06-4998. Self-Regulatory Organizations; National Stock Exchange; Order Granting Approval to Proposed Rule Change To Prohibit Tape Shredding

May 24, 2006.

I. Introduction

On April 4, 2006, National Stock Exchange^SM (“NSX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) ^[1] and Rule 19b-4 thereunder,^[2] a proposed rule change to prohibit tape shredding. The proposed rule change was published for comment in the Federal Register on April 24, 2006.^[3] The Commission received no comments on the proposal. This order approves the proposed rule change.

II. Description of the Proposal

The Exchange proposed to add an interpretation to Rule 3.1, which identifies the splitting of any order into multiple smaller orders (“tape shredding”) for any purpose other than best execution as contrary to the high standards of commercial honor and just and equitable principles of trade.

III. Discussion and Commission Findings

The Commission has reviewed carefully the proposed rule change and finds that it is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange,^[4] particularly section 6(b)(5) of the Act which, among other things, requires that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating securities transactions, to remove impediments to and to perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest.^[5] The Commission believes that the proposed rule change should help eliminate the distortive practice of trade shredding, and, therefore, promote just and equitable principles of trade.

IV. Conclusion

It is therefore ordered, pursuant to section 19(b)(2) of the Act,^[6] that the proposed rule change (File No. SR-NSX-2006-05), be and hereby is, approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.^[7]

J. Lynn Taylor,

Assistant Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  See Securities Exchange Act Release No. 53663 (April 17, 2006), 71 FR 21063.

4.  In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

5.  15 U.S.C. 78f(b)(5).

6.  15 U.S.C. 78s(b)(2).

7.  17 CFR 200.30-3(a)(12).