The Exchange 
represents that this proposal does not impose any new requirements or 
obligations and is consistent with current practice.
    Thus, in the above example, the broker could bid on behalf of the 
retained portion of the order, or take offers, at prices of $20.21 or 
above, but could not, on behalf of the retained portion of the order, 
purchase stock at $20.20 or lower, unless the ``booked'' portion of the 
order had been executed or canceled.
2. Statutory Basis
    The Exchange believes that the proposal to amend NYSE Rule 122 to 
provide that a Floor broker may send a portion of an order to a 
specialist manually or via a hand-held terminal while retaining the 
remainder of the order is consistent with Section 6(b) of the Act,\5\ 
in general, and Section 6(b)(5) of the Act,\6\ in particular, 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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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, as 
amended, 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 not solicited, and does not intend to solicit, 
comments regarding the proposed rule change. The Exchange has not 
received any unsolicited written comments from members or other 
interested parties.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, as amended, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment for (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2004-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-NYSE-2004-11. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements

[[Page 25162]]

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 Section, 450 Fifth Street, NW., 
Washington, DC 20549-0609. Copies of such filing also will be available 
for inspection and copying at the principal office of the NYSE. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSYE-2004-11 and should be 
submitted on or before May 26, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-10152 Filed 5-4-04; 8:45 am]
BILLING CODE 8010-01-P