[Federal Register Volume 60, Number 211 (Wednesday, November 1, 1995)]
[Notices]
[Pages 55626-55628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27005]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36416; File No. SR-NYSE-95-33]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the New York Stock Exchange,
Inc. (``NYSE'' or ``Exchange'') filed with the Securities and Exchange,
Inc., Relating to Additions to List of Rule Violations and Fines
Administered Pursuant to NYSE Rule 476A
October 25, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October
2, 1995,
[[Page 55627]]
the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'' filed with
the Securities and Exchange Commission (``SEC'' or ``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.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NYSE proposes to add the following options rules to the ``List
of Exchange Rule Violations and Fines Applicable Thereto Pursuant to
Rule 476A'' (``Rule 476 List''): (1) the requirement under NYSE Rule
750(e)(i) that options specialists establish bid/ask spreads no greater
than the maximum permitted Competitive Options Traders (``COTs''),
based on the price of the option or the bid/ask differential of the
underlying security; (2) the requirement under NYSE Rule
758(b)(i)(C)(1) that COTs establish bid/ask spreads within specified
parameters, based on the price of the option or the bid/ask
differential of the underlying security; (3) the requirement under NYSE
Rule 780(b)(i) that members and member organizations indicate to the
Exchange the final decisions of equity option holders to exercise or
not to exercise expiring equity options by a specified time; and (4)
the requirement under NYSE Rule 780(f) that members and member
organizations make, keep, and file with the Exchange records concerning
every final exercise decision for which a contrary exercise advice is
required.\1\ The NYSE also plans to amend its 19d-1 reporting plan\2\
for NYSE Rule 476A violations to include the rules added to the Rule
476A List.3
\1\A contrary exercise advice is a form that the Exchange
prescribes for use by a member or member organization to convey a
final exercise decision of an equity option holder either (1) not to
exercise an equity option that would otherwise by exercised
automatically pursuant to the exercise-by exception procedure of
Options Clearing Corporation Rule 805; or (2) to exercise an equity
option that would otherwise not be so exercised.
\2\Pursuant to Rule 19d-1(c)(1) under the act, a self-regulatory
organization (``SRO'') is required to file promptly with the
Commission notice of any ``final'' disciplinary action taken by that
SRO. Pursuant to Rule 19d-1(c)(2), however, 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, shall not be considered ``final'' if the sanction
imposed consists of a fine not exceeding $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. The Commission approved the NYSE's minor rule plan, contained
in NYSE Rule 476A, in 1985. See Securities Exchange Act Release No.
21688 (January 25, 1985), 50 FR 5025 (February 5, 1985) (ordered
approving File No. SR-HYSE-84-27) (``Minor Rule Plan Approval
Order''). Accordingly, the Exchange is relieved of current reporting
requirements under Section 19(d)(1) with respect to those
disciplinary actions taken pursuant to NYSE Rule 476A.
\3\See Letter from Daniel Parker Odell, Assistant Secretary,
NYSE, to Glen Barrentine, Senior Counsel, Division of Market
Regulation, Commission, dated September 29, 1995.
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The text of the proposed rule change is available at the Office of
the Secretary, NYSE, and at the Commission.
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
(a) Purpose
NYSE Rule 476A\4\ provides that the Exchange may impose a fine, not
to exceed $5,000, on any member, 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 NYSE
rules.
\4\NYSE Rule 476A was approved by the Commission on January 25,
1985. See Minor Rule Plan Approval Order, supra note 2. Subsequent
additions of rules to the Rule 476A List were approved in Securities
Exchange Act Release Nos. 22307 (May 14, 1985), 50 FR 21008 (May 21,
1985) (order approving File No. SR-NYSE-85-15); 23104 (April 11,
1986), 51 FR 13307 (April 18, 1986) (order approving File No. SR-
NYSE-86-12); 24895 (October 5, 1987), 52 FR 41643 (October 29, 1987)
(order approving File No. SR-NYSE-86-21); 25763 (May 27, 1988), 53
FR 20925 (June 7, 1988) (order approving File No. SR-NYSE-87-10);
27878 (April 4, 1990), 55 FR 13345 (April 10, 1990) (order approving
File No. SR-NYSE-89-44); 28003 (May 8, 1990), 55 FR 20004 (May 14,
1990) (order approving File No. SR-NYSE-91-09); 28505 (October 2,
1990), 55 FR 41288 (October 10, 1990) (order approving File No. SR-
NYSE-90-04); 28995 (March 21, 1991), 56 FR 12967) (March 28, 1991)
(order approving File No. SR-NYSE-91-04); 30280 (January 22, 1992),
57 FR 3452 (January 29, 1992) (order approving File No. SR-NYSE-91-
38); 30536 (March 31, 1992), 57 FR 12357 (April 9, 1992) (order
approving File No. SR-NYSE-91-42); 32421 (June 7, 1993), 58 FR 32978
(June 14, 1993) (order approving File No. SR-NYSE-93-24); 33403
(December 28, 1993), 59 FR 641 (January 5, 1994) (order approving
File No. SR-NYSE-95-35); 33816 (March 25, 1994), 59 FR 15471 (April
1, 1994) (order approving File No. SR-NYSE-93-27); and 34230 (June
17, 1994), 59 FR 32727 (June 24, 1994) (order approving File No. SR-
NYSE-94-05).
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The purpose of the NYSE Rule 476A procedure is to provide for a
response to a rule violation when a meaningful sanction is appropriate
but when the initiation of a disciplinary proceeding under NYSE Rule
476, ``Disciplinary Proceedings Involving Charges Against Members,
Member Organizations Allied Members, Approved Persons, Employees, or
Others,'' 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. NYSE Rule 476A provides for an appropriate
response to minor violations of certain Exchange rules while preserving
the due process rights of the party accused through specified, required
procedures. The Rule 476A List specifies those rule violations which
may be the subject of fines under the rule and also includes a fine
schedule.
In the Minor Rule Plan Approval Order,\5\ which initially set forth
the provisions and procedures of NYSE Rule 476A, 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 NYSE Rule 476A
as experience with it was gained.
\5\See note 2, supra.
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The Exchange presently seeks approval to add to the list of rules
subject to possible imposition of fine under NYSE Rule 476A procedures
the failure by members or member organizations to comply with various
options rules. Specifically, these include NYSE Rule 750(e)(i) and
758(b)(i)(C) (1), which establish maximum bid/ask spreads which options
specialists and COTs may make based on the price of the option or the
bid/ask differential of the underlying security; NYSE Rule 780(b)(i),
which requires members and member organizations to indicate final
decisions of equity options holders either to exercise or not to
exercise expiring equity options by a specified time; and NYSE Rule
780(f), which requires members and member organizations to make, keep,
and file with the Exchange records with respect to final exercise
decisions made with respect to options in certain circumstances.
The NYSE notes that while the Exchange, upon investigation, may
determine that a violation of these procedures is a minor violation of
the
[[Page 55628]]
type which is properly addressed by the procedures adopted under NYSE
Rule 476A, in those instances where investigation reveals a more
serious violation of the above-described rules, the Exchange will
provide an appropriate regulatory response.
(b) Statutory Basis
The NYSE believes that the proposed rule change is consistent with
Section 6(b) of the Act, in general, and, in particular, with Section
6(b)(6), 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 NYSE believes
that the proposal 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.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The NYSE 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
Because the foregoing rule change: (1) Does not significantly
affect the protection of investors or the public interest; (2) does not
impose any significant burden on competition; (3) was provided to the
Commission for its review at least five business days prior to the
filing date; and (4) does not become operative for 30 days after
October 2, 1995, it has become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder. In particular,
the Commission believes that the proposal does not significantly affect
the protection of investors or the public interest and does not impose
any significant burden on competition. At any time within 60 days of
the filing of such proposed 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 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. Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to the file
number in the caption above and should be submitted by November 22,
1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27005 Filed 10-31-95; 8:45 am]
BILLING CODE 8010-01-M
