[Federal Register Volume 69, Number 13 (Wednesday, January 21, 2004)]
[Notices]
[Pages 2958-2959]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 04-1212]
[[Page 2958]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-49063; File No. SR-NYSE-2003-36]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto by
the New York Stock Exchange, Inc. Relating to Interpretation of Rule
15A (ITS ``Trade-Throughs'' and ``Locked Markets'')
January 13, 2004.
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 November 18, 2003, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. On
January 6, 2004, the Exchange submitted Amendment No. 1 to the proposed
rule change.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See e-mail from Karen Lorentz, Director of Intermarket
Relations, NYSE, to Katherine England, Assistant Director, Division
of Market Regulation, Commission, dated January 6, 2004 (``Amendment
No. 1''). In Amendment No. 1, the NYSE clarified that the proposed
interpretation will be added as rule text immediately after NYSE
Rule 15A.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change is based on a long-standing interpretation
of NYSE Rule 15A (ITS ``Trade-Throughs'' and ``Locked Markets'') that
trading on the NYSE and sending contemporaneously an Intermarket
Trading System (``ITS'') commitment to trade to another participating
market to fully satisfy the quote thereon constitutes full compliance
with the Rule. A complaint under these circumstances is not valid, even
if the commitment cancels/expires or there is more stock behind the
quote on the other market. The text of the interpretation is below:
* * * * *
Rule 15A. ITS ``Trade-Throughs'' and ``Locked Markets''
(a)-(e) No Change.
Interpretation
i. the terms ``Exchange trade-through'' and ``Third participating
market center trade-through'' do not include the situation where a
member who initiates the purchase (sale) of an ITS security at a price
which is higher (lower) than the price at which the security is being
offered (bid) in another ITS participating market, sends
contemporaneously through ITS to such ITS participating market a
commitment to trade at such offer (bid) price or better and for at
least the number of shares displayed with that market center's better-
priced offer (bid); and
ii. a trade-through complaint sent in these circumstances is not
valid, even if the commitment sent in satisfaction cancels or expires,
and even if there is more stock behind the quote in the other market.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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. The Exchange 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
The Exchange is proposing to codify a long-standing interpretation
of NYSE Rule 15A. NYSE Rule 15A uses certain defined terms as follows:
[sbull] An ``Exchange trade-through'', as that term is used in this
Rule, occurs whenever a member on the Exchange initiates the purchase
on the Exchange of a security traded through ITS (an ``ITS Security'')
at a price which is higher than the price at which the security is
being offered (or initiates the sale on the Exchange of such a security
at a price which is lower than the price at which the security is being
bid for) at the time of the purchase (or sale) in another ITS
participating market center as reflected by the offer (bid) then being
displayed on the Exchange from such other market center. The member
described in the foregoing sentence is referred to in this Rule as the
``member who initiated an Exchange trade-through.''
[sbull] A ``third participating market center trade-through'', as
that term is used in this Rule, occurs whenever a member on the
Exchange initiates the purchase of an ITS Security by sending a
commitment to trade through the system and such commitment results in
an execution at a price which is higher than the price at which the
security is being offered (or initiates the sale of such a security by
sending a commitment to trade through the System and such commitment
results in an execution at a price which is lower than the price at
which the security is being bid for) at the time of the purchase (or
sale) in another ITS participating market center as reflected by the
offer (bid) then being displayed on the Exchange from such other market
center. The member described in the foregoing sentence is referred to
in this Rule as the ``member who initiated a third participating market
center trade-through.''
[sbull] A ``trade-through,'' as that term is used in this Rule,
means either an Exchange trade-through or a third participating market
center trade-through.
The Exchange believes that the basic concept of the trade-through
rule is that superior priced quotations in a security displayed from
other participant markets should be protected/satisfied if, in another
participant market, an execution in the security occurs at an inferior
price (a trade-through). One of the remedies that NYSE Rule 15A
provides is that, upon a valid complaint of a trade-through, a
commitment to trade at the price, and for the number of shares in the
disseminated quotation, must be sent to the other Participant market to
fully satisfy such quotation. The Exchange believes that the proposed
interpretation has long recognized that superior quotations are fully
protected/satisfied if an ITS commitment is sent to trade with a bid/
offer that would otherwise appear to have been traded-through. That is,
a trade will not be considered a trade-through if an ITS commitment is
sent contemporaneously from the participant executing the trade for the
purpose of being executed against the better-priced displayed bid or
offer. A complaint is not valid even if a commitment cancels or expires
or there is more stock behind the away quote. Furthermore, the Exchange
believes that the interpretation recognizes the impracticality of
having to wait for the other market to revise its quotation as a result
of trading with a satisfying commitment before trade activity may occur
in other markets. Specifically, the interpretation states that:
i. The terms ``Exchange trade-through'' and ``Third participating
market center trade-through'' do not include the
[[Page 2959]]
situation where a member who initiates the purchase (sale) of an ITS
security at a price which is higher (lower) than the price at which the
security is being offered (bid) in another ITS participating market,
sends contemporaneously through ITS to such ITS participating market a
commitment to trade at such offer (bid) price or better and for at
least the number of shares displayed with that market center's better-
priced offer (bid); and
ii. A trade-through complaint sent in these circumstances is not
valid, even if the commitment sent in satisfaction cancels or expires,
and even if there is more stock behind the quote in the other market.
2. Statutory Basis
The Exchange believes that the proposal is consistent with section
6(b) of the Act,\4\ in general, and Section 6(b)(5) of the Act,\5\ in
particular, in that it will promote just and equitable principles of
trade, facilitate transactions in securities, remove impediments to and
perfect the mechanisms of a free and open market and a national market
system, and protect investors and the public interest.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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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 that is 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 on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(i) of the Act \6\ and subparagraph (f)(1) of Rule 19b-4
thereunder,\7\ because it is concerned solely with the interpretation
of the meaning, administration or enforcement of existing NYSE Rule
15A. At any time within 60 days of the filing of such 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.\8\
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\6\ 15 U.S.C 78s(b)(3)(A)(i).
\7\ 17 CFR 240.19b-4(f)(1).
\8\ For purposes of determining the effective date of the filing
and calculating the 60-day abrogation date, the Commission considers
the period to commence on January 6, 2004, the date the NYSE filed
Amendment No. 1.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW., Washington,
DC 20549-0609. Comments may also be submitted electronically at the
following e-mail address: rule-comments@sec.gov. All comment letters
should refer to File No. SR-NYSE-2003-36. This file number should be
included on the subject line if e-mail is used. To help the Commission
process and review comments more efficiently, comments should be sent
in hardcopy or by e-mail but not by both methods. 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. Copies of such filing will also be available for
inspection and copying at the principal office of the NYSE. All
submissions should refer to file number SR-NYSE-2003-36 and should be
submitted by February 11, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 04-1212 Filed 1-20-04; 8:45 am]
BILLING CODE 8010-01-P