

[Federal Register: August 1, 2007 (Volume 72, Number 147)]
[Notices]               
[Page 42193-42195]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au07-133]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56140; File No. SR-NYSE-2007-55]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change, 
as Modified by Amendment No. 1 Thereto, Relating to Rule 106 
(Specialists' Contact With Listed Companies and Member Organizations)

July 26, 2007.
    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 June 28, 2007, the New York Stock Exchange LLC (``NYSE'' or 
``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 substantially prepared by the Exchange. 
NYSE filed the proposal pursuant to section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. On July 25, 2007, the 
Exchange submitted Amendment No. 1 to the proposed rule change. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 7 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 NYSE Rule 106 (Specialists' Contact 
with Listed Companies and Member Organizations). The text of the 
proposed rule change is available at NYSE, the Commission's Public 
Reference Room, and http://www.nyse.com.


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 seeks to amend NYSE Rule 106 in order to modify the 
requirements related to specialist contact with listed companies and 
with Exchange member organizations. The proposal takes into 
consideration the reality that a listed company's, or a member 
organization's, access to electronic information may result in such 
listed company or member organization declining to have meetings with 
the specialist. Therefore, the Exchange seeks to amend the rule to 
require the specialist unit to make itself available for contact with 
its listed companies and with certain Exchange member organizations.
    NYSE Rule 106 was adopted at a time when orders entered with the 
specialist were handled manually, and contact between a specialist unit 
and its listed companies was necessary to ensure that such listed 
companies were informed about the trading in its listed security on the 
Exchange trading floor.\5\ As a result, NYSE Rule 106(a) mandates 
interaction between a specialist unit and representatives of its listed 
companies. The rule is very specific as to the frequency of contact 
(quarterly) and the status of the issuer representative with whom the 
contact must be had (Secretary or higher). Further, the rule mandates 
that at least one of the quarterly meetings be in person. NYSE Rule 
106(a) was intended to help foster a better understanding of the 
specialist function, the operations of the Exchange market, and the 
markets that are maintained in the listed company's stock.
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    \5\ See Securities Exchange Act Release No. 27292 (September 26, 
1989), 54 FR 41193 (October 5, 1989) (SR-NYSE-89-13).
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    The Exchange is mindful of the busy schedules kept by the highest 
ranking corporate employees in listed companies. As such, the Exchange 
believes that NYSE Rule 106 no longer takes into consideration the 
possibility that in today's world of electronic messaging, Internet 
connectivity, and automated trading, a listed company may not need or 
want the type of contact with their specialist unit that is currently 
required by NYSE Rule 106(a).
    In addition to the listed companies' ability to access public 
information, specialist units have internal departments that are 
responsible for

[[Page 42194]]

communicating with its listed companies during the trading day. 
Specifically, specialist units have corporate relations groups that 
serve to provide its listed companies with information and are 
available to answer questions from such listed companies during the 
trading day. As such, the requirements of NYSE Rule 106(a) are 
unnecessary since the specialist units are in contact with their listed 
companies on a daily basis as part of its regular course of business.
    NYSE Rule 106(a) places the responsibility of contact between the 
specialist unit and the listed company solely on the proverbial 
``shoulders'' of the specialist unit. If the current requirements of 
NYSE Rule 106(a) are not met by a specialist unit, it is the specialist 
unit, and not the listed company, that is in violation of the rule and 
potentially subject to disciplinary action.
    Accordingly, the Exchange proposes that NYSE Rule 106(a) be amended 
to require a specialist unit to make itself available for contact with 
its listed companies. The proposal would continue to afford listed 
companies with opportunities for contact with its specialist unit, 
while removing potential for disciplinary action against a specialist 
unit that acts as the registered specialist for such listed company 
that declines to meet or have contact with the specialist unit.
    Similarly, while NYSE Rule 106(b) was originally designed to foster 
a better understanding between the specialist units and the Exchange's 
fifteen largest member organizations through required, semi-annual 
``off the Exchange Trading Floor'' contact, the Exchange believes that 
NYSE Rule 106(b) no longer reflects the needs of the member 
organizations. In today's world of electronic messaging, Internet 
connectivity, and 24-hour news coverage of market activity, a member 
organization may not want or need the type of contact with a specialist 
unit that is currently required by NYSE Rule 106(b). The interpersonal 
relationships between specialists and member organizations that once 
took front stage in the marketplace have been significantly replaced by 
automated trading initiatives and computerized market data reports. 
Moreover, the specialist units are generally in contact with member 
organizations on a regular basis through electronic and/or telephonic 
means, which render the requirements of NYSE Rule 106(b) unnecessary.
    As does the current version of NYSE Rule 106(a), NYSE Rule 106(b) 
currently places the responsibility of the semi-annual ``off the 
Exchange Trading Floor'' contact on the specialist unit, not on the 
member organization, and if the member organization is unable or 
chooses not to have such contact with the specialist unit, the 
specialist unit may be in violation of NYSE Rule 106(b) and potentially 
subject to disciplinary action. Accordingly, the Exchange proposes to 
amend NYSE Rule 106(b) to require a specialist unit to ``make itself 
available'' semi-annually for ``off the Exchange Trading Floor'' 
contact with the fifteen largest member organizations of the Exchange 
and certain other members.
    Finally, given the current frequency of contact as described above, 
the Exchange does not believe that it is necessary for specialist units 
to provide the Exchange with a record of their contacts. As such, the 
Exchange further proposes to amend NYSE Rule 106(c) to have the 
specialist report such contacts to the Exchange upon request of the 
Exchange.
2. Statutory Basis
    The proposed rule change is consistent with the requirements of 
section 6(b) of the Act,\6\ in general, and furthers the objectives of 
section 6(b)(5) of the Act,\7\ in particular, because 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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

    Written comments on the proposed rule change were neither solicited 
nor received.

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

    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 this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. 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. In addition, Rule 19b-4(f)(6)(iii) requires a 
self-regulatory organization to provide the Commission with written 
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.\10\
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    \10\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business days prior to the 
filing date. See 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange has asked the Commission to waive the 30-day operative 
delay to allow the Exchange to immediately implement the proposed rule 
change and avoid any rule violations by specialist units that are 
unable to fulfill the current obligations of NYSE Rule 106. The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
\11\ because the proposed rule change to amend NYSE Rules 106(a) and 
(b) would continue to foster contact and interaction between the 
specialist units and the Exchange's listed companies and member 
organizations, respectively, taking into consideration the 
contemporary, real-time means of communication, connectivity, and 
access to information. In addition, the Commission believes that the 
proposed amendment to NYSE Rule 106(c) is consistent with the 
requirements of the Act, and the Commission notes that, as proposed, 
the Exchange would still be able to obtain information regarding 
contact between the specialist units and their listed companies and 
certain member organizations upon request.
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    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. 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

[[Page 42195]]

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.\12\
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    \12\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, as 
amended, under section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on July 25, 2007, the date on which 
the Exchange submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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 rule-comments@sec.gov. Please include 

File No. SR-NYSE-2007-55 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-NYSE-2007-55. 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 such filing will also 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 available publicly. All 
submissions should refer to File No. SR-NYSE-2007-55 and should be 
submitted on or before August 22, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-14843 Filed 7-31-07; 8:45 am]

BILLING CODE 8010-01-P
