[Federal Register Volume 70, Number 105 (Thursday, June 2, 2005)]
[Notices]
[Pages 32391-32392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2809]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51744; File No. SR-NYSE-2005-31]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Interpretation of Exchange Rules

May 25, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 29, 2005 the New York Stock Exchange, Inc. (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II and III 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 proposed rule change is an Information Memo providing certain 
interpretations of Exchange rules concerning the application of those 
rules in connection with the Pilot Program established by the 
Commission under Rule 202T \3\ of Regulation SHO (the ``Pilot'').\4\ 
The text of the proposed rule change is available on the Exchange's 
Internet Web site (http://www.nyse.com), at the Exchange's Office of 
the Secretary, and at the places specified in Item IV below.
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    \3\ 17 CFR 242.202T.
    \4\ 17 CFR 242.200 through 203.
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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 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
    The Exchange is issuing an Information Memo to provide guidance to 
its members and member organizations that are engaged in trading on the 
floor of the Exchange concerning the impact the Pilot will have with 
respect to certain rules of the Exchange governing such trading. The 
Information Memo reminds members and member organizations that, even 
though tick tests will not apply to short sales in Pilot securities, 
short sales in these securities must still be conducted in a manner 
consistent with all other applicable Exchange rules and Federal 
securities laws regarding market manipulation, fraud, market 
maintenance and other violative trading situations. The Information 
Memo also identifies specific Exchange rules, which have tick-sensitive 
components, but which are not affected by the suspension of tick tests 
for short sales outlined in the Pilot. For example, Exchange Rule 80A 
(Index Arbitrage Trading Restrictions) requires in certain 
circumstances that index arbitrage orders in certain stocks be entered 
on the Exchange as ``sell plus,'' meaning the orders must be executed 
on a plus or zero-plus tick. This requirement will continue to apply 
even if the order is a short sale entered in a stock that is part of 
the Pilot. The Exchange identifies several other tick-sensitive rules 
that will not be affected by the Pilot.
    The Exchange is alerting specialists and other floor members as to 
the manner in which it is interpreting certain provisions of Exchange 
Rule 104 (Dealings by Specialists) once the Pilot begins. As the 
Exchange anticipates that trading in certain stocks may see an increase 
in speed and volatility, the Exchange is advising specialists that, in 
such circumstances, Floor Official approval required under the Rule may 
be sought after a trade has taken place, but, in any case, as soon as 
possible. The Exchange is advising Floor Officials in these situations 
to review requests for approval as quickly as possible, and that they 
should complete their review and

[[Page 32392]]

make a decision before the close of trading on the same day. The 
Exchange is also providing guidance to Floor Officials with respect to 
reviewing approval requests involving specialist short sale proprietary 
trades against the existing bid in a declining market. Here the 
Exchange is advising Floor Officials to use the same considerations to 
reach a decision as to whether to give approval as they would use in 
evaluating specialist proprietary trades against existing offers in a 
rising market. Floor Officials must promptly report to the Exchange's 
On Floor Surveillance Unit instances where they have declined to give 
approval to a transaction.
    The Information Memo also highlights the application of depth 
guidelines in certain stocks. Depth guidelines specify what are 
considered general tolerances for price movements per trading sequence 
of 3,000 shares or less based on a stock's current price range and the 
prior month's adjusted average daily volume, which excluded trades of 
25,000 shares or more. The Exchange reminds Floor Officials that 
requests to widen or suspend depth guidelines should continue to be 
evaluated based on what is reasonable given the relevant facts and 
circumstances in the market at the time of the request.
    The Exchange believes that the guidance offered in the Information 
Memo will help the membership in facing any challenges offered by new 
market dynamics that could result from trading after the Pilot has 
begun.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \5\ of the Act 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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    \5\ 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 change will 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 comments on the 
proposed rule change.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(i) \6\ of the Act and subparagraph (f)(1) of Rule 
19b-4 \7\ thereunder. The proposed rule change is a stated policy, 
practice or interpretation with respect to the meaning, administration 
or enforcement of existing rules of the Exchange. 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.
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    \6\ 15 U.S.C. 78s(b)(3)(A)(i).
    \7\ 17 CFR 240.19b-4(f)(1).
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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-2005-31 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-2005-31. 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. 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-2005-31 and should be submitted on or before June 
23, 2005.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2809 Filed 6-1-05; 8:45 am]
BILLING CODE 8010-01-P