[Federal Register Volume 60, Number 210 (Tuesday, October 31, 1995)]
[Notices]
[Pages 55403-55404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-26895]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36407; File No. SR-NYSE-95-32]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the New York Stock Exchange,
Inc., Relating to Additions to the ``List of Exchange Rule Violations
and Fines Applicable Thereto Pursuant to Rule 476A.''
October 23, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on October 1, 1995 the New
York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by the self-regulatory organization. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The rule change revises the ``List of Exchange Rule Violations and
Fines Applicable Thereto Pursuant to Rule 476A'' by adding order entry
and cancellation procedures for market-at-the-close (``MOC'') orders on
non-expiration days (expiration day procedures for MOC orders are
already included) and for limit-at-the-close (``LOC'') orders for
expiration and non-expiration days. The rule change also amends the
NYSE's Minor Rule Violation Enforcement and Reporting Plan (``Plan'')
to include these entry and cancellation procedures for MOC and LOC
orders.\2\ The Exchange believes that a violation of the above-named
rules merit possible imposition of a fine under Rule 476A procedures.
\2\ See Letter from Daniel Parker Odell, Assistant Secretary,
NYSE, to Glen Barrentine, Team Leader, Division of Market
Regulation, SEC, dated October 1, 1995.
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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 self-regulatory organization
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 self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Rule 476A\3\ provides that the Exchange may impose a fine, not to
exceed $5,000,\4\ on any member,
[[Page 55404]]
member organization, allied member, approved person, or registered or
non-registered employee of a member or member organization for a minor
violation of certain specified Exchange rules.
\3\ Rule 476A was approved by the Commission on January 25,
1985. See Securities Exchange Act Release No. 21688 (January 25,
1985), 50 FR 5025 (February 5, 1985). Subsequent additions of rules
to the Rule 476A Violations List were made in Securities Exchange
Act Release Nos. 22037 (May 14, 1985), 50 FR 21008 (May 21, 1985);
23104 (April 11, 1986), 51 FR 13307 (April 18, 1986); 24985 (October
5, 1987), 52 FR 41643 (October 29, 1987); 25763 (May 27, 1988), 53
FR 20925 (June 7, 1988); 27878 (April 4, 1990), 55 FR 13345 (April
10, 1990); 28003 (May 8, 1990), 55 FR 20004 (May 14, 1990); 28505
(October 2, 1990), 55 FR 41288 (October 10, 1990); 28995 (March 21,
1991), 56 FR 12967 (March 28, 1991); 30280 (January 22, 1992), 57 FR
3452 (January 29, 1992); 30536 (March 31, 1992), 57 FR 12357 (April
9, 1992); 32421 (June 7, 1993), 58 FR 32973 (June 14, 1993); 33403
(December 28, 1993), 59 FR 641 (January 1, 1994); 33816 (March 25,
1994), 59 FR 15471 (April 1, 1994); 34230 (June 17, 1994), 59 FR
32727 (June 24, 1994); and 34327 (July 7, 1994), 59 FR 35956 (July
14, 1994).
\4\ Fines imposed pursuant to Rule 476A in excess of $2,500 are
deemed final, and therefore are subject to the reporting
requirements of section 19(d)(1) of the Act and Rule 19d-1(c)
thereunder. Pursuant to Rule 19d-1(c)(1), and SRO is required to
file promptly with the commission notice of any ``final''
disciplinary action taken by that SRO. Any disciplinary action taken
by an SRO for a violation of an SRO rule, which has been designated
as a minor rule violation pursuant to a Commission approved plan,
however, shall not be considered ``final'' if the sanction imposed
consists of a fine not exeeding $2,500 and the sanctioned person
does not seek an adjudication, including a hearing, or otherwise
exhaust his or her administrative remedies. By deeming that
unadjudicated minor rule violations are not final, the Commission
permits the SRO to report such violations on a periodic basis. See
Securities Exchange Act Release No. 21013 (June 1, 1984), 49 FR
23838 (June 8, 1984).
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The purpose of the Rule 476A procedure is to provide for a response
to a rule violation when a meaningful sanction is appropriate, but when
initiation of a disciplinary proceeding under Rule 476 is not suitable
because such a proceeding would be more costly and time-consuming than
would be warranted given the minor nature of the violation. Rule 476A
provides for an appropriate response to minor violations of a certain
Exchange rules or policies, while preserving the due process rights of
the party accused through specified, required procedures. The list of
rules that are eligible for 476A procedures specifies those rule
violations that may be the subject of fines under the rule and also
includes a schedule of fines.
In File No. SR-NYSE-84-27, which initially set forth the provisions
and procedures of Rule 476A,\5\ the Exchange indicated it would amend
the list of rules from time to time, as it considered appropriate, in
order to phase-in the implementation of Rule 476A as experience with it
was gained.
\5\ See Securities Exchange Act Release No. 21688, supra, note
3.
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The Exchange is presently adding to the list of rules subject to
possible imposition of fines under Rule 476A procedures the failure by
members or member organizations to adhere to the order entry and
cancellation procedures for MOC orders on non-expiration days \6\ and
for LOC orders on expiration and non-expiration days.\7\ MOC order
entry and cancellation procedures for expiration days are already
included in the Rule 476A List.\8\ The Exchange is also amending its
Minor Rule Violation and Reporting Plan to include these entry and
cancellation procedures for MOC and LOC orders.
\6\ The closing procedures for non-expiration days require that
all MOC orders be entered, reduced or cancelled no later than 3:50
p.m. As soon as practicable after 3:50, the specialist must
disseminate any MOC order imbalance of 50,000 shares or more in
certain so-called pilot stocks, stocks being added to or dropped
from an index and, upon the request of a specialist, any other stock
with the approval of a Floor Official. After 3:50 p.m., MOC orders
may be entered in any stock in which there is a published imbalance,
but only to offset the imbalance. See Securities Exchange Act
Release No. 35589 (April 10, 1995), 60 FR 19313 (April 17, 1995)
(order approving File No. SR-NYSE-94-44).
\7\ The closing procedures for non-expiration and expiration
days allow LOC orders to be entered up to 3:55 p.m., but only to
offset a published imbalance of MOC orders in that stock. Moreover,
on expiration days LOC orders are irrevocable after 3:40 p.m., while
on non-expiration days LOC orders are irrevocable after 3:55 p.m.
See Securities Exchange Act Release No. 35854 (June 16, 1995), 60 FR
32723 (June 23, 1995) (order approving File No. SR-NYSE-95-09).
\8\ See Securities Exchange Release No. 33403 (December 28,
1993), 59 FR 641 (January 5, 1994) (order approving File No. SR-
NYSE-93-35).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(6) of the
Act \9\ in that it will provide a procedure whereby member
organizations can be ``appropriately disciplined'' in those instances
when a rule violation is minor in nature, but a sanction more serious
than a warning or cautionary letter is appropriate. The rule change
provides a fair procedure for imposing such sanctions, in accordance
with the requirements of Sections 6(b)(7) and 6(d)(1) of the Act.\10\
\9\ 15 U.S.C. 78f(b)(6).
\10\ 15 U.S.C. 78f(b)(7) and 78f(d)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the 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
Because the foregoing proposed rule change: (1) does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from October 1, 1995, the
date on which it was filed, and the Exchange provided the Commission
with written notice of its intent to file the rule change at least five
business days prior to the filing date, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \11\ and subparagraph (e)(6)
of Rule 19b-4 thereunder.\12\
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4.
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At any time within 60 days of the filing of such rule change, the
Commission may summarily abrogate such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors or otherwise in furtherance
of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549. 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 at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing also will be available for
inspection and copying at the principal office of the New York Stock
Exchange, Inc. All submissions should refer to File No. SR-NYSE-95-32
and should be submitted by November 21, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
\13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 95-26895 Filed 10-30-95; 8:45 am]
BILLING CODE 8010-01-M
