[Federal Register Volume 63, Number 233 (Friday, December 4, 1998)]
[Notices]
[Pages 67160-67161]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32323]
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SECURITIES AND EXCHANGE COMMISSION
[(Release No. 34-40711; File No. SR-NYSE-98-34)]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. To Amend Rule 104.10 By
Deleting the Odd-Lot Exception
November 25, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 16, 1998, the New York Stock Exchange, Inc. (``NYSE'') 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 NYSE. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange is proposing to amend NYSE Rule 104.10(6)(i) by
eliminating paragraph (C), which provides an exception to the Floor
Official approval requirement for specialist purchases and sales on
destabilizing ticks to offset positions acquired by the specialist in
executing odd-lot orders on the same day.
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 NYSE 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 NYSE 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
NYSE Rule 104 governs specialists' dealings in their specialty
stocks. In particular, NYSE Rule 104.10(6) describes the manner in
which a specialist may liquidate or increase his
[[Page 67161]]
or her position in a specialty stock. In general, the rule requires
such transactions to be effected ``in a reasonable and orderly manner''
in relation to the overall market. The rule also requires the market in
the particular stock and the adequacy of the specialist's position to
meet the reasonably anticipated needs of the market. NYSE Rule
104.10(6)(i)(A) provides that a specialist may liquidate a position by
selling stock on a direct minus tick or by purchasing stock on a direct
plus tick (destabilizing ticks), only if the transaction is reasonably
necessary in relation to the specialist's overall position in the stock
and if Floor Official approval is obtained. Floor Official approval
provides an independent review of these destabilizing transactions for
compatibility with the reasonableness test.
NYSE Rule 104.10(6)(i)(C) provides an exception to the Floor
Official approval requirement for specialist purchases and sales on
destabilizing ticks to offset position acquired by the specialist in
executing odd-lot orders on the same day. Odd-lot orders are executed
throughout the day in the odd-lot system against the specialist in that
stock. Periodically, the specialist receives an automated notification
of the net amount of odd lots that have been executed against his or
her position. The specialist can then offset these odd-lot transactions
by buying or selling for his or her own account.
The basis for the exception was that these odd-lot offsets would
not have an impact on the market as a whole. However, there has been a
marked increase in the volume of odd-lot transactions in the last
several years \3\ and, as a result, an increase in specialist offset
transactions. The Exchange believes that odd-lot offsets should be
treated as other liquidating transactions and be netted with round lot
transactions. All destabilizing transactions would require Floor
Official approval pursuant to Exchange Rules.\4\ Therefore, the
Exchange is proposing to delete the exception for odd-lots in paragraph
(C).
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\3\ Odd-lot volume exceeded 1 billion shares on the NYSE in
1997, an 87% increase from 1994. Telephone conversation between
Agnes Gautier, Vice President, Market Surveillance, NYSE, and Robert
B. Long, Attorney, Division of Market Regulation, Commission, on
October 23, 1998.
\4\ See Letter from Agnes Gautier, Vice President, Market
Surveillance, NYSE, to Richard Strasser, Assistant Director,
Division of Market Regulation, Commission, dated November 20, 1998.
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2. Statutory Basis
The NYSE believes that the proposed rule change is consistent with
Section 6(b)(5) of the Act \5\ in that the proposed rule change is
designed to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The NYSE does not believe that the proposed rule change will impose
any inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal 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. 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-98-34 and should be
submitted by December 28, 1998.
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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-32323 Filed 12-3-98; 8:45 am]
BILLING CODE 8010-01-M
