[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Notices]
[Pages 58123-58124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28624]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36489; File No. SR-NYSE-95-37]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the New York Stock Exchange,
Inc. Relating to a Pilot Program to Display Price Improvement on the
Execution Report Sent to the Entering Firm
November 16, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
November 6, 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. On November 16, 1995, the NYSE filed Amendment No. 1 to
the proposed rule change.\1\ The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
\1\ See letter from James E. Buck, Senior Vice President and
Secretary, NYSE, to Howard Kramer, Associate Director, Division of
Market Regulation, SEC, dated November 16, 1995. Amendment No. 1
modified the original filing by removing the Exchange's proposal to
calculate price improvement based on size. Amendment No. 1 also
modified the pilot to make the program available to all NYSE member
organizations starting in January 1996.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change consists of additional descriptions of the
pilot program whereby the Exchange will test and evaluate a means of
calculating and displaying, on the execution reports sent to member
firms, the dollar amounts realized as savings to their customers as a
result of price improvement in the execution of their orders on the
Exchange.\2\ Initially, the Exchange expects to work with Merrill
Lynch, Pierce, Fenner & Smith, Incorporated (``Merrill Lynch'') in
testing and evaluating the proposed methodology. Assuming the results
of the pilot program are successful, the Exchange will make this
program available to all its member organizations in January 1996.
\2\ See Securities Exchange Act Release No. 36421 (October 26,
1995), 60 FR 55625 (November 1, 1995) (notice of filing and
immediate effectiveness of proposed rule change by the NYSE relating
to a six-month pilot program to display price improvement on the
execution report sent to the entering firm) (File No. SR-NYSE-95-35)
(``Pilot Filing'').
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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
As noted in the Pilot Filing, the purpose of the six month pilot
program is to develop, test, and evaluate a methodology and program for
calculating and displaying, on an execution report sent to member firms
entering orders, the dollar value saved by their customers as a result
of price improvement of orders executed on the Exchange. This program
does not in any way affect the actual execution of orders. The Exchange
refers to this calculated dollar savings as the ``NYSE PRIME SM.''
\SM\ NYSE is a service mark of the New York Stock Exchange.
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In the Pilot Filing, the Exchange presented several examples of how
NYSE PRIME is intended to work. Herein, the Exchange is providing an
additional example as to how NYSE PRIME will operate in situations when
an order is stopped against the prevailing bid or offer and then
exposed at a better price in an effort to obtain price improvement for
the order.
Assume the NYSE market quote is 50-50\3/8\, with 500 shares bid and
10,000 offered, and that the best offer displayed in the National
Market System is 50\1/4\ for 200 shares. A market order to buy 1,000
shares, entered on the NYSE is stopped at 50\3/8\, meaning it is
guaranteed to buy at 50\3/8\ or a better price. The order is
subsequently executed at 50\1/4\ on the NYSE. Because in this situation
there is not complete price improvement, there would be no
representation of NYSE PRIME price improvement on the execution report.
The NYSE PRIME program operates in the same manner when an order is
not stopped, but is executed at a price equal to the best price
displayed in the National Market System if that quotation size is 200
shares or more.\3\
\3\ The Commission notes that this filing initially proposed to
modify the program, as soon as practicable, to reflect price
improvement on 800 shares in the above example, whether or not the
order was stopped. In Amendment No. 1, the NYSE indicated that it
will not modify the PRIME program to represent price improvement as
initially proposed in this filing. See supra note 1.
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2. Statutory Basis
The basis under the Act for this rule change is the requirement
under Section 6(b)(5) that an exchange have rules that are designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system and, in general, to protect investors and the public
interest. This rule change is designed to perfect the mechanism of a
free and open market in that it enhances the information provided to
investors by displaying to them the dollar value of the price
improvement their orders may have received when executed on the NYSE.
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. In fact, the Exchange believes
that the NYSE PRIME program can reasonably be expected to enhance
competition by disclosing to investors the amount of savings they may
realize as a result of the price improvement their orders may receive
when executed on the NYSE.
[[Page 58124]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
This rule change is filed pursuant to paragraph (A) of Section
19(b)(3) of the Act, and paragraphs (e)(5)(i), (ii), and (iii) of Rule
19b-4 thereunder. The NYSE PRIME program will entail enhancements to
the Exchange's CMS (common message switch), SuperDOT and Post Trade
systems. This program does not significantly affect the protection of
investors or the public interest, does not impose any significant
burden on competition, and does not have the effect of limiting access
to or availability of any Exchange order entry or trading system. As
such, this rule change, as amended on November 16, 1995,\4\ may take
effect immediately upon filing with the Commission, to modify the
program described in SR-NYSE-95-35.\5\ 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.
\4\ See supra note 1.
\5\ See supra note 2.
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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, N.W., Washington, D.C. 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
submissions should refer to File No. SR-NYSE-95-37 and should be
submitted by December 15, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28624 Filed 11-22-95; 8:45 am]
BILLING CODE 8010-01-M
