SEC Division of Trading and Markets no-action letter: New York Stock Exchange, Inc.

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June 22, 2001 Darla C. Stuckey Assistant Secretary New York Stock Exchange, Inc. 11 Wall Street New York, NY 10005 Re: Request for Exemptions under Rule 11Ac1-5 Dear Ms. Stuckey: In your letter dated June 21, 2001 on behalf of the New York Stock Exchange, Inc. ("Exchange"), you requested that the Commission grant two exemptions from Rule 11Ac1-5 ("Rule") under the Securities Exchange Act of 1934 ("Exchange Act"). Specifically, you requested (1) that all market centers be exempt from the requirement that the initial monthly reports on trading in May 2001 be made publicly available, and (2) that orders with a size of 10,000 shares or greater be exempted from the Rule. Your June 21 letter supplemented a letter from Edward A. Kwalwasser, Group Executive Vice President, Exchange, dated June 4, 2001 (collectively, "Letters"). This letter responds to your request. I. Background

Adopted in November 2000, 1 the Rule generally requires a "market center" (as defined in the Rule) that trades national market system securities to make available to the public monthly electronic reports that include uniform statistical measures of execution quality. The initial compliance date for the Rule was moved back by one month until May 1, 2001. 2 In addition, the Commission has issued a temporary exemption from the reporting requirements of the Rule until July 31, 2001 for Nasdaq securities. 3 The final phase-in date is October 1, 2001, on which the Rule is scheduled to apply to all national market system securities. The Letters note that the Exchange has been a strong supporter of the Rule in its comment letter and in public forums since its adoption. You are very concerned, however, regarding the appropriate tabulation and uniformity of the data among the various market centers that will be preparing monthly reports under the Rule, and support efforts to assure the quality of the initial data to be made available to the public. The Letters therefore request an exemption from the requirement that the initial reports for May 2001 be made publicly available by the end of June. You note that the additional delay will allow all market centers to address unforeseen anomalies and provide a degree of certainty that processing algorithms are reliable. In addition, the Letters state the information required by the Rule would be enhanced by limiting at 10,000 shares the order size category of 5000 shares or greater. Based on review of Exchange data, you are convinced that the absence of a size limit would result in significant distortion of the data and make it of less value in order routing decision-making. Consequently, you request an exemption from the Rule for orders with a size of 10,000 shares or greater. II. Exemptions

On the basis of your representations and the facts presented, the Commission, by the Division pursuant to delegated authority, 4 is granting the following two exemptions from the Rule:

The Commission is exempting all market centers that are required to prepare a report that covers trading in May 2001 from the requirement that they make such reports publicly available on an Internet site, as specified in the Joint-SRO Plan for the Rule. Market centers must, however, prepare a May 2001 report internally and make it available for inspection and examination by the Commission staff. The exemption will allow additional time for market centers to assure that the initial execution quality reports to be made publicly available will be as accurate, reliable, and comparable as possible. The Commission therefore finds that the exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors. Reports that cover trading in June, however, must be made publicly available on an Internet site by the end of July in accordance with the Joint-SRO Plan. The Commission is exempting from the Rule any order with a size of 10,000 shares or greater. One of the primary objectives of the Rule is to generate statistical measures of execution quality that provide a fair and useful basis for comparisons among different market centers. The exclusion of very large orders will help assure greater comparability of statistics in the largest size category of 5000 or greater shares. The Commission therefore finds that the exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.

The exemptions granted in this letter are subject to modification or revocation at any time if the Commission determines that such action is necessary or appropriate in the public interest or otherwise in furtherance of the purposes of the Exchange Act. If you have questions, please do not hesitate to contact me. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Sincerely, Annette L. Nazareth Director

Footnotes

1 Securities Exchange Act Release No. 43590 (November 17, 2000), 65 FR 75414 ("Adopting Release"). 2 Securities Exchange Act Release No. 44060 (March 9, 2001), 66 FR 15028. 3 Letter to Stuart J. Kaswell, Senior Vice President and General Counsel, Securities Industry Association, from Annette L. Nazareth, Director, Division, dated April 12, 2001. 4 17 CFR 200.30-3(a)(69).

http://www.sec.gov/interps/legal/nyse062201.htm

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Modified: 06/25/2001