[Federal Register Volume 70, Number 141 (Monday, July 25, 2005)]
[Notices]
[Pages 42608-42610]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3947]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52051; File No. SR-NYSE-2005-45]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Amend NYSE Rule 80A (Index 
Arbitrage Trading Restrictions) To Calculate Limitations on Index 
Arbitrage Trading Based on the NYSE Composite Index, Replacing the 
Current Usage of the Dow Jones Industrial Average

July 18, 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 June 28, 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

[[Page 42609]]

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 seeks to amend NYSE Rule 80A (``Index 
Arbitrage Trading Restrictions'') to calculate limitations on index 
arbitrage trading as provided in the rule based on the NYSE Composite 
Index (``NYA''), replacing the current usage of the Dow Jones 
Industrial Average (``DJIA''). 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.

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. 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 80A provides for limitations on index arbitrage trading 
in any component stock of the S&P 500 Stock Price Index (``S&P 500'') 
on any day that the DJIA\3\ advances or declines at least 2% \4\ from 
its previous day's closing value. The Exchange is proposing to amend 
NYSE Rule 80A to base the collars on a 2% movement in the average 
closing value of the NYSE Composite Index[supreg]. The NYA is designed 
to measure the performance of all common stocks listed on the Exchange, 
including American depository receipts (``ADRs''), real estate 
investment trusts (``REITs'') and tracking stocks. The base value of 
the NYA was recalculated on December 31, 2002 at 5,000. It closed at 
7030.74 on April 19, 2005. The NYA represents 77% of the total market 
capitalization of all publicly traded companies in the U.S., and 64% of 
the total market capitalization of all publicly traded companies 
worldwide.
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    \3\ ``Dow Jones Industrial Average'' is a service mark of Dow 
Jones & Company, Inc.
    \4\ NYSE Rule 80A provides that collars are based on a quarterly 
calculation of ``two percent value,'' which is 2%, rounded down to 
the nearest ten points, of the average closing value of the DJIA for 
the last month of the previous calendar quarter.
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    NYSE Rule 80A affects index arbitrage orders entered in any 
component stock of the S&P 500 traded on the NYSE on any day that the 
DJIA experiences a price movement of 2% or more. If the market advances 
by 2% or more, all index arbitrage orders to buy must be stabilizing 
(buy minus); similarly, if the market declines by 2% or more, all index 
arbitrage orders to sell must be stabilizing (sell plus). The 
stabilizing requirements are removed if the DJIA moves back to or 
within 1% of its closing value.
    The Exchange believes that the NYA is a better reflection of market 
activity with respect to the S&P 500 as there is a higher correlation 
between the NYA and the S&P 500 than there is between the DJIA and the 
S&P 500. In this regard, the stocks in the NYA include 86% of the total 
market capitalization of the companies in the S&P 500. The DJIA 
represents only 34%. The Exchange also believes that the NYA will 
continue to provide an appropriate measure of market volatility. A 
review of the NYSE Rule 80A collars during 2003 shows that the 2% DJIA 
collar was triggered 28 times. During this same period, using the NYA 
at 2% as the measure would have resulted in the collar being triggered 
18 times. In 2004, the NYSE Rule 80A collars were not triggered at all, 
while the collar would have been triggered once using the NYA at 2%.
2. Statutory Basis
    The NYSE believes the basis under the Act for this proposed rule 
change is the requirement under Section 6(b)(5)\5\ 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 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.

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-2005-45 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-2005-45. 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

[[Page 42610]]

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-2005-45 and should be 
submitted on or before August 15, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.6
[FR Doc. E5-3947 Filed 7-22-05; 8:45 am]
BILLING CODE 8010-01-P