

[Federal Register: February 12, 2008 (Volume 73, Number 29)]
[Notices]               
[Page 8098]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12fe08-75]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57272; File No. SR-NYSE-2007-101]

 
Self-Regulatory Organizations; New York Stock Exchange, LLC; 
Order Granting Approval of Proposed Rule Change Relating to Amendments 
to NYSE Rule 104.21 (``Specialist Organizations--Additional Capital 
Requirements'')

February 5, 2008.

I. Introduction

    On November 2, 2007, the New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or the ``Commission''), pursuant to section 19(b)(1) \1\ of 
the Securities Exchange Act of 1934 (``Exchange Act'') \2\ and Rule 
19b-4 thereunder,\3\ a proposal to amend its Rule 104.21 regarding 
additional capital requirements for specialist organizations. The 
proposed rule change was published for comment in the Federal Register 
on December 28, 2007.\4\ The Commission received no comments regarding 
the proposal. This order approves the proposed rule changes.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78(a) et seq.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 57000 (Dec. 20, 
2007), 72 FR 73947.
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II. Description of the Proposal

    The proposed rule change would reduce the total base capital 
requirement that must be maintained as net liquid assets for all 
specialists from $1 billion to $250 million. NYSE believes this amount 
will adequately protect specialist organizations during periods of 
market stress. Further, each of the specialist organizations have 
sources of funding that can provide necessary liquidity during a period 
of market stress. It is no longer necessary for specialist 
organizations to maintain the currently required levels of liquid 
capital, as specialist positions and the likelihood of losses have been 
reduced dramatically due to changes in the structure of the market.

III. Discussion

    After careful review and based on the Exchange's representations, 
the Commission finds that the proposed rule changes are consistent with 
the Act and the rules and regulations applicable to a national 
securities exchange.\5\ In particular, the Commission finds that the 
proposed rule changes are consistent with section 6(b)(5) \6\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission believes it is consistent with the Act for the 
Exchange to amend NYSE Rule 104.21 as proposed, because the level of 
participation by specialist firms in trading on the Exchange has 
declined with the proliferation of electronic trading and the 
significant change in the Exchange's trading system introduced by the 
Hybrid Market.\7\ The NYSE has noted that the increased efficiency with 
which others can access the Exchange's market has increased liquidity 
and decreased the market's reliance on the specialist to provide the 
contra side in a continuous auction. While the NYSE considers 
specialist participation to still be an important feature of its Hybrid 
Market, it has documented a lower participation by specialist 
organizations. This decreased participation means that specialists are 
assuming less risk.
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    \7\ See Release No. 34-53539 (March 22, 2006); 71 FR 16353 
(March 31, 2006) File No. SR-NYSE-2004-05) (approving amendments to 
NYSE Rules (approving the proposed rule change to establish the NYSE 
Hybrid Market). The rule change created a ``Hybrid Market'' by, 
among other things, increasing the availability of automatic 
executions in its existing automatic execution facility, NYSE 
Direct+, and providing a means for participation in the expanded 
automated market by its floor members. The change altered the way 
NYSE's market operates by allowing more orders to be executed 
directly in Direct+, which in essence moves NYSE from a floor-based 
auction market with limited automation order interaction to a more 
automated market with limited floor-based auction market 
availability.
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    The Commission notes that FINRA, on behalf of NYSE, will continue 
to assess the specialists' net liquid asset requirements in relation to 
the Hybrid Market and monitor their net liquid assets on a daily basis. 
NYSE and FINRA require notification for all withdrawals of capital, and 
approval for any withdrawal being made on less than six months advance 
notice to the Exchange.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-NYSE-2007-101), as amended, 
be, and hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2470 Filed 2-11-08; 8:45 am]

BILLING CODE 8011-01-P
