

[Federal Register: September 19, 2007 (Volume 72, Number 181)]
[Notices]               
[Page 53615-53616]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19se07-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56392; File No. SR-NYSE-2007-42]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of Proposed Rule Change as Modified by Amendment No. 
1 Thereto Relating to Rule 103B (``Specialist Stock Allocation'')

 September 12, 2007.
    On April 20, 2007, 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, as amended (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend NYSE Rule 103B 
(``Specialist Stock Allocation''). On July 20, 2007, NYSE filed 
Amendment No. 1 to the proposed rule change. The proposed rule change, 
as modified by Amendment No. 1, was published for comment in the 
Federal Register on August 8, 2007.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change, 
as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 56183 (August 2, 
2007), 72 FR 44601 (``Notice'').
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    The Exchange proposes to permit member organizations to establish 
policies and procedures to isolate the activities of the member 
organization that trade ETFs in a specialist capacity while at the same 
time registered as a specialist in any of an ETF's component 
securities. At a minimum, these policies and procedures would have to 
include information barriers preventing the flow of non-public 
information between a member organization's ETF specialist and the 
member organization's specialist in an associated component security. 
Further, the trading of an ETF and its underlying component securities 
by the same specialist firm would be pre-conditioned on the review of 
the Exchange's Division of Member Firm Regulation for the adequacy of 
the firm's information barriers.\4\ Thereafter, the Exchange would 
periodically evaluate the integrity of information barriers for 
breaches and weaknesses to ensure that they are adequately designed. In 
addition, the Exchange will periodically assess its surveillance and 
examination procedures to determine whether they are adequate in 
preventing manipulative or improper trading. The Exchange explained 
that the current rule requiring organizational separation was 
originally implemented, at least in part, to address the issue of 
``wash sales'' in the context of ETF and component securities.\5\
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    \4\ See, for example, comparable provisions of NYSE Information 
Memo 91-22 (June 21, 1991), the NASD/NYSE Joint Memo on Chinese Wall 
Policies and Procedures for procedural structures to assure the 
effective containment of trading information.
    \5\ See Securities Exchange Act Release No. 44272 (May 7, 2001), 
66 FR 26898 (May 15, 2001) (SR-NYSE-2001-07).
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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.\6\ In 
particular, the Commission believes that the proposal is consistent 
with Section 6(b)(5) of the Act,\7\ which require that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system, and, in general, protect investors 
and the public interest. This proposal should eliminate certain 
redundancies and expenses that result from the current rule requiring 
organizational separation while ensuring that the relevant activities 
and information of member organizations that trade ETFs and any of an 
ETF's component securities in a specialist capacity remain isolated and 
confidential.
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    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-NYSE-2007-42), as 
modified by

[[Page 53616]]

Amendment No. 1, be, and hereby is, 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\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-18391 Filed 9-18-07; 8:45 am]

BILLING CODE 8010-01-P
