[Federal Register Volume 64, Number 229 (Tuesday, November 30, 1999)]
[Notices]
[Pages 66956-66957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30979]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42163; File No. SR-NYSE-98-33]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change and Notice of Filing and Order Granting Accelerated Approval of
Amendment No. 1 to the Proposed Rule Change to Amend NYSE Rule 64
November 19, 1999.
I. Introduction
On October 16, 1998, the New York Stock Exchange, Inc. (``NYSE'' 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 amend NYSE Rule 64. The proposed rule change
was published for comment in the Federal Register on November 12,
1998.\3\ On November 1, 1999, the Exchange filed Amendment No. 1.\4\
The Commission received no comments on the proposal. This notice and
order approves the proposed rule change, as amended, and solicits
comments from interested persons on Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 40631 (November 3,
1998), 63 FR 63347 (November 12, 1998).
\4\ See Letter from James E. Buck, Senior Vice President and
Secretary, NYSE, to Richard Strasser, Assistant Director, Division
of Market Regulation, Commission, dated October 29, 1999
(``Amendment No. 1''). Amendment No. 1 changes the proposal to
require Floor Official approval for non-regular way trades
throughout the year, but not during the last calendar week of the
year, to \2/16\ point away from the regular way bid or offer from
\4/16\ point away. Initially, the proposed rule change would have
extended the existing requirement of NYSE Rule 64 for Floor Official
approval for end-of-the-year non-regular way trades to the entire
year. In other words, Floor Official approval would have been
required for non-regular way trades that were more than \4/16\ point
away from the regular way bid or offer throughout the year.
---------------------------------------------------------------------------
II. Description of Proposal
Currently, NYSE Rule 64 requires Floor Official approval for all
``non-regular way'' \5\ trades during all but the final calendar week
of the year. During the last calendar week of the year such approval is
required only for sales more than \4/16\ point away from the regular
way bid or offer. The Exchange proposes to amend the rule to eliminate
the requirement of Floor Official approval for certain non-regular way
trades that do not occur during the final calendar week of the year.
Under the proposed rule change, Floor Official approval would be
required only for those non-regular way trades that are more than \2/
16\ point away from the regular way bid or offer throughout the year,
but not during the final calendar week of the year.\6\ The proposal
does not change the existing requirement for Floor Official approval
for non-regular way trades that are more than \4/16\ point away from
the regular way bid or offer during the last calendar week of the
year.\7\ Under the proposed rule change, Floor Officials will still be
required to ``take into consideration whether the price of the
transaction is reasonable in relation to the `regular way' market''
when deciding whether to grant approval for a non-regular way trade.
---------------------------------------------------------------------------
\5\ A ``non-regular way'' trade is a trade that is settled in a
different time frame from ``regular-way'' trades, which settle on
the third business day following the transaction. See NYSE Rule
64(a)(3).
\6\ See note 4, above.
\7\ Id.
---------------------------------------------------------------------------
Exchange staff and analyzed price changes from the current bid or
offer for non-regular way trades during June 1998.\8\ The Exchange's
analysis showed that approximately 80% of non-regular way trades
occurred at \2/16\ point or less away from the regular way bid or
offer. The Exchange believes that the proposed rule change would
relieve members of the burden of obtaining Floor Official approval for
routine non-regular way trades at small price variations, while
preserving Floor Official supervision for those instances were it is
most needed.
---------------------------------------------------------------------------
\8\ See NYSE Analysis of Non-Regular Way Trades for June 1998.
---------------------------------------------------------------------------
III. Discussion
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)(5) of the Act.\9\
Section 6(b)(5) \10\ requires, among other things, that an exchange
have rules which are designed to promote just and equitable principles
of trade, to facilitate transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market,
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
---------------------------------------------------------------------------
The Commission believes that the proposed rule change should help
to alleviate the administrative burden for Floor Officials and members
with regard to non-regular way trades, which should in turn permit the
reallocation of valuable resources, and thereby increase operational
efficiency for Floor Officials and members. As mentioned above, the
Exchange's analysis of non-regular way trades indicates that this
proposal should substantially reduce the number of Floor Official
approvals required for such trades.\11\ The Commission believes that by
requiring Floor Official approval for non-regular way trades that are
more than \2/16\ point away from the regular way bid or offer
throughout the year, but not during the final calendar week of the
year, the proposal should facilitate transactions in securities and
help to remove impediments to and perfect the mechanism of a free and
open market. The Commission notes, however, that the approval of the
elimination of the requirement for Floor Official approval for non-
regular way trades with a \2/16\ point, or less, deviation from the
regular way bid or offer does not relieve brokers of their best
execution duty. The Commission further notes that Floor Officials, as
per NYSE guidelines, will still be required to consider whether the
price of the transaction is reasonable in relation to the regular way
market when deciding whether to grant approval for
[[Page 66957]]
a non-regular way trade when such approval is required.
---------------------------------------------------------------------------
\11\ See note 8, above.
---------------------------------------------------------------------------
The Commission finds good cause to approve Amendment No. 1 to the
proposed rule change prior to the thirtieth day after the date of
publication of notice of filing of the amendment in the Federal
Register. Specifically, Amendment No. 1 changes the proposal to require
Floor Official approval for non-regular way trades throughout the year,
but not during the last calendar week of the year, from \4/16\ point
away from the regular way bid or offer to \2/16\ point away. Initially,
the proposed rule change would have extended the existing requirement
of NYSE Rules 64 for Floor Official approval for end-of-the-year non-
regular way trades to the entire year. In other words, Floor Official
approval would have been required for non-regular way trades that were
more than \4/16\ point away from the regular way bid or offer
throughout the year. The Commission finds that reducing the deviation
from the regular way bid or offer that would require Floor official
approval for a non-regular way trade is consistent with Section 6(b)(5)
of the Act.\12\ The Exchange's analysis of non-regular way trades
indicated that approximately 97% of such trades occur at a \4/16\ point
or less deviation from the regular way market, while approximately 80%
of such trades occur at a \2/16\ point or less deviation from the
regular way market. Therefore, the Commission believes that Amendment
No. 1 helps to achieve the Exchange's goal of alleviating a substantial
administrative burden for Floor Officials and members while preserving
the investor protection provided by Floor Official review of non-
regular way trades that occur at \2/16\ point or more away from the
regular way market throughout the year, but not during the final
calendar week of the year. Accordingly, the Commission believes that
there is good cause, consistent with Sections 6(b)(5) and 19(b) of the
Act,\13\ to approve Amendment No. 1 to the proposal on an accelerated
basis.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78f(b)(5) and 78s(b).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning Amendments No. 1, including whether Amendment No.
1 is consistent with the Act. Persons making written submissions should
file six copies thereof with the Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW., Washington DC 20549-0609. 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 Room. Copies of such filing will also be available for
inspection and copying at the principal office of the NYSE. All
submissions should refer to File No. SR-NYSE-98-33 and should be
submitted by December 21, 1999.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-NYSE-98-33), as amended, is
approved.
\14\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deptuy Secretary.
[FR Doc. 99-30979 Filed 11-29-99; 8:45 am]
BILLING CODE 8010-01-M
