[Federal Register Volume 71, Number 131 (Monday, July 10, 2006)]
[Notices]
[Page 38953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10716]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54086; File No. SR-NYSE-2006-24]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change To Lower the Minimum Display Size 
Requirement for Specialists To Maintain Undisplayed Reserve Interest at 
the Exchange Best Bid or Offer in the NYSE Hybrid Market

June 30, 2006.
    On April 7, 2006, the New York Stock Exchange LLC (``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 Exchange Rule 104(d)(i) to provide that 
specialists shall have the ability to maintain undisplayed reserve 
interest on behalf of the dealer account at the Exchange best bid or 
offer (``BBO''), provided at least 1,000 shares of dealer interest is 
displayed at that price, on the same side of the market as the reserve 
interest. This proposed rule change would lower the specialist's 
minimum display size requirement from at least 2,000 shares to at least 
1,000 shares at the Exchange BBO and would conform the minimum display 
requirements for reserve interest for specialists and floor brokers.\3\ 
In addition, the Exchange proposes to make a conforming change to 
Exchange Rule 104(d)(ii) to require that after an execution at the 
Exchange BBO that does not exhaust the specialist's interest, the 
specialist's displayed interest would be automatically replenished from 
its reserve interest, if any, so that at least a minimum of 1,000 
shares is displayed (or whatever amount remains if the reserve interest 
is less than 1,000 shares). The proposed rule change was published for 
comment in the Federal Register on May 16, 2006.\4\ The Commission 
received no comments regarding the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ NYSE permits floor brokers to maintain undisplayed reserve 
interest at the Exchange BBO, provided floor brokers display at 
least 1,000 shares. See NYSE Rule 70.20(c)(ii).
    \4\ See Securities Exchange Act Release No. 53780 (May 10, 
2006), 71 FR 28398.
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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, and, in 
particular, with the requirements of Section 6(b) of the Act.\5\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \6\ in that it is designed, 
among other things, to promote just and equitable principle 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). In approving this proposed rule change, 
the Commission considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission previously approved NYSE's proposal to permit 
specialists and floor brokers to maintain undisplayed reserve interest 
at the Exchange BBO, provided that they display a minimum number of 
shares and yield priority to all displayed interest.\7\ In the Hybrid 
Market Order, the Commission found it to be consistent with the 
requirements of the Act to allow specialists to place reserve interest 
in the Display Book system because it could increase the liquidity 
available for execution at the Exchange BBO. The Commission 
specifically noted that the minimum size requirement and the priority 
of displayed interest over undisplayed reserve interest should help 
ensure that market participants continue to have an incentive to 
display quotes or orders on NYSE. The Commission stated that, taken 
together, these requirements could promote additional depth at the 
Exchange BBO, while preserving incentives for investors to display 
limit orders. Since NYSE's proposal would retain the requirements that 
specialists display a minimum amount of size at the BBO in order to 
maintain undisplayed reserve interest and that undisplayed reserve 
interest yield priority to displayed interest at that price, the 
Commission finds that the proposed rule change remains consistent with 
the requirements of the Act.
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    \7\ See Securities Exchange Act Release No. 53539 (March 22, 
2006), 71 FR 16353 (March 31, 2006) (``Hybrid Market Order'').
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NYSE-2006-24) is hereby 
approved.
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    \8\ 15 U.S.C. 78s(b)(2).
    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
[FR Doc. E6-10716 Filed 7-7-06; 8:45 am]
BILLING CODE 8010-01-P