
[Federal Register: September 17, 2008 (Volume 73, Number 181)]
[Notices]               
[Page 53914-53915]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17se08-147]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58517; File No. SR-NYSE-2008-61]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change Amending NYSE Rule 104(e) (Dealings by 
Specialists) To Modify the Conditions Governing the Specialists' Use of 
the Price Improvement Trading Message Pursuant to NYSE Rule 
104(b)(i)(H)

September 11, 2008.
    On July 25, 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 modify the rule governing the specialists' use 
of the price improvement trading message. The proposed rule change was 
published for comment in the Federal Register on August 7, 2008.\3\ The 
Commission received no comments regarding the proposal. This order 
approves the proposed rule change.
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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. 58278 (July 31, 
2008), 73 FR 46124 (``Notice'').
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    Pursuant to NYSE Rule 104(b), specialists may use algorithms to 
generate quoting and trading messages. Such trading messages may 
provide price improvement to an order, subject to the conditions set 
forth in Rule 104(e). In order to provide price improvement to a 
marketable incoming order, Rule 104(e)(i) requires that the specialist 
must be represented in the bid or offer in a ``meaningful amount.'' 
Rule 104(e)(ii) defines ``meaningful amount'' as at least ten round-
lots for the 100 most active securities on the Exchange, based on 
average daily volume, and at least five round-lots for all other 
securities on the Exchange. NYSE proposes to delete the requirement in 
Rule 104(e)(i) that specialists must be represented in a bid or offer 
in a meaningful amount to provide price improvement to the incoming 
order.\4\
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    \4\ As part of this rule change, NYSE also proposes deleting the 
definition of ``meaningful amount'' in Rule 104(e)(ii).
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    The Commission has carefully reviewed the proposed rule change and 
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,\5\ and, in particular, Section 6(b)(5) of 
the Act,\6\ which requires, among other things, that NYSE rules be 
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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    \5\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    As NYSE stated in its proposal, average quote sizes on the Exchange 
have decreased in recent years.\7\ Because of this, the Exchange 
believes the meaningful amount requirement for price improvement is a 
deterrent to specialists' participation in price improvement. The 
Commission believes that deletion of the meaningful amount requirement 
should encourage greater participation by specialists in the Exchange's 
price improvement mechanism. At the same time, the Commission must 
carefully review

[[Page 53915]]

trading rule proposals that seek to offer special advantages to market 
participants. Although an exchange may reward its participants for the 
benefits they provide to the exchange's market, such rewards must not 
be disproportionate to the services provided.\8\ In considering the 
totality of the benefits accorded to and obligations imposed upon 
specialists on the Exchange, the Commission believes that it is 
reasonable for NYSE to delete the ``meaningful amount'' requirement of 
Rule 104(e).\9\
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    \7\ See Notice supra note 3, at 46125.
    \8\ See Securities Exchange Act Release No. 58092 (July 3, 
2008), 73 FR 40144 (July 11, 2008) at 40148.
    \9\ The Commission notes that, through a separate proposed rule 
change, the Exchange has proposed to eliminate all of the provisions 
relating to the specialists' price improvement mechanism under NYSE 
Rule 104(e) by October 15, 2008. See Securities Exchange Act Release 
No. 58184 (July 17, 2008), 73 FR 42853 (July 23, 2008) (SR-NYSE-
2008-46).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSE-2008-61) be, and it hereby is, 
approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-21707 Filed 9-16-08; 8:45 am]

BILLING CODE 8010-01-P
