[Federal Register: November 23, 2007 (Volume 72, Number 225)]
[Notices]
[Page 65787-65797]
[DOCID:fr23no07-115]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56798; File No. SR-NYSE-2007-102]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change Relating to NYSE Rule 1500
(NYSE MatchPoint\SM\)

November 15, 2007.
    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 8, 2007, 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, II,
and III below, which Items have been substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    NYSE proposes to adopt NYSE Rule 1500 to establish NYSE
MatchPoint\SM\ (``MatchPoint''), an electronic facility

that matches aggregated orders at predetermined, one-minute sessions
throughout regular hours and after hours of the Exchange. MatchPoint
will trade securities listed on all major exchanges.\3\ The text of the
proposed rule change is available on the Exchange's Web site (http://www.nyse.com
), at the Exchange, and at the Commission's Public

Reference Room.
---------------------------------------------------------------------------

    \3\ The major exchanges include the NYSE (including securities
otherwise admitted to dealing on the NYSE pursuant to the Joint
Self-Regulatory Organization Plan Governing the Collection,
Consolidation and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on an Unlisted
Trading Privilege Basis (``UTP Plan'')), the NYSE Arca, Inc. Stock
Exchange LLC (``NYSE Arca''), the NASDAQ Stock Market, Inc.
(``Nasdaq''), the American Stock Exchange (``Amex'') and regional
stock exchanges. The Exchange is a participant in the UTP Plan, a
National Market System Plan that accommodates trading on participant
exchanges of non-NYSE-listed securities on an unlisted trading
privileges (``UTP'') basis. See Securities Exchange Act Release No.
55192 (January 29, 2007), 72 FR 5456 (February 6, 2007) (File No.
S7-24-89) (Plan amendment admitting the Exchange as a Plan
Participant). The Exchange is proposing to permit UTP trading of
non-NYSE-listed securities in MatchPoint matching sessions during
the regular hours and after hours of the Exchange.
---------------------------------------------------------------------------

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 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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange seeks to establish the MatchPoint matching system to
provide its customers with an ability to execute securities at a
predetermined, externally derived, single trading price in accordance
with algorithmic calculations during one-minute matching sessions at
predetermined times during the regular hours (9:30 a.m. Eastern Time
(``ET'') to 4 p.m. ET) and after hours of the Exchange.\4\ MatchPoint
participants (``users'') transmit their market and limit orders, which
are undisplayed, by means of an electronic interface. MatchPoint
matches aggregated, anonymous orders of securities listed on the
primary exchanges such as the NYSE, as well as securities admitted to
trading on the NYSE pursuant to the UTP Plan that are listed on NYSE
Arca, Nasdaq, Amex and regional stock exchanges.
---------------------------------------------------------------------------

    \4\ NYSE MatchPoint will operate on an Eastern Time basis. All
references to time herein and in the MatchPoint rules will mean
Eastern Time.
---------------------------------------------------------------------------

    The Exchange believes that MatchPoint will provide its customers a
greater ability to execute single, block and portfolio (i.e., basket,
list, etc.) orders efficiently and reduce the trading risks and costs
associated with market volatility. MatchPoint customers who enter
single orders, block orders and portfolio orders will reap the benefits
of this centralized, neutral matching environment.\5\ Additionally, the
Exchange believes that customers that rely on index-based or model-
driven trading and investment strategies will find MatchPoint to be a
very effective trading tool.
---------------------------------------------------------------------------

    \5\ The Exchange notes that portfolio matches have been in
existence for over twenty years. Instinet's crossing network has
been matching portfolios since December 1986 and Investment
Technology Group Inc.'s Portfolio System for Institutional Trading
(POSIT) has been matching portfolios since July 1987.
---------------------------------------------------------------------------

    Because MatchPoint is an anonymous trading platform, no order
information will be displayed and clearance and settlement of
executions will be anonymous. Trade reports will be disseminated after
each matching session.
    All NYSE Members, Member Organizations and Sponsored Participants
of Sponsoring Member Organizations are automatically eligible for
access to MatchPoint. Before access is granted to MatchPoint users, all
users must go through a connectivity authorization process.\6\ After
NYSE Members, Member Organizations and Sponsored Participants of
Sponsoring Member Organizations obtain connectivity authorization they
may access MatchPoint.
---------------------------------------------------------------------------

    \6\ MatchPoint can only be accessed through an electronic
Financial Information eXchange (``FIX'') application and/or an
internet based password-protected order entry application. Users
must fill out an application for connectivity through either of
these two electronic connectivity capabilities. Once granted
connectivity through the authorization process, eligible users may
access MatchPoint.
---------------------------------------------------------------------------

NYSE MatchPoint Matching Sessions
    The first MatchPoint matching session of the trading day will
commence at 9:45 a.m. Thereafter, during the trading day of the
Exchange, there will be a matching session at 10 a.m., 11 a.m., 12
p.m., 1 p.m., 2 p.m. and 3 p.m. A MatchPoint after hours matching
session will occur at 4:45 p.m.\7\
---------------------------------------------------------------------------

    \7\ Because transactions from the MatchPoint after hours
matching session, which occurs at 4:45 p.m., occur outside of
regular trading hours, they cannot fall within the definition of
trade-throughs and will not be subject to the provisions of Rule 611
of Regulation NMS. See 17 CFR 242.600(b)(64) and (77).
---------------------------------------------------------------------------

    MatchPoint matching sessions are predetermined one-minute trading
periods that occur through an automated matching mechanism. During the
matching sessions, the Matchpoint Reference Price (``Reference Price'')
is determined and eligible orders are executed at the designated hour,
as stated in the rule, at the randomly selected time during the
predetermined one-minute trading session. The matching and execution of
orders occurs immediately after the algorithm selects a Reference
Price. No user can be assured of a match unless they enter an eligible
portfolio or single order with an internal match designation that
corresponds with contra side eligible portfolio or single orders with
internal match designations from the same user. No user knows precisely
when the match will occur. If an order is not executed in a particular
matching session it will be immediately cancelled back to the user upon
completion of the matching session. The user may resubmit the order in
any one of the subsequent matching sessions.

NYSE MatchPoint Reference Prices

    The Reference Price is the single trading price at which MatchPoint
orders will execute during a predetermined one-minute ``matching
session.'' MatchPoint employs a passive pricing system. The Reference
Price is derived from external market data of the Exchange and other
primary securities markets. There is no price discovery as orders are
not displayed and all trades occur in accordance with a predetermined
algorithm.
    The Reference Price is calculated differently for regular hour
matching sessions and the after hours matching session. During the
regular hours of the Exchange, the Reference Price shall be the
midpoint of the national best bid and offer (``NBBO'') which is
randomly selected during a predetermined one-minute pricing period. For
the after hours MatchPoint matching session, the Reference Price is the
official closing price of the primary market (i.e., the listing market)
for securities listed on the NYSE, NYSE Arca, Amex, Nasdaq and regional
stock exchanges. If, however, there is no official closing price for a
particular security, the Reference Price will be the last sale

price of the primary market for a particular security.

Half Penny Increments

    The MatchPoint Reference Price for the matching sessions that occur
during the regular hours (i.e., the midpoint of the NBBO), may be
calculated to three (3) decimal places when the NBBO is an odd penny
spread (i.e., one (1) penny, three (3) pennies, five (5) pennies,
etc.). For example, if the NBBO of Stock XYZ is $23.01 to $23.02, the
Reference Price is $23.015. As a consequence, executions at the
midpoint of the NBBO may be in half penny increments, requiring the use
of three decimal places, as demonstrated in the example.\8\
---------------------------------------------------------------------------

    \8\ MatchPoint will not display, rank or execute orders in any
NMS stock priced below one dollar ($1.00). In addition, MatchPoint
will not display, rank or execute orders in increments smaller than
a penny. However, when there is an odd penny spread, as described
above, MatchPoint will execute it in a half penny increment. The
Exchange notes that, in response to public comments to the
Regulation NMS Proposing Release, the Commission wrote, ``Executions
occurring at a sub-penny price resulting from a midpoint, VWAP, or
similar volume-weighted pricing algorithm are not prohibited by Rule
612 [of Regulation NMS].'' See Securities Exchange Act Release No.
51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS
Release'') at note 831.
---------------------------------------------------------------------------

Securities Priced Below One Dollar

    As discussed above, MatchPoint orders in securities are not subject
to auction-market price discovery procedures, as Reference Prices of
securities are not determined until a matching session commences and
the algorithm calculates the price of the securities. If the MatchPoint
algorithm prices a security (i.e., the Reference Price) below one
dollar ($1.00), MatchPoint will not execute orders in these securities
but will cancel these orders back to the user immediately upon
completion of the matching session.

Entry and Processing of NYSE MatchPoint Orders

MatchPoint Orders

    MatchPoint users may enter, correct or cancel orders beginning at
3:30 a.m. until 4:45 p.m. The MatchPoint system will not accept any
orders before 3:30 a.m. or after 4:45 p.m. MatchPoint will accept and
execute single orders and NYSE MatchPoint Portfolios (``portfolios'').
Orders may be either market or limit orders and must have a minimum
size of one round lot. As discussed in more detail below, MatchPoint
will permit odd lot and partial round lot orders to be entered into the
system. Odd lot orders and the odd lot portion of partial round lot
orders will be reported as unexecuted.
    Orders may not be cancelled or replaced while a matching session is
in progress or when trading in the applicable security is halted in the
MatchPoint system. MatchPoint orders shall not be available for
execution until the next eligible matching session. All orders must be
available for automatic execution. MatchPoint has no order delivery
capability and will not route to other market centers. Users, however,
would be able to enter eligible orders into MatchPoint through a FIX
\9\ application and/or an internet based order entry system provided
the orders are available for automatic execution. MatchPoint orders
will not trade-through a Protected Bid or Protected Offer as defined in
Regulation NMS.\10\
---------------------------------------------------------------------------

    \9\ FIX Protocol is a messaging standard developed specifically
for the real-time electronic exchange of securities transactions.
    \10\ See Regulation NMS Release, supra note 8. Because the
MatchPoint Reference Price during the regular hours of the Exchange
is calculated to be the midpoint of the NBBO, no trade-through
executions will occur and, therefore, Rule 611 of Regulation NMS
(``Order Protection Rule'') will not be violated.
---------------------------------------------------------------------------

MatchPoint Order Parameters

    All MatchPoint orders, single and portfolio, must have the
following parameters: (1) List name; \11\ (2) matching session (if a
user fails to designate a specific matching session, the system will
provide a default function and direct the order to the next eligible
matching session); (3) side of the market (i.e., buy, sell or short
side); (4) symbol; and (5) minimum and maximum amount of shares
available for execution. Additionally, a user may include an optional
constraint (i.e., net cash and internal match constraints) for a
MatchPoint order.
---------------------------------------------------------------------------

    \11\ A portfolio must have a unique portfolio name that is
distinct from the names of other portfolios of the same user.
---------------------------------------------------------------------------

MatchPoint Order Designation

    MatchPoint orders must be designated for only one of the matching
sessions during regular hours of the Exchange or for the single after
hours matching session. If a MatchPoint order does not execute in the
designated matching session, it will be cancelled back to the user
immediately upon completion of the matching session. If a user fails to
designate a particular matching session for a MatchPoint order, the
order, by default, shall be available for execution in the next
scheduled matching session. If an undesignated order does not execute
in the next scheduled regular hours matching session it will be
cancelled back to the user immediately upon completion of such matching
session. If a user fails to designate an order and enters the order
after 3 p.m., which is the last regular hours matching session, the
order will participate in the after hours matching session at 4:45 p.m.
If the order does not execute in the after hours matching session it
will be cancelled back to the user immediately upon completion of the
after hours matching session.
    As discussed above, a user must designate an order for only one
matching session at a time. For example, if a user wishes to have an
order available for execution in the 11 a.m. matching session, the user
must designate the order for the 11 a.m. matching session and must
enter the order into the MatchPoint system anytime between 3:30 a.m.,
when the system opens to receive orders, and 11 a.m., when the
designated matching session commences. If the order does not execute in
the 11 a.m. matching session, such order will be immediately cancelled
back to the User upon completion of the matching session. Thereafter,
the user must submit a new order for execution in another matching
session, e.g., the 12 p.m. matching session. The user must submit the
subsequent order with a designation for the 12 p.m. matching session.
Such order must then be entered into the system before commencement of
the 12 p.m. matching session. Again, if the order does not execute in
the 12 p.m. matching session, such order will be immediately cancelled
back to the user upon completion of the 12 p.m. matching session.

Round Lot Orders

    MatchPoint will execute orders only in round lots. The MatchPoint
system will accept odd lot orders but not execute them. Odd lot orders
entered into the MatchPoint system will be reported to the user as
unexecuted. Similarly, orders containing partial round lots (i.e.,
``mixed lots'') may be entered into MatchPoint in the form of a
portfolio but the odd lot portion of the order will not be executed and
will be reported to the user as unexecuted. The system will permit the
entry of odd lot and partial round lot orders to accommodate portfolio
orders. The Exchange believes that to require the portfolio-based users
to first strip their orders of odd lots and partial round lots before
entering their orders into MatchPoint would introduce operational risk
into the administration of the portfolios and, for example, disturb the
tracking of the portfolios that follow the underlying index.
Additionally, the Exchange believes that excluding odd lot and partial
round lot

orders from MatchPoint will discourage portfolio trading and
significantly reduce liquidity in the MatchPoint market.
    The following example demonstrates how odd lot and partial round
lot orders are processed through MatchPoint:
    A portfolio of buy orders is entered into MatchPoint:

Stock A: 12,300 shares.
Stock B: 5,650 shares.
Stock C: 35 shares.
Stock D: 17,099 shares.

    Depending upon available contra side interest, the following
portfolio executions could occur: Order A could execute up to 12,300
shares. Order B could execute up to 5,600 shares with at least 50
shares immediately cancelled back to the user upon completion of the
matching session. Order C will result in all 35 shares being
immediately cancelled back to the user upon completion of the matching
session. Order D will execute up to 17,000 shares and at least 99
shares will be immediately cancelled back to the user upon completion
of the matching session.

NYSE MatchPoint Order Allocation

    MatchPoint orders will be allocated on a pro rata basis, such that
shares will be allocated pro rata in round lots (rounded down to the
nearest 100 shares) to eligible orders based on the original size of
the order. In this process MatchPoint will honor all user-directed
constraints. If the allocation to an eligible order is less than the
minimum acceptable execution quantity for that order, the order shall
not be eligible for execution in that matching session. If additional
shares remain after the initial pro rata allocation, those shares will
continue to be allocated pro rata to eligible orders. If additional
shares remain thereafter that are the same size or are unexecuted
because of rounding or minimum trade size constraints, the remaining
shares will be allocated in 100 share lots to the oldest eligible
orders.
    The example below demonstrates how MatchPoint will allocate shares
on a pro rata basis:

----------------------------------------------------------------------------------------------------------------
                                                                                Shares
                User                         Side         Shares entered           Price             executed
----------------------------------------------------------------------------------------------------------------
User A.............................  Buy................         100,000  MKT...................         100,000
User B.............................  Buy................         100,000  MKT...................         100,000
User C.............................  Sell...............         100,000  MKT...................         *74,100
User D.............................  Sell...............          75,000  MKT...................         *55,600
User E.............................  Sell...............          50,000  MKT...................          37,000
User F.............................  Sell...............          25,000  MKT...................          18,500
User G.............................  Sell...............          10,000  MKT...................           7,400
User H.............................  Sell...............           5,000  MKT...................           3,700
User I.............................  Sell...............           5,000  MKT...................           3,700
----------------------------------------------------------------------------------------------------------------

    In this example the total amount of buy orders is 200,000 shares.
The total amount of sell orders is 270,000 shares. There are 70,000
more shares to sell than to buy. The greatest number of shares that may
execute in the MatchPoint system is 200,000 shares. 200,000 shares is
74.074% (rounded percentage) of 270,000. Therefore, the pro rata
percentage that will be allocated to each of the seven sell orders is
74.074%. Based on the order size of each order, MatchPoint will prorate
the available liquidity (200,000 shares) accordingly (see ``Shares
Executed'' in the example above). (* Users C and D each receive an
additional 100 shares because C and D are the oldest eligible orders
after the pro rata share allocations.)
    The second example (below) will illustrate the allocation of
MatchPoint shares when all orders are equal in size. Under these
circumstances, MatchPoint will allocate shares based on order entry
sequence. The oldest order will get the larger fill if residual shares
remain after the initial pro rata allocation. In the example below,
assume the following orders are received in the following sequence:

MatchPoint Orders:
MatchPoint Executions:
    1. 10,000 fully allocated order
    2. 3,300 shares + 100 residual shares = 3,400 (oldest sell order)
    3. 3,300 shares executed
    4. 3,300 shares executed

    The results of the matching session are as follows: Broker-dealer
A's order is allocated 9,900 shares from a pro rata fill from each of
the three sell orders from broker-dealers B, C and D in the amount of
3,300 shares. Each sell order has an equal residual of 6,700 shares,
but because broker-dealer B has the oldest order of the three sell
orders, B's residual 100 shares of stock will be allocated to A's buy
order resulting in a fully allocated order of 10,000 shares.

Portfolio Trading

    A MatchPoint user may submit NYSE MatchPoint Portfolios into the
MatchPoint system for execution. An NYSE MatchPoint Portfolio is a
group of linked orders with user-directed parameters and a unique,
user-defined portfolio name. The portfolio orders may represent
separate and distinct broker dealer-customer orders and separate and
distinct proprietary broker dealer orders. A user may enter one
portfolio of buy and sell/short orders or many portfolios of buy and
sell/short orders.

Internal Match Constraints

    MatchPoint portfolio users may effectuate internal matches and
simultaneously match residual shares against orders from other users
within a single matching session when using an optional internal match
constraint. This type of constraint enables the user to execute trades
between the same user's portfolios first before trading with other
available orders in a particular matching session. If, after an
internal match occurs and residual orders remain, the residual
portfolios will trade with all other orders. Single orders may be
designated for internal matches as well.
    Internal matches have priority over other executions. MatchPoint
will first process internal matches and then process all other orders
in the matching session. All user-directed constraints will be honored
in the internal match. An internal match constraint, like a MatchPoint
order, is active only for a single matching session. A user may
resubmit a new internal match constraint when resubmitting an order for
a different matching session.
    All orders that are designated with an internal match designation,
single or portfolio orders, and entered by the same user are eligible
for matching with all such orders. For example, single orders that have
internal match designation are capable of matching

with all other orders that have internal match designations entered by
the same user. Portfolio orders within a portfolio that are designated
for internal matches are also capable of matching with one another when
entered by the same user. Such orders are allocated on a pro rata basis
as described above.
    An internal match is illustrated in the following example:
    Broker-dealer A enters one order in a portfolio to buy 20,000
shares of XYZ stock and in another portfolio Broker-dealer A enters an
order to sell 10,000 shares of XYZ stock. Broker-dealer B enters an
order to sell 10,000 shares of XYZ stock, and broker-dealer C enters an
order to sell 10,000 shares of XYZ stock. The internal match will
result in the following executions: Broker-dealer A's buy order for
20,000 shares of XYZ stock will trade with broker-dealer A's sell order
of 10,000 and 5,000 shares of XYZ stock from broker dealer B and 5,000
shares of XYZ stock from broker dealer C respectively, leaving broker-
dealers B and C with residual amounts of 5,000 shares each of XYZ
stock. The unexecuted shares of XYZ stock for broker-dealers B and C
(5,000 shares each) will be immediately cancelled back to broker-
dealers B and C upon completion of the matching session.

Net Cash Constraints

    An optional ``net cash'' constraint provides valuable risk and cash
management tools for portfolio users. A user entering a single order
may also place a net cash constraint on that order. To execute a net
cash constraint, a user must enter a specific net buy dollar amount and
a specific net sell dollar amount for a portfolio. A net cash
constraint is active only for a single matching session. A user may
resubmit a new net cash constraint when resubmitting an order for a
different matching session. MatchPoint users may utilize such net cash
constraints as the primary vehicle for controlling how much a user may
spend or raise in an individual portfolio. This functionality enables
users to keep their purchases and sales in line with each other and to
fund additional purchases.
    When calculating a customer's net cash constraint position, the
matching algorithm takes into account the eligible portfolio order
shares in a specific security, the reference price of the security and
the customer's net cash constraint. MatchPoint first processes the
stock with the largest orders in the largest portfolios. In order to
honor all cash constraints, the matching algorithm processes all single
and portfolio orders in a particular security that have net cash
constraints and calculates share allocation by applying a percentage of
the original order size to contra side shares that are available to
fill the order. The algorithm takes this percentage calculation and
multiplies it by the Reference Price. This calculation is then compared
to the order's net cash constraint and determines if the allocation of
the available contra side shares will violate the order's net cash
constraint. If the calculation violates the net cash constraint, these
shares will not be allocated to the contra side order but may be
allocated to other eligible orders. This algorithmic process continues
until all eligible orders are executed. There is no priority given to
orders with a net cash constraint.
    The example below demonstrates how portfolios, with and without a
net cash constraint, execute in MatchPoint. Specifically, the example
illustrates the portfolios of users A, B and C in three different
scenarios: The pre-match scenario, the post-match scenario with no net
cash constraint and a post match scenario with a net cash constraint.
In that third scenario, user B has a net cash constraint of plus or
minus $1,000,000 (+/-$1,000,000). In the matching session, user B's
portfolio cannot sell (raise) $1 million more than it buys (spends) and
it cannot buy (spend) $1 million more than it sells (raises). Users A
and C have no net cash constraints on their portfolios. Users A and B
are on the same side of the market and user C represents the contra
side interest in the matching session. User B entered orders first and
would therefore receive any residual shares to be allocated. As
previously mentioned, allocated shares are rounded down to the nearest
100 shares.

----------------------------------------------------------------------------------------------------------------
                 Side                             Symbol              Shares entered             Price
----------------------------------------------------------------------------------------------------------------
                                                    PRE-MATCH
----------------------------------------------------------------------------------------------------------------
User A Portfolio:
    Buy...............................  ABC.......................             67,600  MKT
    Buy...............................  QRS.......................             82,500  MKT
    Sell..............................  XYZ.......................             86,300  MKT
    Sell..............................  DEF.......................             41,200  MKT
User B Portfolio:
    Buy...............................  ABC.......................             47,600  MKT
    Buy...............................  QRS.......................             98,600  MKT
    Sell..............................  XYZ.......................             61,800  MKT
    Sell..............................  DEF.......................             62,200  MKT
User C Portfolio:
    Buy...............................  XYZ.......................            139,200  MKT
    Buy...............................  DEF.......................             88,800  MKT
    Sell..............................  ABC.......................            146,400  MKT
    Sell..............................  QRS.......................            258,300  MKT
----------------------------------------------------------------------------------------------------------------
                                     POST MATCH WITH NO NET CASH CONSTRAINTS
----------------------------------------------------------------------------------------------------------------
User A Portfolio:
    Buy...............................  ABC.......................             67,600  32.66
    Buy...............................  QRS.......................             82,500  23.55
    Sell..............................  XYZ.......................             81,100  38.71
    Sell..............................  DEF.......................             35,300  72.03
User B Portfolio:
    Buy...............................  ABC.......................             47,600  32.66
    Buy...............................  QRS.......................             98,600  23.55
    Sell..............................  XYZ.......................             58,100  38.71
    Sell..............................  DEF.......................             53,500  72.03
User C Portfolio:

    Buy...............................  XYZ.......................            139,200  38.71
    Buy...............................  DEF.......................             88,800  72.03
    Sell..............................  ABC.......................            115,200  32.66
    Sell..............................  QRS.......................            181,100  23.55
----------------------------------------------------------------------------------------------------------------
                                       POST MATCH WITH NET CASH CONSTRAINT
----------------------------------------------------------------------------------------------------------------
User A Portfolio:
    Buy...............................  ABC.......................             67,600  32.66
    Buy...............................  QRS.......................             82,500  23.55
    Sell..............................  XYZ.......................             86,300  38.71
    Sell..............................  DEF.......................             41,200  72.03
User B Portfolio:
+/-$1 Million Cash Constraint
    Buy...............................  ABC.......................             47,600  32.66
    Buy...............................  QRS.......................             98,600  23.55
    Sell..............................  XYZ.......................             45,500  38.71
    Sell..............................  DEF.......................             43,100  72.03
User C Portfolio:
    Buy...............................  XYZ.......................            131,800  38.71
    Buy...............................  DEF.......................             84,300  72.03
    Sell..............................  ABC.......................            115,200  32.66
    Sell..............................  QRS.......................            181,100  23.55
----------------------------------------------------------------------------------------------------------------

    As the example shows, the allocation of shares may vary
significantly with and without the net cash constraint. User B's
portfolio executes fewer shares with a net cash constraint than without
the constraint. Users A and C, with no net cash constraints, are able
to obtain more executions and have a more competitive position than
user B when user B has a net cash constraint in place.
    Below is a chart comparing the post match customer net cash
position results (i.e., total dollars raised and total dollars spent)
from the example above.

----------------------------------------------------------------------------------------------------------------
                                                                 Post match 1     Post match 2     Post match 1
                                                                   Net cash         Net cash       and 2  Cash
                                                                   position         position        difference
----------------------------------------------------------------------------------------------------------------
Customer A...................................................      $1,535,220       $2,157,618         $622,398
Customer B...................................................      $2,222,139         $989,152   \12\($1,232,987
                                                                                )
Customer C...................................................     ($3,757,359)     ($3,146,770)       ($610,589)
----------------------------------------------------------------------------------------------------------------

    Post Match 1 reflects the net cash position for Customers A, B and
C when their portfolios match with one another and when Customer B has
no net cash constraint. Customer A raised $1,535,220 more than he
spent; Customer B raised $2,222,139 more than he spent and Customer C
spent $3,757,359 more than she raised.
---------------------------------------------------------------------------

    \12\ Numbers that appear in parentheses represent expenditures.
---------------------------------------------------------------------------

    Post Match 2 reflects the net cash position for Customers A, B and
C when they match with one another and Customer B has a net cash
constraint of plus or minus $1,000,000 (+/-$1,000,000). Customer B
raised $989,152 more than he spent, which is within his net cash
constraint of $1,000,000, but is $1,232,987 less than what he raised in
Post Match 1 (when he had no net cash constraint). This shows the
effect of Customer B's net cash constraint on his eligible portfolio
orders, which limits the dollar amount that he can raise (or spend).
The matching algorithm honors Customer B's net cash constraint before
allocating shares.
    Customer B has an additional $10,848 that he could raise up to the
$1 million constraint, but because the algorithmically calculated
percentage of the available shares would violate his constraint if
allocated, the available shares are not allocated to Customer B and he
stops raising cash. The example demonstrates how the matching algorithm
honors Customer B's net cash constraint before allocating shares.
    Further, in Post Match 2, Customer A raised $2,157,618 more than he
spent and $622,398 more than he raised in Post Match 1. Customer A was
able to match more shares because of Customer B's net cash constraint,
which restricted Customer B's ability to raise or spend more than
$1,000,000. Customer C spent $3,146,770 more than she raised and spent
$610,589 less than she spent in Post Match 1. This reflects Customer
A's ability to increase the number of his executions and Customer B's
ability to limit the number of his executions through his net cash
constraint.
    The above example also illustrates the following MatchPoint
principles for net cash constraints: (1) A net cash constraint placed
on a portfolio may affect the execution of other orders in the matching
session by generally allowing additional shares for such other orders
to be executed, and (2) net cash constraints will generally result in
fewer executions of a portfolio and may inhibit the maximum order
execution potential of a particular security in a particular matching
session.

Price Collar Threshold in the After Hours Matching Session

    In the after hours matching session, the Exchange will place
parameters on the prices of all MatchPoint eligible securities in order
to dampen volatility and provide accurate pricing for executions. Such
parameters will be referred to as a ``Price Collar Threshold.'' A Price
Collar Threshold is an after hours market price beyond which a
MatchPoint order will not be executed. The Price Collar Threshold will
protect against unusual occurrences when the market has moved

significantly from the official closing price of the primary market
based on information that becomes available after the market close. In
this situation, the Exchange will cancel the after hours MatchPoint
matching session rather than execute the matching session at a price
that no longer reflects the market accurately. All unexecuted orders
will be immediately cancelled back to the user upon completion of the
matching session.
    The Price Collar Threshold will be set at a predetermined
percentage of the MatchPoint after hours Reference Price. Initially,
the Price Collar Threshold will be set at two percent (2%). Therefore,
if the difference between the Price Collar Threshold and the
consolidated last sale price of the security is two percent or more,
the matching session in that particular security will not occur. All
unexecuted orders will be cancelled back to the user upon completion of
the scheduled matching session. For example, if the Reference Price of
XYZ stock is $100, and at 4:45 p.m. the consolidated last sale price
for XYZ stock is either $98 or less or $102 or more, the Price Collar
Threshold will cause the stock to be halted in the after hours matching
session.
    In the future, if the Exchange determines that the Price Collar
Threshold should be adjusted in order to protect users and provide more
accurate trades, the Exchange may make such adjustments, up to and
including five percent (5%) of the MatchPoint after hours Reference
Price. The Exchange will inform its users of such an adjustment via the
NYSE MatchPoint Web site at http://www.nyse.com/MatchPoint and the

Member Firm Notice, and notice of such adjustments will be provided to
all users reasonably in advance of any such adjustments.

Locked and Crossed Markets

    If the NBBO for a particular security is locked at the time of a
MatchPoint matching session during the regular trading hours of the
Exchange, the matching session shall execute orders at the locked
price. Unexecuted MatchPoint orders in that security shall be cancelled
back to the user immediately upon completion of the matching session.
    If the NBBO for a particular security is crossed at the time of a
MatchPoint matching session during the regular trading hours of the
Exchange, the matching session in that particular security shall not
occur. Unexecuted MatchPoint orders in that security shall be cancelled
back to the user immediately upon completion of the matching session.

Trading Ahead of Customer Orders

    In the event a MatchPoint Order executes at the midpoint of the
NBBO resulting in a Member or Member Organization's trading ahead of a
held customer order at the same price, the Exchange believes that NYSE
Rule 92 (Limitations on Member's Trading Because of Customers' Orders)
may be implicated. NYSE Rule 92(a) generally restricts a Member or
Member Organization from entering a proprietary order while in
possession of a customer order. NYSE Rule 92(b) through (d) provides
several exceptions to the general restrictions of Rule 92(a). When
trading on the MatchPoint system, all users will be expected to comply
with Rule 92(a) unless such trading falls within an applicable
exception in NYSE Rule 92(b) through (d).

Halting, Suspending and Closing of NYSE MatchPoint Trading on the
Exchange

    Trading on MatchPoint will be halted, suspended or closed \13\ when
necessary in order to maintain a fair and orderly market, and in
certain other conditions, as described below. If trading in a
particular security is halted, suspended or closed due to regulatory or
unusual market conditions at the time a matching session commences, the
matching session will not occur in that security and all unexecuted
orders will be immediately cancelled back to the user upon completion
of the matching session.
---------------------------------------------------------------------------

    \13\ The use of the word ``close'' in the context of this rule
refers to the intentional closing of the market due to regulatory or
other unusual circumstances as described above, and does not refer
to the predetermined ``close'' or end of the regular trading day at
4 p.m.
---------------------------------------------------------------------------

    MatchPoint trading may be halted, suspended or closed when: (1) In
the exercise of its regulatory capacity, the Exchange determines such
action is necessary or appropriate to maintain a fair and orderly
market, to protect investors, or otherwise is in the public interest
due to extraordinary circumstances or unusual market conditions; (2) in
the case of a particular security whenever, for regulatory purposes,
trading in the related security has been halted, suspended or closed on
the Exchange or the primary listing exchange; (3) in the case of a
particular security trading on the Exchange pursuant to unlisted
trading privileges, whenever, for regulatory purposes, trading in that
security has been halted, suspended or closed on the primary listing
exchange; (4) with respect to a particular security trading on the
Exchange pursuant to unlisted trading privileges, if the authority
under which a security trades on the Exchange or its primary market is
revoked (i.e., because it is delisted); or (5) in the after hours
matching session, news reports and/or corporate actions are disclosed
after the close of the regular hours of the market that have a material
impact on a particular security, which may include the following
situations: (a) New corporate earnings; (b) major market index company
deletions or additions; (c) corporate takeovers; (d) other significant
corporate actions; (e) court decisions and injunctions; and (f)
governmental announcements. No terms or conditions specified in this
rule shall be interpreted to be inconsistent with any other rules of
the Exchange.

Clearance and Settlement of MatchPoint Executions

    Details of each MatchPoint trade will be automatically matched and
compared by the Exchange and will be submitted to a registered clearing
agency for clearing and settlement on a locked-in basis.\14\ All
executions effected by a Member or Member Organization will be cleared
and settled using the Member's and Member Organization's account, and
all executions effected by a Sponsored Participant will be cleared and
settled using the relevant Sponsoring Member Organization's account.
---------------------------------------------------------------------------

    \14\ MatchPoint executions will be compared through the Regional
Interface Organization Online process (``RIO Online''). RIO Online
is NYSE Arca's internal processing interface that sends order
execution information to the Depository Trust & Clearing Corporation
(DTCC). RIO Online gathers the trades that are executed on any given
day, places the trades into the appropriate message format and sends
them to DTCC. RIO Online provides a record of all trades that were
sent to DTCC. RIO Online is also used to manage any approved trade
corrections.
---------------------------------------------------------------------------

    Because MatchPoint is an anonymous trading facility, the proposed
rule will require MatchPoint transaction reports to indicate the
details of the transaction, but not to reveal contra party and clearing
firm identities,\15\ except under the following circumstances: (1) In
the event the National Securities Clearing Corporation (``NSCC'') \16\
ceases to act for a Member or Member Organization, which is the
unidentified contra side of any such trade processing, and/or the
relevant clearing firm, the NYSE shall have the responsibility to
identify to

Members or Member Organizations the trades included in reports produced
by the NSCC which are with the affected Member or Member Organization,
and (2) for regulatory purposes or to comply with an order of a court
or arbitrator.
---------------------------------------------------------------------------

    \15\ Post-trade anonymity described herein has been previously
approved by the Commission for other exchanges. See, e.g.,
Securities Exchange Act Release Nos. 48527 (September 23, 2003), 68
FR 56361 (September 30, 2003) (SR-NASD-2003-85); and 49786 (May 28,
2004), 69 FR 32087 (June 8, 2004) (SR-PCX-2004-40).
    \16\ The Exchange will submit completed MatchPoint trades for
clearance and settlement to NSCC, which is a subsidiary of DTCC.
---------------------------------------------------------------------------

    The trade reports that the NSCC will receive from MatchPoint for
anonymous trades will contain the identities of the parties to the
trade. This measure will enable the NSCC to conduct its risk management
functions and settle anonymous trades. The trade report sent to the
NSCC will contain an indicator noting that the trade is anonymous. On
the contract sheets the NSCC issues to its participants, the NSCC will
substitute ``ANON'' for the acronym of the contra-party. The purpose of
this masking is to preserve anonymity through settlement.
    The Exchange states that it will be able to maintain anonymity with
respect to disputed or erroneous trades because the Exchange resolves
disputes through a centralized process and conducts the process on
behalf of its Members and Member Organizations.

Dissemination of Trading Information

    The MatchPoint system will report trade information to the
Securities Information Processors for all MatchPoint eligible
securities. Trades will be reported as one print for each security with
the total volume of the transaction reported with the price. Market
data for NYSE-listed securities will be disseminated via the
consolidated tape pursuant to the Consolidated Tape Association Plan
(``CTA Plan''). Trade reports of securities that are governed by the
UTP Plan will be disseminated pursuant to the UTP Plan. All trades will
indicate the market of execution as the NYSE for CTA and UTP purposes.

Member Organization and Non-Member Access to the NYSE MatchPoint System

    Members and Member Organizations of the Exchange are automatically
eligible for access to MatchPoint by their membership on the Exchange.
A non-member who wishes to trade securities on MatchPoint may do so as
a ``Sponsored Participant'' of a Member Organization, i.e.,
``Sponsoring Member Organization,'' and must enter into a written
agreement with the Sponsoring Member Organization and with the
Exchange. As previously explained, all Members, Member Organizations
and Sponsored Participants of Sponsoring Member Organizations must
first obtain connectivity authorization before they can access
MatchPoint.
    The proposed rule requires the Sponsoring Member Organization and
the Sponsored Participant to enter into a sponsorship arrangement and
maintain a written ``sponsorship agreement.'' The sponsorship agreement
must be agreed to by both the Sponsoring Member Organization and the
Sponsored Participant and include provisions for Authorized Traders.
Such written agreement must include the Sponsoring Member's consent to
sponsor the Sponsored Participant. The proposed sponsorship agreement
must also include the following provisions:

Sponsorship Provisions

    (A) Sponsored Participant and its Sponsoring Member Organization
must have entered into and maintained a written agreement with the
Exchange. The Sponsoring Member Organization must designate the
Sponsored Participant by name in its written agreement as such.
    (B) Sponsoring Member Organization acknowledges and agrees that:
    (i) All orders entered by the Sponsored Participants and any person
acting on behalf of or in the name of such Sponsored Participant and
any executions occurring as a result of such orders are binding in all
respects on the Sponsoring Member Organization and
    (ii) Sponsoring Member Organization is responsible for any and all
actions taken by such Sponsored Participant and any person acting on
behalf of or in the name of such Sponsored Participant.
    (C) Sponsoring Member Organization shall comply with the rules of
the Exchange, the rules and procedures with regard to MatchPoint and
Sponsored Participant shall comply with the rules of the Exchange and
the rules and procedures with regard to MatchPoint, as if Sponsored
Participant were a Sponsoring Member Organization.
    (D) Sponsored Participant shall maintain, keep current and provide
to the Sponsoring Member Organization a list of Authorized Traders who
may obtain access to the MatchPoint on behalf of the Sponsored
Participant.
    (E) Sponsored Participant shall familiarize its Authorized Traders
with all of the Sponsored Participant's obligations under this Rule and
will assure that they receive appropriate training prior to any use or
access to MatchPoint.
    (F) Sponsored Participant may not permit anyone other than
Authorized Traders to use or obtain access to MatchPoint.
    (G) Sponsored Participant shall take reasonable security
precautions to prevent unauthorized use or access to MatchPoint,
including unauthorized entry of information into MatchPoint, or the
information and data made available therein. Sponsored Participant
understands and agrees that Sponsored Participant is responsible for
any and all orders, trades and other messages and instructions entered,
transmitted or received under identifiers, passwords and security codes
of Authorized Traders, and for the trading and other consequences
thereof.
    (H) Sponsored Participant acknowledges its responsibility to
establish adequate procedures and controls that permit it to
effectively monitor its employees, agents and customers' use and access
to MatchPoint for compliance with the terms of this agreement.
    (I) Sponsored Participant shall pay when due all amounts, if any,
payable to Sponsoring Member Organization, MatchPoint or any other
third parties that arise from the Sponsored Participants access to and
use of MatchPoint. Such amounts include, but are not limited to
applicable exchange and regulatory fees.
    (J) Sponsored Participant shall maintain and keep current all
records and documents relating to its trading activities on MatchPoint,
and shall provide all such records and documents to the Sponsoring
Member Organization upon request.

Notice of Consent to the Exchange

    (A) The Sponsoring Member Organization must provide the Exchange
with a notice of consent acknowledging its responsibility for the
orders, executions and actions of its Sponsored Participant at issue
prior to providing the Sponsored Participant with authorized access to
MatchPoint.

Authorized Traders

    (A) Sponsoring Member Organization shall maintain a list of
Authorized Traders who may obtain access to MatchPoint on behalf of the
Sponsoring Member Organization or the Sponsoring Member Organization's
Sponsored Participants. The Sponsoring Member Organization shall update
the list of Authorized Traders as necessary. Sponsoring Member
Organizations must provide the list of Authorized Traders to the
Exchange upon request.
    (B) A Sponsoring Member Organization must have reasonable
procedures to ensure that all Authorized Traders comply with the
trading rules and procedures related to MatchPoint and all other rules
of the Exchange.
    (C) A Sponsoring Member Organization must suspend or withdraw a
person's status as an Authorized Trader if the Exchange has determined
that the person has caused the

Sponsoring Member Organization to fail to comply with the rules of the
Exchange and the Exchange has directed the Sponsoring Member
Organization to suspend or withdraw the person's status as an
Authorized Trader.
    (D) A Sponsoring Member Organization must have reasonable
procedures to ensure that an Authorized Trader maintain the physical
security of the equipment for accessing the facilities of MatchPoint to
prevent the improper use or access to the system, including
unauthorized entry of information into the system.

Limitations on the Use of MatchPoint

    (A) Specialists on the Floor of the Exchange are not authorized to
access MatchPoint. The off-Floor operations of specialist firms may
obtain authorized access to MatchPoint provided they have policies and
procedures and barriers in place that preclude improper information
sharing between the specialist firm and the firm's specialist on the
Floor of the Exchange.\17\
---------------------------------------------------------------------------

    \17\ Currently, all specialist organizations on the Exchange
utilize information barrier procedures pursuant to NYSE Rule 98
(Restrictions on Approved Person Associated with a Specialist's
Member Organization). Information barrier procedures that would be
utilized to block access by a specialist to any MatchPoint trading
information generated by the off-Floor personnel of the specialist
organization would be similar in design and utilization.
---------------------------------------------------------------------------

    (B) Members who have authorized access to MatchPoint are not
permitted to enter orders into the MatchPoint system from the Floor of
the Exchange when such orders are for their own accounts, the accounts
of associated persons, or accounts over which it or an associated
person exercises investment discretion. Similarly, Members on the Floor
may not have such orders entered into MatchPoint by sending them to an
off-Floor facility for entry. Members with authorized access to
MatchPoint may only enter customer orders into MatchPoint from the
Floor of the Exchange. Members that have authorized access to
MatchPoint may enter proprietary and customer orders into MatchPoint
from off the Floor of the Exchange.

Applicability of Section 11(a) and (b) of the Act

    Section 11(a) of the Act prohibits a member of a national
securities exchange from effecting transactions on that exchange for
its own account, the account of an associated person, or an account
over which it or its associated person exercises investment discretion,
unless an exception applies. The ``Effect versus Execute Rule,'' as
Rule 11a2-2(T) under the Act is known, permits an exchange member,
subject to certain conditions, to effect a transaction for such
accounts, utilizing an unaffiliated member to execute transactions on
the exchange floor. The Rule requires that: (1) The order must be
transmitted from off-floor; (2) once the order has been transmitted,
the member may not participate in the execution; (3) the transmitting
member may not be affiliated with the executing member; and (4) neither
the member or associated person may retain any compensation in
connection with effecting such transaction, respecting accounts over
which either has investment discretion, without the express written
consent of the person authorized to transact business for the account.
The Exchange requests interpretation that MatchPoint orders entered
from off-floor comply with the following provisions of the Rule:
    1. Off -Floor Transmissions: Orders are electronically entered into
the MatchPoint system from on and off the Floor of the Exchange;
however, Members are not permitted to enter orders into the MatchPoint
system from the Floor of the Exchange when such orders are for their
own accounts, the accounts of associated persons, or accounts over
which it or an associated person exercises investment discretion. Also,
specialists on the Floor are not permitted to enter any orders into the
MatchPoint system and they do not have access to the MatchPoint system
from the Floor, as described in more detail below. However,
``upstairs'' specialist firms are permitted to be MatchPoint users and
may enter orders from off the Floor provided such firms have adequate
policies, procedures and ``barriers'' in place between the upstairs
firm and the Floor specialists, which will preclude improper sharing of
trading information.
    2. Non-Participation in Order Execution: In accordance with Rule
11a2-2(T), once orders are entered into the MatchPoint system, a member
may not participate in, guide or influence the execution of such
orders. MatchPoint orders are sent by electronic means (i.e., FIX
application or an internet-based application) to the MatchPoint trading
platform. Users may enter, correct or cancel MatchPoint orders any time
prior to the commencement of a matching session. However, once the
matching session has commenced, the system will not permit a user to
affect the order or its execution in any way. Thus, when the matching
session commences, the member relinquishes all control of MatchPoint
orders. Users have no special or unique order handling or trading
advantages when trading on MatchPoint.
    3. Affiliated Executing Members: Rule 11a2-2(T) provides that the
transmitting member may not be affiliated with the executing member.
The Commission has previously recognized that this requirement may be
satisfied when automated exchange facilities are used.\18\ MatchPoint
is a fully automated, electronic trading facility. As described above,
MatchPoint orders are sent by electronic means to the MatchPoint
trading platform. Matching sessions commence automatically at a
predetermined time. Matching, trading and pricing of orders is
effectuated through an algorithm, which does not permit entry,
correction or cancellation of orders during the matching session. At
the completion of a matching session, transaction reports, including
order cancellation reports for orders that were not executed, are sent
back to the user. Reference Prices are derived from outside sources.
The intra-day Reference price is the midpoint of the NBBO, and the
after hours Reference Price is the official closing price or last sale
price of a particular security.
---------------------------------------------------------------------------

    \18\ In considering the operation of automated execution systems
by an exchange, the Commission has noted in the past that the
execution of an order is automatic once it has been transmitted into
a system, and therefore satisfies the independent execution
requirement of rule 11a2-2(T). See, e.g., Securities Exchange Act
Release Nos. 49068 (January 13, 2004), 69 FR 2775 (January 20, 2004)
(order approving the Boston Options Exchange as an options trading
facility of the Boston Stock Exchange); 29237 (May 24, 1991), 56 FR
24853 (May 31, 1991) (regarding NYSE's Off-Hours Trading Facility);
and 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File
No. 10-131).
---------------------------------------------------------------------------

    The Exchange believes that MatchPoint complies with the
``Affiliated Executing Member'' provision of Rule 11a2-2(T) because the
automatic execution function of MatchPoint ensures that all authorized
MatchPoint users have the same abilities with respect to entering
orders, and no users can effect an order once the matching session has
commenced. The design of the MatchPoint system ensures that members do
not possess any special or unique trading advantages in the handling of
orders. Thus, the Rule's provision respecting the use of affiliated
members to execute orders is not implicated by the MatchPoint system.
    4. Non-Retention of Compensation: The Exchange represents that
members that rely on Rule 11a2-2(T) for a managed account transaction
must comply with the limitations on compensation set forth in the rule.
    Section 11(b) of the Act and Rule 11b-1 thereunder, which pertains
to

specialists, are not applicable to the operation of the MatchPoint
system for several reasons. First, as stated above, specialists on the
Floor of the Exchange are not able to access MatchPoint. MatchPoint can
only be accessed through an electronic FIX application and/or an
internet based, password-protected order entry application, which are
not available to individual specialists on the Floor. Although the
upstairs firms that employ specialists are able to access MatchPoint
through these two applications, such firms must be authorized to access
MatchPoint, and the firms must have policies and procedures and
information barriers in place to preclude the improper sharing of
trading information between the specialists on the Floor and in the
upstairs firm. Further, the specialist firms will be subject to
examinations by the Financial Industry Regulatory Authority, Inc.
(``FINRA'') as agent for NYSE Group pursuant to a Regulatory Services
Agreement dated July 30, 2007, to ensure that such policies and
procedures and information barriers are in place and are adequate to
preclude improper sharing of trading information.
    Specifically, FINRA examiners will perform an on-site review of the
combined specialist firm's written policies and procedures and
determine if they are adequate in relation to trading on MatchPoint. In
addition, FINRA will interview appropriate individuals both within the
affected departments as well as other areas of the specialist firm to
determine whether firm policies have been appropriately disseminated
and appear to be followed in relation to MatchPoint trading. The
examination will also determine whether there have been any apparent
breaches of the information barriers.
    Second, the MatchPoint system is independent of all other
electronic trading platforms, including the specialists' API
(``Application Programmed Interface'') which is also known as the
specialists' ``algorithm.'' As a consequence, the specialists'
algorithm cannot interface with the MatchPoint system and has no access
to order entry information or MatchPoint market data. Similarly, the
individual specialist on the Floor has no MatchPoint order entry
information or MatchPoint market data. Without access to MatchPoint and
without access to MatchPoint order entry information and market data,
specialists will not be able to manipulate MatchPoint trading.
    Third, the Exchange has an internal authorization process that
authorizes MatchPoint users to access MatchPoint through the FIX
application and internet by providing an authorized user name and
protected password. Individual specialists on the Floor will not be
authorized through the internal process. Upstairs firms that employ
specialists may be authorized to access MatchPoint through MatchPoint's
internal authorization process, provided, as noted above, FINRA, as
agent for NYSE Group, examines such firms to ensure that policies,
procedures and barriers are in place and are adequate to preclude
improper sharing of trading information.
    Therefore, because specialists on the Floor do not have access to
the MatchPoint system or MatchPoint order information, and because the
specialist firms are subject to regulatory examinations to ensure the
integrity of information barriers between the firms and their
specialists on the Floor, the Exchange believes that section 11(b) of
the Act and Rule 11b-1 thereunder, which pertains to specialists, is
not applicable to the operation of the MatchPoint system.

Regulation of the MatchPoint System

    The Exchange notes that NYSE Regulation represents that it has
appropriate policies and procedures in place to adequately and
effectively regulate the MatchPoint system. A surveillance plan
describing the various surveillances that will be in place to monitor
the operation of MatchPoint has been submitted to the Commission under
separate cover, and will be implemented prior to any trading on the
MatchPoint system. Also, FINRA, as agent for NYSE Group, will perform
examinations of specialist firms that trade on MatchPoint as described
above.
2. Statutory Basis
    The Exchange states that the statutory basis for proposed rule
change is the requirement under section 6(b)(5) \19\ of the Act that an
Exchange have rules that are 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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange has neither solicited nor received written comments on
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the NYSE consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

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<EMAIL_ADDRESS>Please include

File Number SR-NYSE-2007-102 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.

    All submissions should refer to File Number SR-NYSE-2007-102. 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-2007-102 and should be
submitted on or before December 14, 2007.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22782 Filed 11-21-07; 8:45 am]

BILLING CODE 8011-01-P


Site Visit Report

	Potomac Generating Station

1400 North Royal Street

Alexandria, Virginia

	December 3, 2007

Background and Objectives

The Environmental Protection Agency (EPA) is in the process of
developing 316(b) cooling water intake structure requirements that
reflect the best technology available (BTA) for minimizing adverse
environmental impact for all existing power plants and manufacturing
facilities. As part of this process, EPA staff is visiting electric
generators and manufacturers to better understand the cooling water
intake structure (CWIS) technologies in use at facilities, including the
site-specific characteristics of each facility and how these affect the
selection and performance of CWIS technologies.  EPA is also visiting
facilities to better understand cooling water use and specific issues or
technologies that can affect 316(b) compliance.  Potomac Generating
Station (Potomac) was selected for a site visit due to its testing of a
new type of intake screen (Geiger screen) and its proximity to the
Washington, D.C. area.

Facility Description

Potomac is owned by the Mirant Corporation and employs approximately 130
people.  The facility is located on 25 acres in Alexandria, Virginia and
is bounded on all sides—the Potomac River (and a National Park Service
walking path), city streets, a railroad, and nearby housing
developments.  The facility began operations in 1949 and withdraws
cooling water from the Potomac River.

Potomac’s NPDES permit is DC0022004.  The permit expired on April 19,
2005.  A draft permit was issued in May 2007 and requires the submittal
of information similar to that required by the now-suspended Phase II
rule’s Comprehensive Demonstration Study (CDS) during the permit term
to provide data for a 316(b) best professional judgment (BPJ)-based
analysis.  The permit also offers three compliance alternatives for the
facility to become compliant.

Electricity Generation and Transmission

Potomac has 5 coal-fired generating units which have a combined
generating capacity of 482 MW.  Units 1 and 2 were installed in 1949 and
1950 and are cycling units, generating 88 MW each.  Units 3, 4, and 5
are c baseload units and were installed between 1954 and 1957,
generating 102 MW each.

PEPCO owns the switchyard at the facility and operates two large
capacity power lines and 16 smaller ones that serve Maryland and the
District of Columbia.  The transmission system in the Washington, D.C.
area is a “spoke and wheel” configuration, where a ring of
transmission lines circles the city with inward “spokes” providing
electricity to the various sections.  Potomac is located near the
interior terminus of one of the spokes, which elevates its importance to
maintaining reliability (i.e., if the transmission lines outside the
spoke from the plant are disrupted, the plant is the only source of
electricity to parts of the District of Columbia).  The facility is
currently operating below its planned capacity, as an emissions study is
being conducted to support Mirant’s application to merge the stacks at
the facility.  The facility hopes to begin construction soon.

Approximately 6% of the power generated by the facility is reclaimed to
operate the plant.  Facility representatives also noted that the
facility is nearing (or may have reached) the capacity of its internal
electrical infrastructure, making the addition of any new processes at
the plant difficult.

Cooling Water Intake Structure

Potomac withdraws water via a shoreline CWIS in a small cove on the
western bank of the Potomac River.  The CWIS has 5 intake bays that
supply cooling and service water to the facility.  All of the generating
units employ once-through cooling, with two pumps per intake (each rated
at 30,000 gpm), and a design delta T of 10-15 degrees at the discharge
point.  No biocides are in use at the facility.

The total design intake flow (DIF) is 432 million gallons per day (mgd).
 Average intake flows have historically been high (even at or near the
design values), but have decreased in recent years due to a reduction in
the generation at the facility.

The first layer of screening at the CWIS is provided by a bar rack,
which excludes large debris.  The next layer of screening is provided by
Geiger screens.  The facility previously used single-entry, single-exit
traveling screens, but installed Geiger screens on all CWISs in 2004 at
an approximate cost of $3 million.  Potomac selected the Geiger screen
design to reduce the debris carryover experienced by some vertical
traveling screens.  The new screens (mesh size of 3/8”) have virtually
eliminated debris clogging in the condenser.

In addition, the screen for Unit 1 is equipped with fish buckets, a low
pressure spray wash, and the ability to add a fish return.

Under the previous screen configuration, the design intake velocity for
the CWIS was 1.52 feet per second.

A representative from the Electric Power Research Institute (EPRI) added
that it is currently conducting a study of fine mesh Geiger screens at
another location.

Impingement and Entrainment Information

At the time of the site visit, no information on the effectiveness of
the Geiger screens in reducing impingement or entrainment was publicly
available.  Potomac recently conducted two years of monitoring of the
fish return system for Unit 1 to evaluate its effectiveness in reducing
fish impingement.  Facility representatives stated that impingement
events are historically rare and are generally linked to storms, as
organisms retreat to the shallower waters near the intake.  As such, the
facility did not experience significant impingement problems before
installing the new screens, making analysis of the test results
difficult to interpret.  Nevertheless, the facility estimates they have
enough data for statistically valid results for approximately a half
dozen species that show impingement reductions ranging from 20% to 80%.
These results were presented at a recent conference of the American
Fisheries Society.

The facility also considered other technologies for reducing impingement
and entrainment.  Preliminary designs for a Gunderboom estimated a ¾
mile long barrier, which would result in excessive maintenance and
unacceptable interference with existing uses of the river.  Potomac also
considered cylindrical wedgewire screens, but concluded that due to the
relatively shallow depth of the river, a large number of small screens
would be required to meet the facility’s cooling water needs.  These
screens would need to be located in the deeper portion of the river (to
ensure sufficient counterflow currents to remove materials from the
screen surface), which is on the opposite side from the facility,
resulting in long runs of piping and potential conflicts with ongoing
dredging activities in that area.  A representative from EPRI noted that
the preliminary results of a joint test with Alden Laboratories on fine
mesh wedgewire screen use at Potomac was presented at a recent
conference of the American Fisheries Society and that the final results
should be completed by the end of 2008.  EPRI also studied barrier nets
at approximately 15 locations, noting that each facility achieved 80-90%
reductions in impingement, but that problems with debris and hydrilla
would limit the effectiveness of a net at Potomac.

To comply with the now-suspended Phase II rule, the facility stated that
it had intended to demonstrate that the Geiger screens met the
impingement requirements and would have conducted entrainment monitoring
to determine an appropriately-scaled restoration project to meet the
entrainment requirements of the rule.

Cooling Tower Feasibility

Facility representatives stated that cooling towers have not been
extensively considered.  They added that the site is quite small and
nearly all of the existing space is currently in use for critical
activities.  Facility representatives also noted that the facility is
surrounded by land uses that would be problematic for either
constructing towers or for acquiring additional land.  Potomac is also
located approximately 2 miles south of Ronald Reagan Washington National
Airport.

Attachments

Attachment A		List of Attendees

Attachment B		Aerial Photo

Attachment A--List of Attendees

Paul Shriner, EPA

Jan Matuszko, EPA

Josh Hall, EPA

Ron Jordan, EPA

Erik Helm, EPA

Paul Balserak, EPA

Mary Smith, EPA

Richard Witt, EPA

Suzanne Rudzinski, EPA

Julie Hewitt, EPA

Kelly Meadows, Tetra Tech

John Sunda, SAIC

Mike Stumpf, Mirant

Debra Knight, Mirant

Ann Wearmouth, Mirant

Mark Nitz, Mirant

Dave Bailey, EPRI

Also see DCN 10-6512A for an electronic copy of the sign-in sheet.

Attachment B—Aerial Photo

Please see DCN 10-6512B accompanying this document.

 However, due to high suspended sediment loads in the source water, the
facility still regularly shuts down to remove sediment buildup in the
condenser tubes.

 In the current configuration, any fish removed from any of the
facility’s screens would be discharged into the same trough as all
other debris; there is no separate fish return trough for re-routing
impinged organisms.

 As noted in Section 2.0, the facility is bordered by high-rise
residential buildings to its north, a major city street to its west, and
a rail line to its south.  The National Park Service owns the shoreline,
which operates a frequently used walking path along the river.

 PAGE   5

 PAGE   5


[Federal Register Volume 85, Number 63 (Wednesday, April 1, 2020)]
[Notices]
[Page 18299]
[FR Doc No: 2020-06742]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88491]

Order Under Section 15b of The Securities Exchange Act of 1934
Granting an Exemption for Municipal Advisors From Specified Provisions
of The Securities Exchange Act and Rule 15ba1-5(A)(1) Thereunder

March 26, 2020.
    The Commission has been monitoring the effects of the current
outbreak of coronavirus disease 19 (``COVID-19''). In light of the
current situation, we are issuing this Order providing a temporary
conditional exemption from certain requirements of the Exchange Act for
municipal advisors. In particular, the Commission recognizes that
municipal advisors may face challenges in timely satisfying the
provisions of Section 15B of the Securities Exchange Act of 1934
(``Exchange Act'') and Rule 15Ba1-5(a)(1) thereunder concerning the
filing of a municipal advisor's annual update to Form MA as a result of
COVID-19.
    Section 15B(a)(4) of the Exchange Act provides that the Commission,
by rule or order, upon its own motion or upon application, may
conditionally or unconditionally exempt any broker, dealer, municipal
securities dealer, or municipal advisor, or class of brokers, dealers,
municipal securities dealers, or municipal advisors from any provision
of Section 15B or the rules or regulations thereunder, if the
Commission finds that such exemption is consistent with the public
interest, the protection of investors, and the purposes of Section 15B.

I. Time Period for the Relief

    The relief specified in this Order is limited to filing obligations
for which the original due date for an annual update to Form MA is on
or after the date of this Order but on or prior to June 30, 2020. The
Commission intends to continue to monitor the current situation. The
time period for the relief may, if necessary, be extended with any
additional conditions that are deemed appropriate, and the Commission
may issue other relief consistent with Section 15B(a)(4).

II. Form MA Annual Update Filing Requirement for Registered Municipal
Advisors

    The disruptions resulting from COVID-19 mentioned above could
hamper the efforts of municipal advisors to timely meet filing
deadlines for annual updates to Form MA. In light of the current and
potential effects of COVID-19, the Commission finds that the exemption
set forth below is consistent with the public interest, the protection
of investors and the purposes of Section 15B of the Exchange Act.
    Accordingly, it is ordered, pursuant to Section 15B(a)(4) of the
Exchange Act:
    For time period specified in Section I, a registered municipal
advisor is exempt from the requirements under Exchange Act Rule 15Ba1-
(a)(5) to file an annual update to Form MA within 90 days of the end of
its fiscal year, where the conditions below are satisfied.

Conditions

    (a) The municipal advisor is unable to meet the filing deadline for
its annual update to Form MA due to circumstances related to current or
potential effects of COVID-19.
    (b) The municipal advisor relying on this Order promptly notifies
the Commission staff via email at<EMAIL_ADDRESS>stating:
    i. That it is relying on this Order; and
    ii. A brief description of the reasons why it could not file its
annual update to Form MA on a timely basis.
    (c) The municipal advisor relying on this Order must promptly
disclose on its public website (or if it does not have a public
website, promptly disclose to its clients) the information required in
condition (b) above.
    (d) The municipal advisor files the annual update to Form MA
required by Rule 15Ba1-5(a)(1) under the Exchange Act, as soon as
practicable but not later than 45 days after the original due date for
filing.

    By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-06742 Filed 3-31-20; 8:45 am]
 BILLING CODE 8011-01-P