[Federal Register Volume 70, Number 167 (Tuesday, August 30, 2005)]
[Notices]
[Page 51398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4724]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52328; File No. SR-NYSE-2005-45]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Approving 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

August 24, 2005.
    On June 28, 2005, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Rule 80A (Index Arbitrage Trading 
Restrictions) relating to limitations on index arbitrage trading. The 
proposed rule change was published for comment in the Federal Register 
on July 25, 2005.\3\ The Commission received no comments on the 
proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 52051 (July 18, 2005), 
70 FR 42608.
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    Current NYSE Rule 80A provides for limitations on index arbitrage 
trading in any component stock of the S&P 500 Stock Price Index on any 
day that the Dow Jones Industrial Average (``DJIA'') \4\ advances or 
declines at least 2% \5\ from its previous day's closing value.\6\ The 
NYSE proposes to amend NYSE Rule 80A to calculate the limitations on 
index arbitrage trading as provided in the rule based on the average 
closing value of the NYSE Composite Index[supreg] (``NYA''), replacing 
the current usage of the DJIA.
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    \4\ ``Dow Jones Industrial Average'' is a service mark of Dow 
Jones & Company, Inc.
    \5\ Current 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.
    \6\ NYSE Rule 80A's current limitations on index arbitrage 
trading provide that 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.
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    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange \7\ and, in 
particular, the requirements of Section 6 of the Act \8\ and the rules 
and regulations thereunder. Specifically, the Commission finds the 
proposal to be consistent with Section 6(b)(5) of the Act,\9\ in that 
it is 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. According to the Exchange, the NYA 
is a better reflection of market activity with respect to the S&P 500 
and thus, a better indicator as to when the restrictions on index 
arbitrage trading provided by NYSE Rule 80A should be triggered. 
Therefore, the Commission believes that it is consistent with the Act 
for the NYSE to amend NYSE Rule 80A to calculate limitations on index 
arbitrage trading based on the NYA.\10\
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition and 
capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ The Commission notes that approval of the proposed rule 
change is based, in part, on the fact that NYSE Rule 80A affects 
only certain types of trading by NYSE members trading on the floor 
of the Exchange. The rule's cross-market implications are minimal. 
The Commission, therefore, believes that the NYSE should have 
considerable discretion in determining which index to apply under 
this rule. The Commission's approval of the proposed rule change 
should in no way be interpreted as an indication that a similar 
change to NYSE Rule 80B (Trading Halts Due to Extraordinary Market 
Volatility), which is integral to the cross-market trading halt 
procedures known as ``Circuit Breakers,'' would be subject to the 
same analysis or similarly approved by the Commission.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-NYSE-2005-45) be, and it 
hereby is, approved.
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    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4724 Filed 8-29-05; 8:45 am]
BILLING CODE 8010-01-P