March 3, 2005
Mr. Michael Rufino
Re: Rule 10b-10 / Average Price, Multiple Capacity Confirmations
Dear Mr. Rufino:
In your letter of March 3, 2005, on behalf of the New York Stock Exchange, Inc. ("NYSE"), you request assurance that the staff of the Division of Market Regulation ("Staff") will not recommend enforcement action to the Commission under Rule 10b-10 under the Securities Exchange Act of 1934 ("Exchange Act") if NYSE members or member organizations effect transactions in NYSE-listed equity securities and give or send a single confirmation that (1) reflects the average price and/or multiple capacities of multiple executions undertaken to fill a single customer order, and (2) provides other information related to such transactions as described more fully below. In considering your request, we have also considered whether any relief extended to NYSE members and member organizations should also be extended to other broker-dealers that effect transactions in reported securities.1
You represent that the requirements of best execution, together with the advent of decimal trading and the May 2000 rescission of NYSE Rule 390 (which generally had prohibited NYSE members and their affiliates from effecting certain transactions in NYSE-listed securities away from the NYSE), raise a strong possibility that a single customer order may be executed at multiple prices, in multiple capacities, and/or on multiple markets. You also note that NYSE member organizations have stated that multiple confirmations may result in higher costs and that some customers could find multiple confirmations confusing.
Based on the facts presented and the representations you have made, the Staff will not recommend enforcement action to the Commission under Exchange Act Rule 10b-10 if, within the circumstances defined below, any broker-dealer gives or sends average price and/or multiple capacity confirmations to confirm single customer orders for reported securities,2 effected in multiple executions, in order to achieve best execution for the customer.
This staff position is limited to those circumstances in which the broker-dealer complies with the following conditions:
This position concerns enforcement action only and is limited strictly to the facts and conditions set forth above. Any different facts or circumstances may require a different response.
We express no view with respect to other questions the proposed activities of any broker-dealer relying on this relief may raise, including the applicability of any other federal or state laws or the applicability of self-regulatory organization rules concerning customer account statements or confirmations.
Brian A. Bussey
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