[Federal Register Volume 73, Number 191 (Wednesday, October 1, 2008)]
[Notices]
[Pages 57183-57185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22964]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58629; File No. SR-NYSE-2008-85]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Amending NYSE Rule 1000 (``Automatic Execution of Limit Orders Against 
Orders Reflected in NYSE Published Quotation'')

September 24, 2008.
    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 September 17, 2008, New York Stock Exchange LLC ``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items 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 Exchange proposes to amend Exchange Rule 1000(a)(iv)(C) to 
modify the current LRP value ranges. The text of the proposed rule 
change is available at NYSE, http://www.nyse.com, and 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 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
    The Exchange proposes to amend Exchange Rule 1000(a)(iv)(C) 
(Liquidity Replenishment Point) to widen the value ranges for the 
calculation of liquidity replenishment points (``LRPs'').
Background
    Pursuant to NYSE Rule 1000(a)(iv), LRPs are pre-determined price 
points that function to moderate volatility, improve price continuity, 
and foster market quality in a particular security by temporarily 
converting the electronic market to an auction market and permitting 
new orders, the Crowd, or the specialist, to add liquidity.\3\
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    \3\ See also NYSE Rules 60(e)(i). It is important to note that 
not all securities on the NYSE are eligible for automatic 
executions. In accordance with Exchange Rule 1000(a)(vi) those 
securities that are priced at or more than $1000 per share are 
defined as ``high-priced'' and do not receive automatic executions 
and, therefore, are not assigned an LRP value ranges.
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    Pursuant to NYSE Rule 60, Autoquote is suspended when an LRP is 
reached and resumes in no more than five to ten seconds after the LRP 
is reached.\4\ Autoquote resumes unless there is interest on the NYSE 
Display Book[supreg] system \5\ that would lock or cross the market. In 
such case, Autoquote will resume with a manual transaction.\6\
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    \4\ See NYSE Rule 60(e)(ii)(C). Currently, in an effort to 
increase the availability of NYSE quotes eligible for automatic 
execution, the NYSE will revert to auto-quoting in situations where 
the LRP has been hit but the market is not locked or crossed in five 
seconds. See Liquidity Replenishment Points (LRPs) Timer Pilot 
(August 20, 2008), NYSE Trader Updates available at: http://traderupdates.nyse.com/2008/08/liquidity_replenishment_points_2.html .
    \5\ The Display Book[supreg] system is an order management and 
execution facility. The Display Book system receives and displays 
orders to the specialists, contains the Book, and provides a 
mechanism to execute and report transactions and publish the results 
to the Consolidated Tape. The Display Book system is connected to a 
number of other Exchange systems for the purposes of comparison, 
surveillance, and reporting information to customers and other 
market data and national market systems.
    \6\ See NYSE Rule 60(e)(ii)(C).
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    LRPs are calculated by adding and subtracting a value to the 
security's last sale price. The LRP values are based on an examination 
of trading data and vary based on the security's NYSE average daily 
volume (``ADV''), price, and volatility. The values used to calculate 
the LRP's range do not change intraday

[[Page 57184]]

and are disseminated daily by the Exchange on its Web site.
Modification to LRP Value Ranges
    The Exchange proposes to amend NYSE Rule 1000(a)(iv)(C) to double 
the current LRP ranges in order to limit the number of times that an 
LRP is reached and the total number of times during the trading day 
that automatic execution is suspended as a result of an LRP being 
triggered. In this way the Exchange will allow for more continuous 
automatic executions of securities. While the purpose of the LRP is to 
dampen volatility and to provide market participants with time to 
react, the Exchange believes that the proposed amendment is necessary 
to lessen artificial limitations on trading and will ultimately provide 
beneficial trading opportunities for its customers. As a means of 
controlling volatility, LRPs are intended to be triggered infrequently, 
i.e., when the market is experiencing a large price movement (based on 
a security's typical trading characteristics or other market 
conditions) over short periods of time during the trading day. If an 
LRP is triggered too frequently trading in the security is overly 
restrained and does not meet the competitive needs of NYSE customers. 
As such the NYSE believes that doubling the current LRP value ranges 
will better facilitate the natural trading pattern of a particular 
security.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
and furthers the objectives of Section 6(b)(5) \7\ of the Act, in that 
it is designed to prevent fraudulent and manipulative practices, to 
promote just and equitable principles of trade, to remove impediments 
to, and perfect the mechanisms of, a free and open market and a 
national market system, and, in general, to protect investors and the 
public interest. The proposed rule change also is designed to support 
the principles of Section 11A(a)(1) \8\ in that it seeks to assure 
economically efficient execution of securities transactions, make it 
practicable for brokers to execute investors' orders in the best market 
and provide an opportunity for investors' orders to be executed without 
the participation of a dealer. The Exchange's proposal to double the 
current LRP ranges is consistent with these objectives in that it is 
intended to limit the number of times that an LRP is reached and the 
total number of times during the trading day that automatic execution 
is suspended as a result of an LRP being triggered.
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78k-1(a)(1).
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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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder \10\ because 
the foregoing proposed rule change: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) by its terms, does not 
become operative for 30 days after the date of filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\11\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked the 
Commission to waive the 30-day operative delay, as specified in Rule 
19b-4(f)(6)(iii),\12\ which would make the rule change effective and 
operative upon filing. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because the proposal is designed to benefit market 
participants and customers by providing for more continuous automatic 
executions of securities traded on the Exchange.\13\ Specifically, the 
proposed rule change seeks to maintain LRPs as a mechanism to moderate 
volatility, but proposes to adjust the current LRP ranges in order to 
limit the number of times during the trading day that automatic 
execution is suspended as a result of an LRP being triggered. 
Accordingly, the Commission designates the proposed rule change 
effective and operative upon filing with the Commission.
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    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. NYSE has satisfied this requirement.
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-2008-85 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street, NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2008-85. 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 57185]]

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, 100 F Street, NE., Washington, DC 20549, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of such 
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 publicly available. All submissions should refer to 
File Number SR-NYSE-2008-85 and should be submitted on or before 
October 22, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22964 Filed 9-30-08; 8:45 am]
BILLING CODE 8011-01-P