
[Federal Register: March 14, 2008 (Volume 73, Number 51)]
[Notices]               
[Page 13941-13942]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14mr08-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57455; File No. SR-NYSE-2008-03]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving a Proposed Rule Change, as Modified by Amendment No. 1 
Thereto, To Rescind NYSE Rule 97 (Limitation on Member's Trading 
Because of Block Positioning)

March 7, 2008

I. Introduction

    On January 11, 2008, 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 (``Act'')\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to rescind NYSE Rule 97 (Limitation on Member's 
Trading Because of Block Positioning). The proposed rule change was 
published for comment in the Federal Register on February 6, 2008.\3\ 
On February 20, 2008, NYSE filed Amendment No. 1 to the proposed rule 
change.\4\ The Commission received one comment on the proposed rule 
change.\5\ This order approves the proposed rule change, as modified.
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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. 57236 (January 30, 
2008), 73 FR 7022.
    \4\ In Amendment No. 1, the Exchange made conforming amendments 
to NYSE Rules 123C and 800 to remove references to NYSE Rule 97, and 
corrected typographical errors in NYSE Rule 800. Because Amendment 
No. 1 is technical in nature, it is not subject to notice and 
comment.
    \5\ See letter from Ann L. Vlcek, Securities Industry and 
Financial Markets Association (``SIFMA''), dated February 27, 2008 
(``SIFMA Letter'').
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II. Description of the Proposed Rule Change

    NYSE Rule 97 governs block facilitation transactions by NYSE member 
organizations on behalf of customers. The rule states that if, as a 
result of facilitating one or more customer sell orders in a stock 
during the trading day, a member organization ends up holding a long 
position in the stock in a proprietary account, then

[[Page 13942]]

during the last 20 minutes of trading, the member organization is 
prohibited from buying such stock as principal on a ``plus tick'' if 
the transaction would take place at a price above the lowest price at 
which it acquired the long position. The Exchange states that Rule 97 
was originally adopted to address concerns that a member firm might 
engage in manipulative practices by attempting to ``mark-up'' the price 
of a stock to enable the position acquired in the course of block 
positioning to be liquidated at a profit, or to maintain the market at 
the price at which the position was acquired. The rule has been since 
amended to reduce its scope and provide certain exceptions.\6\
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    \6\ See, e.g., Securities Exchange Act Release No. 46566 
(September 27, 2002), 67 FR 62278 (October 4, 2002) (SR-NYSE-2001-
24) (narrowing the scope of the prohibitions to transactions 
executed within the last 20 minutes of the trading day, and 
providing exceptions to the rule for member organizations that 
establish information barriers and certain hedging transactions).
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    The Rule was last amended in July 2007 to resolve a conflict 
between Regulation NMS under the Act (``Regulation NMS'') \7\ and NYSE 
Rule 97, to add an exemption to Rule 97 so that when facilitating a 
customer order that would otherwise require the firm to either violate 
Rule 97 or trade through protected quotations, member organizations can 
comply with their Regulation NMS obligations without also violating 
Rule 97.\8\ The Exchange now proposes to rescind Rule 97 in its 
entirety.
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    \7\ 17 CFR 242.600 et. seq.
    \8\ See Securities Exchange Act Release No. 56024 (July 6, 
2007), 72 FR 38643 (July 13, 2007) (SR-NYSE-2007-61).
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III. Summary of Comments

    The Commission received one letter on the proposed rule change.\9\ 
The commenter supports the proposed rule change, agreeing with the 
Exchange's rationale for rescinding NYSE Rule 97. Specifically, the 
commentator agrees with the Exchange's view that the rule ``no longer 
serves a useful purpose and may in fact hinder legitimate trading 
activity.'' \10\ Furthermore, SIFMA believes that changes in the 
markets and new regulations, such as Regulation NMS, render the rule no 
longer viable.\11\
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    \9\ See SIFMA Letter, supra note 5.
    \10\ See SIFMA Letter, supra note 5, at 1.
    \11\ See id. at 2.
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IV. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\12\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\13\ which 
requires, among other things, 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. The Commission notes that other venues are available for 
market participants to effect block position transactions without the 
restrictions currently imposed by NYSE Rule 97. The Commission further 
notes that NYSE represented that NYSE Regulation, Inc. will continue to 
surveil in NYSE-listed securities for possible manipulative activity, 
including marking the close, which could be in violation of federal 
securities laws or Exchange Rules.\14\
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    \12\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ See Notice, supra note 3, at 7023.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\15\ that the proposed rule change (SR-NYSE-2008-03), as modified 
by Amendment No. 1 thereto, is approved.
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    \15\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-5097 Filed 3-13-08; 8:45 am]

BILLING CODE 8011-01-P
