[Federal Register Volume 69, Number 143 (Tuesday, July 27, 2004)]
[Notices]
[Pages 44701-44704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17002]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50040; File No. SR-NYSE-2004-32]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the New York Stock Exchange, Inc. 
Relating to NYSE Liquidity Quote\SM\ Exhibit C

July 20, 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 June 24, 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 July 
16, 2004, the NYSE filed an amendment to the proposed rule change.\3\ 
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, Commission, dated July 16, 2004 (``Amendment No. 1''). 
In Amendment No. 1, the NYSE clarified that the entire proposed 
Exhibit C represents new 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 include additional display 
requirements to the existing terms and conditions pursuant to which 
vendors may distribute to their customers NYSE Liquidity Quote\SM\ 
information that the Exchange makes available. The Exchange has set 
forth the additional requirements in an Exhibit C (the ``Liquidity 
Quote Exhibit C'') to the standard form of ``Agreement for the Receipt 
and Use of Market Data.'' The text of the proposed Liquidity Quote 
Exhibit C appears below in italics.
* * * * *

EXHIBIT C

AGREEMENT FOR RECEIPT AND USE OF MARKET DATA: ADDITIONAL PROVISIONS

21. NYSE LIQUIDITY QUOTE\SM\

    (a) DEFINITIONS
    (i) ``Liquidity Quote Information'' means any depth-market 
information and other information that NYSE makes available pursuant to 
the NYSE Liquidity Quote\SM\ Service, including Liquidity Quote bids 
and offers, and any modified version of that information and any 
information derived from that information.
    (ii) ``Other Bids and Offers'' means bids and offers other than 
Liquidity Quote bids and offers. For example, Other Bids and Offers 
include the NYSE best bid or offer, another market center's best bid or 
offer and a national best bid or offer.
    (b) AUTHORIZATION--Exhibit A describes Customer's receipt of 
Liquidity Quote Information. Liquidity Quote Information shall 
constitute ``NYSE Market Information'' for all purposes of the 
Agreement and its exhibits. Customer may use Liquidity Quote 
Information, and may provide displays of Liquidity Quote Information to 
Subscribers, but may do so:
    (i) only as and to the extent described, and in the manner 
specified, in Exhibit A; and
    (ii) only for so long as the Agreement and this Exhibit C are in 
effect.

Customer's provision of displays of Liquidity Quote Information to 
Subscribers shall constitute ``Subscriber Services'' under the 
Agreement. Each display of Liquidity Quote Information that Customer 
provides to Subscribers shall indicate that NYSE is the source of the 
information included in the display.
    (c) DISPLAY SERVICES--As an additional Subscriber Service

[[Page 44702]]

requirement under clause (iii) of Paragraph 5(b) of the Agreement, 
Customer shall not commence to provide displays of Liquidity Quote 
Information to a Subscriber unless:
    (i) Customer has first presented the Subscriber with such form of 
notice or agreement as NYSE may specify; and
    (ii) if NYSE specifies that the Subscriber must acknowledge its 
receipt of that notice, or manifest its assent to that agreement, the 
Subscriber has first complied with that requirement in such manner as 
NYSE may direct.
    (d) LIQUIDITY QUOTE DISPLAY RULES
    (i) AGGREGATED DISPLAYS--Insofar as Customer aggregates Liquidity 
Quote bids and offers with Other Bids and Offers in its displays (an 
``Aggregated Display''), Customer shall cause the Aggregated Display to 
indicate the number of shares attributable to the Liquidity Quote bids 
and offers.
    (ii) MONTAGES--If Customer includes a Liquidity Quote bid or offer 
in a montage that includes an NYSE best bid or offer (a ``Montage''), 
Customer shall exclude the size of the NYSE best bid or offer from any 
calculation of cumulative size within the Montage.
    (iii) ATTRIBUTION--Customer shall associate the identifier ``NYSE 
Liquidity Quote'' or ``NYLQ'' with each element or line of Liquidity 
Quote Information that it includes in an Aggregated Display, Montage or 
other integrated display.
    (iv) LIQUIDITY QUOTE-ONLY DISPLAYS--Customer may integrate 
Liquidity Quote Information with other market information as the 
Agreement, as modified by this Exhibit C, may provide. However, 
Customer shall also make Liquidity Quote Information available as a 
product that is separate and apart from information products that 
include other market centers' information (a ``Non-integrated NYSE 
Liquidity Quote Product''). Customer may include other NYSE market data 
in Non-integrated Liquidity Quote Products, subject to compliance with 
such contract and fee requirements as may apply to that other NYSE 
market data. Customer shall make its subscribers aware of the 
availability of the Non-integrated Liquidity Quote Product in the same 
manner and to the same extent as it makes its subscribers aware of the 
integrated product.
    (v) SCREEN SHOTS--No later than at the time that Customer commences 
to provide to others displays of Liquidity Quote Information, or 
modifies those displays, Customer shall submit to NYSE for inclusion in 
Exhibit A sample screen shots that demonstrate each manner of display 
and each modification.
    (e) INTERNAL DISPLAYS--The Liquidity Quote display requirements set 
forth in Paragraph 21(d) shall not apply insofar as Customer provides 
displays to its officers, partners and employees or to those of its 
Customer Affiliates.

ACCEPTED AND AGREED

[NAME OF VENDOR]

By: ------------------------

     Name:
     Title:
     Date:

NEW YORK STOCK EXCHANGE, INC. acting solely on its own behalf as 
Paragraph 12 describes

    By: ------------------------

     Name:
     Title:
     Date:
* * * * *

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
    On April 2, 2003, the Commission approved NYSE Liquidity Quote, a 
product that provides investors with ``liquidity bids'' and ``liquidity 
offers.'' The NYSE Liquidity Quote represents the aggregated Exchange 
trading interest at a specific price interval below the best bid (in 
the case of a liquidity bid) or at a specific price interval above the 
best offer (in the case of a liquidity offer).\4\ The specific price 
interval above or below the best bid and offer, as well as the minimum 
size of the liquidity bid or offer, is established by the specialist in 
the subject security. Liquidity bids and offers include orders on the 
limit order book, trading interest of brokers in the trading crowd, and 
the specialist's dealer interest, at prices ranging from the best bid 
(offer) down to the liquidity bid (up to the liquidity offer).
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    \4\ See Securities Exchange Act Release No. 47614 (April 2, 
2003), 68 FR 17140 (April 8, 2003) (SR-NYSE-2002-55) (``April 
Order'').
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The Liquidity Quote Contract and Exhibit C

    Pursuant to the Commission's April Order, the Exchange has made 
NYSE Liquidity Quote information available to vendors and others since 
June 13, 2003. As of December 31, 2003, the Exchange had entered into 
agreements with approximately 50 vendors that distribute NYSE Liquidity 
Quote information displays to approximately 12,000 end-user terminals. 
In order for a vendor to receive NYSE Liquidity Quote information from 
the Exchange for redistribution to its customers, the Exchange requires 
the vendor to enter into its standard form of ``Agreement for Receipt 
and Use of Market Data.'' This form (the ``Consolidated Vendor Form'') 
is the same form that vendors must enter into in order to receive 
market data under the Consolidated Tape Association ``CTA'' Plan and 
the Consolidated Quotation ``CQ'' Plan. The participants in the CTA and 
CQ Plans first submitted the Consolidated Vendor Form to the Commission 
for immediate effectiveness in 1990 \5\ and the Commission approved a 
revised version of it in 1996 in conjunction with the participants' 
restatement of the CTA and CQ Plans.\6\
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    \5\ See Securities Exchange Act Release No. 28407 (September 6, 
1990), 55 FR 37276 (September 10, 1990) (File No. 4-281).
    \6\ See Securities Exchange Act Release No. 37191 (May 9, 1996), 
61 FR 24842 (May 16, 1996) (File No. SR-CTA/CQ-96-1).
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    The Exchange designed the Consolidated Vendor Form as a generic, 
one-size-fits-all form of agreement that consists of a standard set of 
basic provisions that apply to all data recipients. Accordingly, the 
Consolidated Vendor Form accommodates a number of different types of 
market data, a number of different means of receiving access to market 
data, and a number of different uses of market data. Because it was 
recognized that the Consolidated Vendor Form could not anticipate every 
aspect of a vendor's receipt and use of market data or future advances 
in technology or new product offerings, Paragraph 19(a) of the Form 
provides that ``Exhibit C, if any, contains additional provisions 
applicable to any non-standard aspects of Customer's Receipt and Use of 
Market Data.'' The Liquidity Quote Exhibit C contains certain display 
requirements that are not standard to the receipt and use of other

[[Page 44703]]

types of market data under the Consolidated Vendor Form (the ``Display 
Requirements'').

The January Order

    The Exchange has required vendors to enter into the Liquidity Quote 
Exhibit C since the June 13, 2003 inception of NYSE Liquidity Quote. 
However, the Commission issued an order \7\ in January that set aside 
five of the Display Requirements after determining that those Display 
Requirements constitute Exchange rules that are required to be filed 
and approved pursuant to Section 19(b) of the Act.
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    \7\ See Securities Exchange Act Release No. 49076 (January 14, 
2004), (Admin. Proc. File 3-11129) (``January Order'').
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    The Exchange has reviewed both the January Order and its experience 
with the NYSE Liquidity Quote product. It has determined that some 
Display Requirements that were essential at the product's commencement 
in order to familiarize investors with the product are no longer 
necessary. It has also considered the oral comments of vendors 
regarding other Display Requirements, has weighed those comments 
against those Display Requirements' contribution to clarity and the 
Exchange's attribution needs, and has determined to eliminate them. As 
a result, the Exchange has determined to submit as the proposed rule 
change a Liquidity Quote Exhibit C that carries forward only one of the 
five Display Requirements that the January Order set aside, that 
requiring indication of the number of shares attributable to NYSE 
Liquidity Quote data. In addition, in response to oral comments of 
vendors and the January Order's discussion regarding the Display 
Requirements that required NYSE's prior approval of screen shots and 
changes to them, Exhibit C now requires vendors to submit screen shots 
and changes contemporaneously with their first use. According to the 
Exchange, this will facilitate the NYSE's monitoring of compliance with 
the Display Requirements. Prior approval is not required.

Number-of-Shares Requirement

    Where a vendor integrates NYSE Liquidity Quote bids and offers with 
``best bid and offer'' data, the quote's display must indicate the 
number of shares attributable to NYSE Liquidity Quote data (the 
``Number-of-Shares Requirement''). A compliant example of such a screen 
would be as follows:

------------------------------------------------------------------------
              Exchange or market maker                  Size       Bid
------------------------------------------------------------------------
N...................................................         8     79.50
B...................................................         5     79.49
T...................................................         2     79.48
NYLQ 50* P 2........................................        52     79.47
C...................................................         1     79.30
------------------------------------------------------------------------

    In this example, ``N,'' ``B,'' ``T,'' ``P,'' and ``C'' refer to the 
best bid available on the Exchange, the Boston Stock Exchange, Inc., 
the Nasdaq Stock Market, Inc., the Pacific Exchange, Inc., and the 
Chicago Stock Exchange, Inc., respectively, and NYLQ refers to the NYSE 
Liquidity Quote bid. The left-hand column shows attribution to NYSE 
Liquidity Quote and the size of the NYSE Liquidity Quote and NYSE best 
bids. According to the Exchange, if one were to omit that column from 
the display, the NYSE Liquidity Quote would lose its attribution to 
NYSE. The Exchange represents that this requirement also alerts 
investors that a part of the aggregated quote's size at $79.47 is 
attributable to NYSE Liquidity Quote, and therefore:
    (i) That part is a depth quote, not a ``best'' quote;
    (ii) The aggregated quote's size includes the size of the NYSE best 
bid; and
    (iii) Other, higher NYSE bids may also be included in its size.
    Thus, if the left-hand column were omitted, investors would have no 
way of knowing that:
    (i) Of the 5,200 shares bid at $79.47, (i) 5,000 shares represent a 
liquidity bid, and (ii) 800 of those 5,000 shares can be traded at 
NYSE's best bid of $79.50; and
    (ii) Other higher-priced bids that are included among the 5,000 
Liquidity Quote shares may be available for execution on NYSE.
2. Statutory Basis
    The Exchange believes that the proposal to include an additional 
display requirement to the existing terms and conditions pursuant to 
which vendors may distribute NYSE Liquidity Quote information is 
consistent with Section 6(b) of the Act,\8\ in general, and Section 
6(b)(5) of the Act,\9\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in processing information with respect to, and 
facilitating transactions in securities, 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).
    \9\ 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 unsolicited written comments from members or other interested 
parties. The Exchange represents that it has taken into account the 
matters addressed by the Commission in the proceeding that gave rise to 
the January Order.

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-2004-32 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.


[[Page 44704]]


 All submissions should refer to File Number SR-NYSE-2004-32. 
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 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-2004-32 and should be submitted on or before August 17, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-17002 Filed 7-26-04; 8:45 am]
BILLING CODE 8010-01-P