[Federal Register Volume 73, Number 228 (Tuesday, November 25, 2008)]
[Notices]
[Pages 71711-71713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-27989]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58975; File No. SR-NYSE-2008-121]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish Fees for Transactions in Stocks With a Price of Less than 
$1.00 per Share

November 19, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 14, 2008, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule changes 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 is proposing to establish a fee for all transactions 
in stocks that have a trading price below $1.00 equal to the lesser of 
(i) .3% of the aggregate transaction value and (ii) the fee that would 
have applied if the stock did not have a trading price below $1.00. 
Transactions subject to this fee limitation will include orders routed 
to other markets, but not transactions that would not otherwise be 
subject to a transaction fee. With respect to transactions in stocks 
with a trading price below $1.00, Designated Market Makers (``DMMs'') 
will receive a rebate of $0.0004 per share for all transactions when 
adding liquidity in round lots in both Less Active Securities and More 
Active Securities. This filing also deletes the Exchange Traded Funds 
(``ETFs'') pricing from the Exchange's 2008 Price List, as ETFs are no 
longer traded on the Exchange. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.nyse.com), at the 
Exchange's Office of the Secretary, 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 self-regulatory organization 
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 NYSE 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 is proposing to establish a fee for all transactions 
in stocks that have a trading price below $1.00 equal to the lesser of 
(i) .3% of the aggregate transaction value and (ii) the fee that would 
have applied if the stock did not have a trading price below $1.00. 
Transactions subject to this fee limitation will include orders routed 
to other markets, but not transactions that would not otherwise be 
subject to a transaction fee. With respect to transactions in stocks 
with a trading price below $1.00, DMMs will receive a

[[Page 71712]]

rebate of $0.0004 per share for all transactions when adding liquidity 
in round lots in both Less Active Securities and More Active 
Securities.
    Regulation NMS, adopted by the Securities and Exchange Commission 
(``SEC''),\3\ provides that each trading center intending to qualify 
for trade-through protection under Regulation NMS Rule 611\4\ is 
required to have a Regulation NMS-compliant trading system fully 
operational by March 5, 2007 (the ``Trading Phase Date'').\5\
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    \3\ 17 CFR 242.600 to 242.612. See Securities Exchange Act 
Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) 
(``Regulation NMS Adopting Release'').
    \4\ See 17 CFR 242.611.
    \5\ See Securities Exchange Act Release No. 55160 (January 24, 
2007), 72 FR 4202 (January 30, 2007) (S7-10-04).
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    For stocks priced below $1.00 per share, Regulation NMS Rule 612 
\6\ permits markets to accept bids, offers, orders and indications of 
interest in increments smaller than a $0.01, but not less than $0.0001, 
and to quote and trade such stocks in sub-pennies. Markets may choose 
not to accept such bids, offers, orders or indications of interest and 
the NYSE has done so, maintaining a minimum trading and quoting 
variation of $0.01 for all securities trading below $100,000.00. See 
NYSE Rule 62.
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    \6\ 17 CFR 242.612. Rule 612 originally was to become effective 
on August 29, 2005, but the date was later extended to January 31, 
2006. See Securities Exchange Act Release No. 52196 (Aug. 2, 2005), 
70 FR 45529 (Aug. 8, 2005) (S7-10-04).
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    The SEC's interpretation of Rule 612 requires a market that routes 
an order to another market in compliance with Rule 611 and receives a 
sub-penny execution, to accept the sub-penny execution, report that 
execution to the customer, and compare, clear and settle that trade. 
The SEC, however, provided a limited exemption to Rule 611's 
proscription against trade-throughs to protected quotes that include a 
sub-penny component to such quotes that are better-priced by a minimum 
of $0.01.\7\
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    \7\ See Securities Exchange Act Release No. 54714 (November 6, 
2006), 71 FR 66352 (November 14, 2006). (Order Granting National 
Securities Exchanges a Limited Exemption from Rule 612 of Regulation 
NMS under the Securities Exchange Act of 1934 to Permit Acceptance 
by Exchanges of Certain Sub-Penny Orders.)
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    In March, 2007, the Exchange amended Rule 123D to provide for a 
``Sub-penny trading'' condition because the Exchange's trading systems 
did not then accommodate sub-penny executions on orders routed to 
better-priced protected quotations, nor could it recognize a quote 
disseminated by another market center if such quote had a sub-penny 
component and, therefore, could have inadvertently traded through 
better protected quotations. The amended rule allowed the Exchange to 
halt trading in a security whose price was about to fall below $1.00, 
without delisting the security, so that the security could continue to 
trade on other markets that deal in bids, offers, orders or indications 
of interest in sub-penny prices, until the price of the security had 
recovered sufficiently to permit the Exchange to resume trading in 
minimum increments of no less than one penny or the issuer is delisted 
for failing to correct the price condition within the time provided 
under NYSE rules.\8\ A subsequent amendment established that any orders 
received by the NYSE in a security subject to a ``Sub-penny trading'' 
condition would be routed to NYSE Arca, Inc. and handled in accordance 
with the rules governing that market.\9\
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    \8\ See Securities Exchange Act Release No. 55398, 72 FR 11072 
(March 12, 2007) (SR-NYSE-2007-25).
    \9\ See Securities Exchange Act Release No. 55537 (Mar. 27, 
2007), 72 FR 15749 (April 2, 2007) (SR-NYSE-2007-30).
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    The NYSE now has the technical capability to recognize protected 
quotations with a sub-penny component in its round-lot market and 
accommodate away market executions in sub-pennies, in compliance with 
SEC Rules 611 and 612. Accordingly, the Exchange has filed an 
immediately effective rule filing to eliminate the ``Sub-penny 
trading'' condition in its entirety.\10\
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    \10\ See SR-NYSE-2008-111 [sic] (November 6, 2008).
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    Rule 610(c) of Regulation NMS imposes a limit of .3% of the 
aggregate dollar value on transaction fees charged by the executing 
market with respect to transactions in stocks that have trading prices 
below $1.00. As the Exchange will now be trading stocks with trading 
prices below $1.00, it proposes to adopt this .3% transaction fee limit 
with respect to all transactions in equities whether executed on the 
Exchange or routed to another market. This limit will apply to all 
customers, including Designated Market Makers. However, the Exchange 
will not be imposing this fee on any transaction that would otherwise 
be free of charge or qualify for a credit. As, in certain cases, .3% of 
the transaction value may exceed the fee that would otherwise be 
charged, in such cases the Exchange will charge the lesser of (i) .3% 
of the aggregate transaction value and (ii) the fee that would have 
applied if the stock did not have a trading price below $1.00.
    DMMs currently receive (i) a rebate of $0.0030 per share when 
adding liquidity in round lots in active securities (i.e., securities 
with a consolidated average daily trading volume (``ADV'') of greater 
than or equal to one million shares) (``More Active Securities); and 
(ii) a rebate of $0.0035 per share when they add liquidity in round 
lots in securities with a consolidated ADV of less than one million 
shares (``Less Active Securities''). Because of the very low price per 
share of stocks trading below a dollar, DMMs will receive a rebate of 
$0.0004 per share for all transactions when adding liquidity in round 
lots in both Less Active Securities and More Active Securities that 
have a trading price below $1.00.
    The Exchange is eliminating all references to ETFs from its Price 
List as the Exchange no longer lists ETFs or trades them on an unlisted 
trading privilege basis. As a consequence, these references no longer 
have any relevance.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 \11\ of the Act in general and Section 
6(b)(4) of the Act \12\ in particular, in that it is designed to 
provide for the equitable allocation of reasonable dues, fees and other 
charges among its members and other persons using its facilities. The 
Exchange believes that the proposal does not constitute an inequitable 
allocation of dues, fees and other charges as it conforms the 
Exchange's pricing policies to the requirements of Rule 610(c) of 
Regulation NMS and the lower rebates to DMMs are consistent with the 
very low trading price per share of the affected securities.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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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 purpose of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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

    The foregoing rule change is effective upon filing pursuant to 
Section 19(b)(3)(A) \13\ of the Act and Rule 19b-4(f)(2) \14\ 
thereunder.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).

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[[Page 71713]]

    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-2008-121 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSE-2008-121. 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 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 the filing will also be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-2008-121 and should be submitted on or before December 16, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27989 Filed 11-24-08; 8:45 am]
BILLING CODE 8011-01-P