[Federal Register Volume 70, Number 134 (Thursday, July 14, 2005)]
[Notices]
[Pages 40768-40770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3722]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51985; File No. SR-NYSE-2005-21]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto 
Relating to the Temporary Reallocation of Securities Among Specialists

July 7, 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 March 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 Exchange. On June 
16, 2005, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the NYSE added a paragraph to the 
purpose section concerning the designee of the Chief Regulatory 
Officer and corrected technical errors in the rule 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 amend NYSE Rule 103.11 regarding the 
temporary reallocation of securities traded on the Exchange from one 
specialist organization to another specialist organization. The text of 
the proposed rule change is set forth below. Italics indicate 
additions; [brackets] indicate deletions.
* * * * *
Rule 103. Registration of Specialists
    No member shall act as a specialist on the Floor in any security 
unless such member is registered as a specialist in such security with 
the Exchange and unless the Exchange has approved of his so acting as a 
specialist and has not withdrawn such approval.
    As a condition of a member's registration as a specialist in one or 
more securities the Board of Directors may at any time require such 
member to register with the Exchange and act as an odd-lot dealer in 
such securities under Rule 101.
Supplementary Material:
    .10 Registration of specialists.--Four classes of specialists have 
been established, namely (1) regular specialists, (2) relief 
specialists, (3) associate specialists, and (4) temporary specialists. 
No member is permitted to act as regular specialist, relief specialist 
or associated specialist unless he is registered with the Exchange. No 
registration is required for temporary specialists, but no member is 
permitted to act as such unless authorized by a Floor Official.
    Registration applies only to individual members, and not to member 
organizations. Consequently each Floor member of a specialist 
organization who expects to act as regular specialist, relief 
specialist or associate specialist at any time must register 
individually.
    All members of the Exchange registered as regular specialists, or 
odd-lot dealers or odd-lot brokers will be required to pay a monthly 
registration fee of $37.50 and all members registered as relief or 
associate specialists will be required to pay a monthly registration 
fee of $1.67.
    Notice of all new applications for registration as regular or 
relief specialist will be posted on the bulletin board. Approval will 
not be given on any such application until one week from the date of 
receipt thereof, except that, if circumstances require immediate 
action, temporary approval may be given. Members wishing to make 
representations with respect to any application should file their 
comments with the Market Surveillance and Evaluation Department during 
the period when notice is posted.
    Notice of applications for registration as associate specialists 
will not be posted.
    Before registration as a specialist, a member is required to pass a 
Specialist's Examination prescribed by the Exchange. Applications for 
this examination should be submitted to the Market Surveillance 
Department.
    .11 Temporary Reallocation of [Stocks] Securities.--The Chief 
[Executive] Regulatory Officer or his or her designee and two [most 
senior] non-specialist BoE Floor Representatives or [in the absence 
from the Floor of either of them, the next senior] if only one or no 
non-specialist BoE Floor Representatives is present on the Floor, the 
most senior non-specialist Floor Governor or Governors based on length 
of consecutive service as a Floor Governor at the time of any action 
covered by this rule, acting by a majority shall have the power to 
reallocate temporarily any [stock] security on an

[[Page 40769]]

emergency basis to another location on the Floor whenever in their 
opinion such reallocation would be in the public interest.
    The member to whom a [stock] security has been temporarily 
reallocated under the provisions of this Rule will be registered as the 
regular specialist therein until the [Board of Directors] Chief 
Regulatory Officer or his or her designee and two non-specialist BoE 
Floor Representatives determine[s] that the security may be returned to 
the original specialist organization or has been reallocated pursuant 
to Exchange rules [the ultimate location of the security].
* * * * *

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
    NYSE Rule 103.11 provides a procedure to temporarily reallocate 
securities listed on the NYSE from one specialist organization to 
another specialist organization on an expedited basis. Current NYSE 
Rule 103.11 requires the Chief Executive Officer and two Board of 
Executive (``BoE'') Floor Representatives to make the decision on such 
reallocation by majority agreement. The participation of the BoE Floor 
Representatives is on a seniority basis.
    The Exchange represents that recent changes to short sale 
regulations promulgated by the Commission in Regulation SHO \4\ may 
result in the need to temporarily reallocate securities from one 
specialist organization to another specialist organization on an 
expedited basis. These regulations, which are intended to address aged 
fails to deliver resulting from short sale transactions, may preclude 
the specialist organization responsible for making a market in a 
particular security from effecting short sales in such security. As a 
result, Exchange specialist organizations would be subject to the 
prohibitions of Regulation SHO and could be prohibited from effecting 
sell-short transactions in a specialty security if it became a 
threshold security without first borrowing or arranging to borrow the 
security, which would be difficult to do in a manner consistent with 
the fulfillment of the specialist's Exchange-mandated market making 
obligations. In these circumstances, the Exchange would look to 
transfer the effected security to another specialist organization until 
such time as the first specialist organization is no longer precluded 
from selling short without first borrowing or arranging to borrow the 
security by Regulation SHO.
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    \4\ See Securities Exchange Act Release No. 50103 (July 28, 
2004), 69 FR 48008 (August 6, 2004).
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    The Exchange believes that the temporary reallocation of a security 
is most likely to be required for regulatory reasons and thus is more 
properly the responsibility of the Chief Regulatory Officer or his or 
her designee. Therefore, the Exchange proposes to amend NYSE Rule 
103.11 in this regard.
    Under the proposed rule, the Chief Regulatory Officer may designate 
someone to meet his or her responsibility. The Exchange expects that 
the designee will be an officer in the Exchange's Regulatory Group, 
with the Executive Vice President of the Market Surveillance Division 
being the primary designee.\5\
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    \5\ See Amendment No. 1.
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    The NYSE's BoE advises the Chief Executive Officer in his or her 
management of the operations of the Exchange. The BoE consists of 
representatives of listed companies, investors, members and member 
organizations. Included on the BoE are specialist and Floor broker 
members.\6\ These Floor member BoE representatives are also Floor 
Officials under NYSE Rule 46 and have certain powers and 
responsibilities under NYSE rules. Among these responsibilities is the 
power, along with the Chief Executive Officer, to temporarily 
reallocate securities on the Floor.
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    \6\ There are currently five BoE Floor Representatives--two 
specialist and three non-specialist Floor brokers.
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    The Exchange believes that, for potential conflict of interest 
reasons, only non-specialist BoE Floor Representatives should be 
involved in a decision to reallocate a security from one specialist 
organization to another specialist organization. In addition, the 
Exchange proposes to remove as unnecessary the provision in NYSE Rule 
103.11 that BoE Floor Representatives be chosen to act on a temporary 
reallocation in order of seniority.
    Finally, the Exchange proposes to provide as an alternative that, 
if there are not two non-specialist BoE Floor Representatives available 
to participate in the reallocation decision, the most senior non-
specialist Floor Governor or Governors, based on his or her current 
length of service as a Floor Governor, would be authorized to act in 
place of the non-specialist BoE Floor Representative. The Exchange 
believes that seniority of the Floor Governors is relevant, because the 
experience of the ten non-specialist Floor Governors may vary widely, 
and the more senior non-specialist Floor Governors would have 
experience similar to that of a BoE Floor Representative.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) of the Act \7\ 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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    \7\ 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 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

    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 the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 40770]]

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 form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2005-21 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-2005-21. 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 the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. 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-2005-21 and should be submitted on or before August 
4, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-3722 Filed 7-13-05; 8:45 am]
BILLING CODE 8010-01-P