[Federal Register Volume 69, Number 242 (Friday, December 17, 2004)]
[Notices]
[Pages 75579-75580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3704]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50828; File No. SR-NYSE-2004-66]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. To Extend the Pilot for Its Automatic Execution Facility for 
Certain Limit Orders (NYSE Direct+[reg])

December 9, 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 November 22, 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 and 
II below, which Items have been prepared by the Exchange. 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 Exchange proposes to extend until December 23, 2005 the 
effectiveness of the pilot program (``Pilot'') for NYSE 
Direct+[reg] (``Direct+''). The Pilot was initially approved 
on a one-year basis and subsequently extended until December 23, 2004.

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
    In light of the fact that the Commission is still considering the 
Exchange's proposed enhancements to Direct+ (``hybrid market 
proposal''),\3\ the Exchange seeks to extend the Pilot as it currently 
operates for an additional year until December 23, 2005. Direct+ was 
originally approved as a one-year pilot ending on December 21, 2001.\4\ 
The Pilot was subsequently extended for three additional one-year 
periods, and is currently scheduled to end on December 23, 2004.\5\
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    \3\ See Securities Exchange Act Release Nos. 50173 (August 10, 
2004), 69 FR 50407 (August 16, 2004) and 50667 (November 15, 2004), 
69 FR 67980 (November 22, 2004) (SR-NYSE-2004-05).
    \4\ See Securities Exchange Act Release No. 43767 (December 22, 
2000), 66 FR 834 (January 4, 2001) (SR-NYSE-00-18).
    \5\ See Securities Exchange Act Release Nos. 45331 (January 24, 
2002), 67 FR 5024 (February 1, 2002) (SR-NYSE-2001-50); 46906 
(November 25, 2002), 67 FR 72260 (December 4, 2002) (SR-NYSE-2002-
47); and 48772 (November 12, 2003), 68 FR 65756 (November 21, 2003) 
(SR-NYSE-2003-30).
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    The 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, 2005. Four filings which impact Direct+ and that 
have been approved by the Commission during the current Pilot are now 
part of the Pilot.\6\ These filings are set forth below.
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    \6\ In addition, SR-NYSE-2003-20 proposed to disengage Direct+ 
in five actively-traded stocks on a pilot basis. 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 which amended NYSE Rule 1000 to provide that Direct+ 
executions would not be available if the resulting trade would be more 
than five cents away from the last sale.\7\ The amendment also 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.
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    \7\ 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 which (i) amended NYSE Rule 13 to provide for a one-
year pilot program (also expiring on December 23, 2004) to expand 
Direct+ order size eligibility (for up to 10,000 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.\8\
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    \8\ 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 which amended NYSE Rule 1005 to permit entry of limit 
orders up to 1099 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.\9\
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    \9\ 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 which amended NYSE Rules 1000 and 1001 in connection 
with the NYSE LiquidityQuoteSM initiative.\10\ In 
conjunction with autoquoting of bids and offers, NYSE Rule 1000 was 
amended to provide that a Direct+ order equal to or greater than the 
size of the published bid/offer would exhaust the entire bid/offer 
rather than decrease it to

[[Page 75580]]

100 shares, and NYSE Rule 1001(c) was deleted.\11\
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    \10\ See Securities Exchange Act Release No. 47614 (April 2, 
2003), 68 FR 17140 (April 8, 2003) (SR-NYSE-2002-55).
    \11\ NYSE Rule 1001(c) formerly 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.
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    The above-mentioned filings became part of the Direct+ rules and 
were incorporated into the Pilot upon their respective approvals by the 
Commission.\12\ Therefore, the Exchange proposes that an extension of 
the Pilot for an additional year would also extend the above-mentioned 
filings as part of the Pilot.
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    \12\ See Amendment No. 1 to SR-NYSE-2002-47, supra note 5.
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    However, if the Commission approves the hybrid market proposal 
during the extension of the Pilot period (December 24, 2004 to December 
23, 2005), the Exchange proposes that the hybrid market proposal would 
supersede this filing.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \13\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \14\ in particular, because 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 also believes that the 
proposed rule change 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, makes it practicable 
for brokers to execute investors' orders in the best market, and 
provides an opportunity for investors' orders to be executed without 
the participation of a dealer.
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    \13\ 15 U.S.C. 78f(b).
    \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

    Because the foregoing proposed rule 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 it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, provided that the self-regulatory 
organization has given the Commission written notice of its intent to 
file the proposed rule change at least five business days prior to the 
date of filing of the proposed rule change or such shorter time as 
designated by the Commission, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\ At any time within 60 days of the filing of 
such 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).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 15 U.S.C. 78s(b)(3)(C).
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    The Exchange requests that the Commission waive the five business 
days pre-filing requirement and the 30-day operative delay under Rule 
19b-4(f)(6)(iii).\19\ The Exchange believes that the continuation of 
the Pilot is in the public interest as it will avoid inconvenience and 
interruption to the public.
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    \19\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiver of the 30 days operative delay 
is consistent with the protection of investors and the public 
interest,\20\ because it will allow the Exchange to continue, without 
interruption, the existing operation of its Pilot for an additional 
year, while the Commission considers the hybrid market proposal. 
Accordingly, the Commission designates that the proposal shall become 
operative as of the date of this notice.
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    \20\ 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2004-66 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-2004-66. 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 Room, 450 Fifth 
Street, NW., Washington, DC 20549. 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-
NYSE-2004-66 and should be submitted on or before January 7, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3704 Filed 12-16-04; 8:45 am]
BILLING CODE 8010-01-P