[Federal Register Volume 59, Number 191 (Tuesday, October 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24518]
[[Page Unknown]]
[Federal Register: October 4, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34730; File No. SR-NYSE-94-03]
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Relating to Adoption of
New Rule 123A.46
September 27, 1994.
On February 22, 1994, the New York Stock Exchange, Inc. (``NYSE''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``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 adopt a new Rule 123A.46
pertaining to members' representation of multiple orders.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1993).
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The proposed rule change was published for comment in Securities
Exchange Act Release No. 34343 (July 11, 1994), 59 FR 36243 (July 15,
1994). No comments were received on the proposal.
Currently, the NYSE Rules do not place any limitations upon members
who represent orders for more than one customer at the same time and on
the same side of the market. New Rule 123A.46 will require such members
and member organizations (including ``upstairs'' trading personnel) to
inform customers if their orders may not receive an execution in time
priority of receipt, or may not receive an equal or proportional split.
For example, if a broker was representing three not held orders to
buy stock, one for 100,000 shares, and two for 50,000 shares each, and
the broker executed a trade for 12,000 shares, the broker will be
permitted under Rule 123A.46 to (1) allocate all 12,000 shares to the
customer who entered the order first (time priority), (2) split the
trade equally by giving 4,000 shares to each customer, or (3) split the
trade proportionally to the customer orders, i.e., 6,000 shares, 3,000
shares and 3,000 shares. Under these circumstances, the new rule will
not require NYSE members to make a disclosure to its customers.
However, if the execution would be split in any other manner, the
member will be required by Rule 123A.46 to disclose this information to
its customers prior to representing the multiple orders, unless the
terms of the order provides for a different split.
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the requirements of Section 6(b).\3\ In particular,
the Commission believes the proposal is consistent with the Section
6(b)(5) requirements that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts, and, in general, to protect investors and the
public interest.
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\3\15 U.S.C. 78f(b) (1988).
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The Commission believes that new NYSE Rule 123A.46 will benefit
investors by requiring that they are informed of the manner in which
their orders will be executed should a member represent multiple orders
on the same side of the market. The rule specifies that in this
situation, members may execute the customer orders in time priority of
receipt, or split the execution equally among the orders or
proportionally based upon the size of the orders. If members who
represent multiple orders on the same side of the market allocate
executions in any other manner, they must first inform their customers.
Customers would then have the ability to withdraw their orders if they
so desire.
The Commission believes that requiring members to notify customers
if their orders may be executed other than in the specified manners
allows investors to better monitor the representation of their orders
and helps to ensure that their orders are being handled fairly and
equitably. By requiring such executions or notification to customers,
investors are assured that their orders will not be executed in a
manner which they believe may be disadvantageous to their interests.\4\
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\4\In this regard, the Commission recently approved a proposal
by the NYSE that placed limits on intra-day trading by floor
brokers. The Commission stated in its approval of these intra-day
trading limitations that it is not inconsistent with the Act for a
self-regulatory organization to limit certain types of trading
activity in order to minimize interference with the execution of
public customer orders and preserve the quality of its market. See
Securities Exchange Act Release No. 34363 (July 13, 1994), 59 FR
36808 (July 19, 1994). The discussion in that approval order is
incorporated herein by reference.
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It is Therefore Ordered, pursuant to Section 19(b)(2) of the
Act,\5\ that the proposed rule change (SR-NYSE-94-03) is approved.
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\5\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-24518 Filed 10-3-94; 8:45 am]
BILLING CODE 8010-01-M
