
[Federal Register: May 13, 2008 (Volume 73, Number 93)]
[Notices]               
[Page 27601-27603]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13my08-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57792; File No. SR-NYSE-2008-36]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Expand the Reserve Order Pilot Program Currently Operating in 100 
Securities Traded on the Exchange To Include All Equity Securities 
Traded on the Exchange

May 7, 2008.
    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 May 6, 2008, 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. 
The Exchange has designated the proposed rule change as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposed rule 
change effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 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 is proposing to expand the Reserve Order pilot program 
currently operating in 100 securities traded on the NYSE \5\ to include 
all equity securities traded on the Exchange. The text of the proposed 
rule change is available at http://www.nyse.com, the Exchange, and the 
Commission's Public Reference Room.
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    \5\ See Securities Exchange Act Release No. 57688 (April 18, 
2008), 73 FR 22194 (April 24, 2008) (SR-NYSE-2008-30) (``Reserve 
Order Notice'').
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE 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. 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
    Through this proposed rule change, the Exchange seeks to expand the 
Reserve Order pilot program currently operating pursuant to Exchange 
Rule 13. On April 23, 2008, the Exchange implemented a new order type 
that allows off-Floor participants the ability to enter reserve 
interest into Exchange systems (``Reserve Order'').\6\
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    \6\ See id.
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    The Reserve Order is a limit order for which a portion of the order 
is to be displayed and a portion of the order, at the same price, is 
not displayed (i.e., is held in ``reserve'').\7\ Market participants 
that choose to enter Reserve Orders must enter specified order 
information in relation to the price and size of the order and the 
amount to be displayed. The displayed portion of a Reserve Order is 
published in NYSE OpenBook[supreg] \8\ and is available to the 
specialist on the Floor. Both the displayed and the non-displayed 
portion are available for automatic execution against incoming contra-
side orders. Displayed and non-displayed interest of Reserve Orders is 
available for manual executions as well.\9\
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    \7\ The Exchange represents that this functionality is 
equivalent to the functionality currently available to Floor brokers 
and specialists with respect to entry of reserve interest. In order 
for Floor brokers' reserve interest not to be visible by the 
specialists, a Floor broker must designate his or her reserve 
interest as ``Do Not Display'' interest. Reserve Orders in contrast 
are never shown to the specialist except when included in aggregate 
quantities for manual executions.
    \8\ NYSE OpenBook[supreg] provides aggregate limit order volume 
that has been entered on the Exchange at price points for all NYSE-
traded securities.
    \9\ See Reserve Order Notice, supra note 5, for a detailed 
description of Reserve Orders and their functionality; see also NYSE 
Information Memo No. 08-24 (April 22, 2008) (both documents are 
available on the Exchange's Web site at http://www.nyse.com). The 
Exchange will issue a revised Information Memo to the Floor 
providing notice of the expansion of the Reserve Order pilot to 
include all equity securities traded on the Exchange.
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    To afford the Exchange and its customers the ability to gain 
systemic experience with the new Reserve Order type, the Exchange 
implemented the amendment to Exchange Rule 13 allowing off-Floor 
participants to enter Reserve Orders on a pilot basis. The pilot 
currently operates in 100 securities traded on the Floor of the 
Exchange.

[[Page 27602]]

Pilot Results and Expansion
    The Exchange has determined that the technology modifications that 
were required to allow off-Floor participants the ability to enter 
Reserve Orders are operating successfully. The Exchange states that, to 
date, there have been no system problems associated with Reserve 
Orders.
    In addition, entry of Reserve Orders in the securities approved to 
operate in the pilot program has been steadily increasing throughout 
the pilot period. Moreover, Exchange customers continue to request the 
ability to send Reserve Orders in all securities traded on the NYSE.
    Given the customer demand and the fact that no technological 
impediments to the operation of Reserve Orders have arisen, the 
Exchange now proposes to expand the Reserve Order pilot program 
operating pursuant to Exchange Rule 13 to all Exchange-traded equity 
securities.\10\
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    \10\ The expansion of the pilot program to operate in all equity 
securities traded on the Floor of the Exchange does not change the 
expiration date of the Reserve Order pilot established pursuant to 
the Reserve Order Notice (supra note 5). The Reserve Order pilot 
program is scheduled to expire no later than the earlier of 
September 30, 2008 or the effective date of Commission approval of a 
proposed rule change to make the pilot program permanent.
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Conclusion
    The Exchange believes that by providing all market participants 
with the ability to maintain non-displayed liquidity on the Display 
Book in all equity securities traded on the Exchange, market 
participants will be encouraged to post liquidity and thus offer 
Exchange customers additional opportunities for price improvement by 
expanding the interest available to execute against incoming orders at 
a single price.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ in particular, in that 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. The proposed rule change also is designed to support the 
principles of Section 11A(a)(1) \13\ in that it seeks to assure 
economically efficient execution of securities transactions, fair 
competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets, and 
provide an opportunity for investors' orders to be executed without the 
participation of a dealer. The Exchange believes that the instant 
proposal is in keeping with these objectives in that extending Reserve 
Order functionality will provide an opportunity for all market 
participants to receive efficient, low cost executions available 
through the use of this order type, and promote fair competition among 
markets which already provide for entry of Reserve Orders by all market 
participants in all equity securities traded on the Exchange.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78k-1(a)(1).
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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 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 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 \14\ and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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 prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \16\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay set forth in Rule 19b-
4(f)(6)(iii) under the Act, which would make the rule change operative 
upon filing.
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    \16\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission 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. NYSE has satisfied the pre-filing notice 
requirement.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because such waiver would immediately allow off-Floor participants to 
directly enter orders that use reserve functionality for all equity 
securities traded on the Exchange. The Exchange represents that, to 
date, there have been no system problems associated with the Reserve 
Orders pilot program, and that Exchange customers have requested the 
ability to send Reserve Orders in all securities traded on the 
Exchange. Finally, the proposed reserve functionality is currently 
available on other exchanges.\17\ Accordingly, the Commission 
designates the proposal to be operative upon filing with the 
Commission.\18\
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    \17\ See, e.g., Nasdaq Rule 4751(f)(2); Securities Exchange Act 
Release No. 54155 (July 14, 2006), 71 FR 41291 (July 20, 2006) (SR-
NASDAQ-2006-001).
    \18\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has 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 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2008-36 on the subject line.

Paper Comments

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


[[Page 27603]]


All submissions should refer to File Number SR-NYSE-2008-36. 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 also will be available for 
inspection and copying at the principal office of the NYSE. 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-2008-36 and should be 
submitted on or before June 3, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Nancy M. Morris,
Secretary.
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    \19\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-10538 Filed 5-12-08; 8:45 am]

BILLING CODE 8010-01-P
