[Federal Register Volume 70, Number 124 (Wednesday, June 29, 2005)]
[Notices]
[Pages 37461-37462]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3380]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51899; File No. SR-NYSE-2005-16]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Rescind the ``Nine-Bond'' 
Rule

June 22, 2005.
    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 11, 2005, 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to rescind NYSE Rule 396 (Off Floor 
Transactions in Bonds), commonly known as the ``Nine-bond'' rule. The 
text of the proposed rule change is available on the NYSE's Web site 
(http://www.nyse.com), at the NYSE's principal office, and at the 
Commission's Public Reference Room.

[[Page 37462]]

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 NYSE 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 396 addresses off-floor trading of bonds. The rule, in 
essence, prohibits a member firm from effecting any transaction in any 
listed bond in the over-the-counter market, either as principal or 
agent, without first satisfying all public bids and offers on the 
Exchange at prices equal to, or better, than the price at which such 
portion of the order is executed over-the-counter. A member 
organization may execute, as agent, a transaction for a customer in the 
over-the-counter market in a listed convertible bond.
    The rule contains several exceptions, including:

--Any order for the purchase or sale of ten bonds or more (hence the 
name of the rule);
--Orders involving less than one unit of trading (generally less than 
$1,000);
--Orders where the customer has specifically directed that the trade 
not be executed on the floor of the Exchange;
--Orders for the purchase or sale of U.S. government bonds, municipal 
bonds, or bonds which have been called or otherwise are to be redeemed 
within 12 months; and
--Bond transactions related to primary or special distributions

    The Exchange believes that the characteristics of bond trading no 
longer necessitate that NYSE Rule 396 be retained. In addition, in a 
separate submission, the Exchange has requested that the Commission 
provide an exemption from the provisions of section 12(a) of the Act 
\3\ to permit NYSE members and member organizations to trade certain 
unregistered debt securities on the Automated Bond System.\4\ If the 
Commission grants this exemption, the Exchange could add substantially 
to the inventory of bonds traded in its market. Although the additional 
bonds would not be subject to NYSE Rule 396 since they would not be 
``listed'' bonds, Rule 396 may be viewed as anti-competitive, 
particularly because the rule would apply only to a small segment of 
bonds traded on the Exchange. The Exchange, therefore, proposes to 
rescind NYSE Rule 396 in its entirety.
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    \3\ 15 U.S.C. 78l(a).
    \4\ See letter from Mary Yeager, Assistant Secretary, NYSE, to 
Jonathan G. Katz, Secretary, Commission, dated May 26, 2005.
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2. Statutory Basis
    The NYSE believes that the proposed rule change is consistent with 
the provisions of section 6(b) of the Act,\5\ in general, and with 
section 6(b)(5) of the Act,\6\ in particular, which requires that NYSE 
rules be designed to promote just and equitable principles of trade, to 
prevent fraudulent and manipulative acts, and 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 NYSE does not believe that the proposed rule change would 
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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change; 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 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-2005-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.

All submissions should refer to File Number SR-NYSE-2005-16. 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, 100 F Street, 
NE., 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-2005-16 and should be 
submitted on or before July 20, 2005.

    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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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3380 Filed 6-28-05; 8:45 am]
BILLING CODE 8010-01-P