[Federal Register Volume 70, Number 126 (Friday, July 1, 2005)]
[Notices]
[Pages 38226-38229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3457]



[[Page 38226]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51925; File No. SR-NYSE-2005-32]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to NYSE OpenBook[reg] Exhibit C

June 24, 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 May 13, 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. On June 16, 
2005, the NYSE submitted Amendment No. 1 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\ 2 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, NYSE submitted an Exhibit 4 to indicate 
the proposed changes to the existing Exhibit C that governs the 
receipt of OpenBook data.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NYSE proposes to amend display requirements pursuant to which 
vendors may distribute to their customers NYSE OpenBook information. 
The Exchange has set forth the display requirements in an Exhibit C to 
the standard form of ``Agreement for the Receipt and Use of Market 
Data'' (the ``OpenBook Exhibit C''). Below is the text of the proposed 
rule change, as amended. Proposed new language is italicized; proposed 
deletions are in [brackets].
* * * * *

EXHIBIT C Agreement for Receipt and Use of Market Data: Additional 
Provisions

21. NYSE [OPENBOOKTM]OPENBOOK[reg]
    (a) [AUTHORIZATION--Exhibit A describes Customer's receipt of the 
NYSE OpenBook\TM\ Service and]DEFINITIONS
    (i) ``NYSE OpenBook Information'' means the limit order and other 
information [included in that service. (This Exhibit C refers to that 
information,]that NYSE makes available pursuant to the NYSE OpenBook 
Service and any modified version of that information and any 
information derived from that information.
    (ii) ``Other Data'' means limit order and other information that 
other market centers make available.
    (b) AUTHORIZATION--Exhibit A describes Customer's receipt of NYSE 
OpenBook Information. NYSE OpenBook Information shall constitute ``NYSE 
Market Information'' for all purposes of the Agreement and its 
exhibits. Customer may use NYSE OpenBook Information, and may provide 
displays of NYSE OpenBook 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 NYSE OpenBook Information to 
Subscribers shall constitute ``Subscriber Services'' under the 
Agreement. Each display of NYSE OpenBook Information that Customer 
provides to Subscribers shall indicate that NYSE is the source of the 
information included in the display.
    ([b]c) DISPLAY SERVICES--As an additional Subscriber Service 
requirement under clause (iii) of Paragraph 5(b) of the Agreement, 
Customer shall not commence to provide displays of NYSE OpenBook 
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.
    [(c) INDIRECT ACCESS PROHIBITED--Except as NYSE may specifically 
permit in writing and notwithstanding anything to the contrary in 
Paragraph 5(c) of the Agreement, Customer shall not provide to any 
other Person any Indirect Access Service that includes OpenBook 
Information.]
    [(d) CONSOLIDATED DISPLAYS PROHIBITED--Notwithstanding anything to 
the contrary in Exhibit A or elsewhere, Customer shall not cause, or 
permit any other Person to cause, the displays of OpenBook Information 
that Customer provides to Subscribers to be integrated with limit 
orders or other market information that any source other than NYSE 
makes available. This means, for instance, that Customer shall not 
permit the displays of OpenBook Information that it provides to 
Subscribers to be consolidated with limit orders that any other market, 
or any electronic communications network or broker-dealer, makes 
available. However, this prohibition does not prevent Vendor from 
enabling a Subscriber to view one or more other entities' limit orders 
side-by-side with, or on the same page as, displays of OpenBook 
Information. In addition, this prohibition shall not apply insofar as 
Customer provides displays to its officers, partners and employees or 
to those of its Customer Affiliates.]
    [(e) SHARING OF RESEARCH--Customer and NYSE shall meet periodically 
to discuss the results, progress and status of the OpenBookTM Service 
and to share any market research that Customer has generated, subject 
to Customer's obligation or reasonable need to maintain confidentiality 
in respect of certain information.]
    (d) NYSE OPENBOOK DISPLAY RULES
    (i) ATTRIBUTION--Customer shall associate the identifier ``NYSE'' 
with each element or line of NYSE OpenBook Information that it includes 
in an Integrated Display or Montage.
    (ii) AGGREGATED DISPLAYS--Insofar as Customer incorporates NYSE 
OpenBook Information with Other Data in its displays (an ``Integrated 
Display''), Customer shall cause the Integrated Display to indicate at 
each price level the number of shares attributable to each NYSE 
OpenBook bid or offer.
    (iii) NYSE OPENBOOK-ONLY DISPLAYS--Customer may integrate NYSE 
OpenBook Information with other market information as the Agreement, as 
modified by this Exhibit C, may provide. However, Customer shall also 
make NYSE OpenBook Information available as a stand-alone product that 
is separate and apart from information products that include other 
market centers' information (a ``Stand-Alone NYSE OpenBook Product''). 
Customer may include other NYSE market data in Stand-Alone NYSE 
OpenBook 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 Stand-Alone 
NYSE OpenBook Product in the same manner and to the same extent as it 
makes its subscribers aware of the product that integrates NYSE 
OpenBook Information with other market information.
    (iv) SCREEN SHOTS--No later than at the time that Customer 
commences to provide to others displays of NYSE OpenBook Information, 
or modifies those displays, Customer shall submit to NYSE for inclusion 
in Exhibit A sample

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screen shots that demonstrate each manner of display and each 
modification.
    (e) INTERNAL DISPLAYS--The NYSE OpenBook 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, as 
amended. 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 OpenBook is a compilation of limit order data that the 
Exchange provides to market data vendors, broker-dealers, private 
network providers and other entities through a data feed. For every 
limit price, NYSE OpenBook includes the aggregate volume. NYSE has made 
NYSE OpenBook data available for more than three years. It updates that 
limit order data every five seconds.\4\ Last August, NYSE submitted a 
proposed rule change to the Commission to provide NYSE OpenBook data on 
the basis of real-time updates. (That filing is pending before the 
Commission.\5\)
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    \4\ The Commission approved the fee applicable to OpenBook in 
December 2001. See Release No. 34-44138 (December 7, 2001); 66 FR 
64895 (December 14, 2001) (SR-NYSE-2001-42) (``OpenBook Fees 
Approval Order'').
    \5\ See Release No. 34-50275 (August 26, 2004), 69 FR 53760 
(September 2, 2004). File No. SR-NYSE-2004-43 (submitted August 10, 
2004), which can be found on the Exchange's Web site.
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    In order for a vendor to receive NYSE OpenBook 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 CTA Plan and the CQ Plan. The participants in the CTA 
and CQ Plans first submitted the Consolidated Vendor Form to the 
Commission for immediate effectiveness in 1990\6\ and the Commission 
approved a revised version of it in 1996 in conjunction with the 
participants' restatement of the CTA and CQ Plans.\7\
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    \6\ See Release No. 34-28407 (September 6, 1990); 55 FR 37276 
(September 10, 1990) (File No. 4-281).
    \7\ See Release No. 34-37191 (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 Exhibit C terms and conditions pursuant to which 
NYSE currently makes NYSE OpenBook available prohibit a recipient of 
NYSE OpenBook data from externally distributing that data if the 
recipient has integrated that data with limit orders or other market 
information from any source other than the NYSE, although the recipient 
may make the integrated data available to its own officers, partners 
and employees or those of its affiliates.
    In light of the Exchange's experience with both the NYSE OpenBook 
product and its Liquidity Quote[supreg] product, as well as comments of 
vendors and NYSE OpenBook users, the Exchange has determined to replace 
the prohibition against integrating NYSE OpenBook data with other data 
with four display requirements.
    First, any Integrated Display must associate the identifier 
``NYSE'' with each element or line of NYSE OpenBook data that is 
included in the Integrated Display.
    Second, any display or montage that incorporates NYSE OpenBook data 
with limit orders or other market information from any source other 
than the NYSE makes available (an ``Integrated Display'') must indicate 
at each price level the number of shares attributable to the OpenBook 
bids and offers.
    Third, if a vendor or internal data user makes Integrated Displays 
available, it must also make NYSE OpenBook Information available as a 
product that is separate and apart from information products that 
include other market centers' information and make its subscribers 
aware of the availability of the stand-alone NYSE OpenBook product in 
the same manner as it makes its subscribers aware of the integrated 
product.
    Fourth, each vendor must add to Exhibit A a sample of each new 
screen shot to demonstrate the manner of the display and any 
modification to previous displays. The vendor is required to submit the 
new screen shot no later than at the time it first commences to provide 
the new or modified display to others.
    The display requirements do not apply insofar as the data recipient 
distributes NYSE OpenBook data to its officers, partners and employees 
or to those of its affiliates.
2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act \8\ in general, and furthers 
the objectives of Section 6(b)(5) \9\ in particular, in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
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,

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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

    No written comments were either solicited or received.

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; 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.
    The Commission notes that, unlike NYSE's Liquidity Quote, which is 
a unique market data product that represents aggregated NYSE trading 
interest at multiple price levels to a specific price interval outside 
the NYSE best bid or offer (``BBO''), NYSE OpenBook consists simply of 
depth-of-book limit order information. In the order approving the 
Exhibit C associated with NYSE's Liquidity Quote, the Commission 
specifically stated that the terms therein did not ``apply and have not 
been considered or approved* * *as acceptable for the distribution of 
NYSE OpenBook data.'' In this proposed rule change, the NYSE proposes 
to eliminate the restrictions it places on vendors' ability to 
integrate OpenBook data with data from other markets. In place of these 
restrictions, however, NYSE has proposed terms substantially identical 
to those applicable to the distribution of Liquidity Quote data. 
Specifically, NYSE proposes to require vendors to identify each element 
or line of OpenBook data that is included in a display that is 
integrated with other markets' data, indicate the number of shares 
attributable to the NYSE OpenBook data in any integrated display and 
provide NYSE OpenBook as a separate data product.
    The Commission recognizes that OpenBook contains important market 
data that provides investors with a view of available liquidity in the 
NYSE limit order book. This data is likely to become even more 
pertinent if the NYSE Hybrid Market Proposal is approved and 
implemented. For example, in the Hybrid Market Proposal, NYSE has 
proposed to substantially expand its automatic execution functionality 
and permit investors to sweep the NYSE limit order book, subject to 
certain parameters. Accordingly, the ability of investors to view and 
consider the depth of liquidity on the book is likely to assume 
heightened importance in making trading decisions in this environment.
    Section 11A of the Act generally sets forth standards under which a 
self-regulatory organization (``SRO'') may distribute information with 
respect to quotations, including limit orders.\10\ In addition, Section 
6(b)(8) of the Act \11\ requires that the rules of an exchange not 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Accordingly, the Commission 
specifically requests commenters to provide their views on the 
following:
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    \10\ See supra note 3, OpenBook Fees Approval Order note 8.
    \11\ 15 U.S.C. 78f(b)(8).
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    1. The Commission requests comment on whether the proposal is 
consistent with the Section 11A(c)(1)(C) of the Act,\12\ which 
requires, among other things, that all securities information 
processors be able to obtain information with respect to quotations and 
transactions for the purposes of distribution and publication on fair 
and reasonable terms. Specifically, are the proposed contract terms 
that require vendors to identify NYSE OpenBook data on displays that 
also include other markets' data and provide a separate OpenBook 
product fair and reasonable?
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    \12\ 15 U.S.C. 78k-1(c)(1)(C).
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    2. Section 11A(c)(1)(B) of the Act \13\ requires, among other 
things, that a SRO distribute information with respect to quotations in 
such a manner as to assure the prompt, accurate, reliable, and fair 
collection, processing, distribution, and publication of information 
with respect to quotations for and transactions in such securities, and 
the fairness and usefulness of the form and content of such 
information. The Commission requests comment on whether the form and 
content of the OpenBook data are useful and fair in light of the 
proposed restrictions on the form of display (i.e., the requirement 
that vendors identify NYSE OpenBook data in integrated displays and 
provide a separate OpenBook product).
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    \13\ 15 U.S.C. 78k-1(c)(1)(B).
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    3. Section 11A(c)(1)(D) of the Act \14\ requires, among other 
things, that exchange members, brokers, dealers and securities 
information processors be able to obtain information with respect to 
quotations for and transactions in securities on terms that are not 
unreasonably discriminatory. The Commission requests comment on whether 
the NYSE's proposal is consistent with this provision. Specifically, 
are the proposed Exhibit C contract terms unfairly discriminatory 
because they only apply to vendors that redisseminate the OpenBook data 
and do not apply to broker-dealers' internal use of the data.
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    \14\ 15 U.S.C. 78k--1(c)(1)(D).
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    4. Finally, the Commission requests comment on the proposed rule 
change's potential impact on competition. Specifically, the Commission 
requests comment on whether the proposal imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of 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-2005-32 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-2005-32. 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

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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-2005-32 and should be submitted on or before July 
22, 2005.
    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3457 Filed 6-30-05; 8:45 am]
BILLING CODE 8010-01-P