[Federal Register Volume 71, Number 73 (Monday, April 17, 2006)]
[Notices]
[Page 19781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-5609]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53610; File No. SR-PCX-2006-12]


Self-Regulatory Organizations; Pacific Exchange, Inc. (n/k/a NYSE 
Arca, Inc.); Order Granting Approval of Proposed Rule Change Relating 
to Clearly Erroneous Executions

April 6, 2006.
    On February 23, 2006, the Pacific Exchange, Inc. (n/k/a NYSE Arca, 
Inc.) (``Exchange'') \1\ filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change pursuant to section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\2\ and Rule 
19b-4 thereunder,\3\ to amend PCX Equities, Inc. (n/k/a NYSE Arca 
Equities, Inc.) (``NYSE Arca Equities'') Rule 7.10(e) pertaining to 
clearly erroneous executions of securities issued in initial public 
offerings (``IPOs''). The proposed rule change was published for 
comment in the Federal Register on March 3, 2006.\4\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change.
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    \1\ On March 6, 2006, the Exchange filed with the Commission a 
proposed rule change, which was effective upon filing, to change the 
name of the Exchange, as well as several other related entities, to 
reflect the recent acquisition of PCX by Archipelago Holdings, Inc. 
(``Archipelago'') and the merger of NYSE with Archipelago. See File 
No. SR-PCX-2006-24. All references herein have been changed to 
reflect the aforementioned rule change.
    \2\ 15 U.S.C. 78s(b)(1).
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 53376 (February 27, 
2006), 71 FR 11008 (``Notice'').
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    The proposed rule change would revise the procedures in NYSE Arca 
Equities Rule 7.10(e) relating to trade nullifications (``busts'') and 
price adjustments (``adjusts'') of the initial trade of securities 
issued in IPOs that are traded on the Archipelago Exchange (n/k/a NYSE 
Arca Marketplace) on an unlisted trading privileges basis. Currently, 
initial trades on NYSE Arca Marketplace of these securities that are 
executed at prices of $1.00 or 10% (whichever is lesser) away from the 
primary listing exchange's opening price are automatically busted or 
adjusted to the opening price of the security on the primary listing 
exchange. Under the proposed rule change, NYSE Arca Equities staff 
would have the discretion to bust or adjust initial trades in IPO 
securities that are executed at $1.00 or 10% (whichever is lesser) away 
from the opening price on the primary listing exchange. The Exchange 
states that this discretion is necessary because the primary listing 
exchange often has multiple prices for an IPO security during the first 
moments that the IPO security begins to trade.
    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.\5\ In 
particular, the Commission believes that the proposal is consistent 
with section 6(b)(5) of the Act,\6\ which requires that the rules of an 
exchange be 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 facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \5\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change, by granting 
NYSE Arca Equities staff the discretion to bust or adjust initial 
trades for IPO securities that are executed at $1.00 or 10% (whichever 
is lesser) away from the primary listed exchange's opening price, and 
thus no longer require NYSE Arca Equities staff to automatically bust 
or adjust such trades, is designed to help ensure that the Exchange's 
clearly erroneous execution rule is exercised in a fair and reasonable 
manner. As the Exchange noted, the primary listing exchange's opening 
price for an IPO security may not necessarily be indicative of the 
actual trading price of the security, and, thus the Commission believes 
that it is fair and reasonable for NYSE Arca Equities staff to have the 
discretion to review all prices at the time the IPO security first 
trades on the primary listing exchange to determine whether it is 
appropriate to adjust or bust the trade at issue.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-PCX-2006-12) is approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    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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Nancy M. Morris,
Secretary.
 [FR Doc. E6-5609 Filed 4-14-06; 8:45 am]
BILLING CODE 8010-01-P