[Federal Register Volume 59, Number 26 (Tuesday, February 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-2770]
[[Page Unknown]]
[Federal Register: February 8, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33564; File No. SR-NYSE-93-27]
Self-Regulatory Organizations; Filing of Proposed Rule Change by
the New York Stock Exchange, Inc. Relating to the Addition of Rules
72(b) and 410A to the ``List of Exchange Rule Violations and Fines
Applicable Thereto Pursuant to Rule 476A'' and Amending Minor Rule
Violation Enforcement and Reporting Plan
February 1, 1994.
Pursuant to Sections 19 (b)(1) and (d)(1) of the Securities
Exchange Act of 1934 (``Act'')\1\ and Rules 19b-4 and 19d-1(c)(2)
thereunder\2\ notice is hereby given that on May 27, 1993, 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 (``SRO''). On June 9,
1993, the NYSE submitted to the Commission Amendment No. 1 to the
proposed rule change.\3\ On January 3, 1994, the Commission received
from the NYSE Amendment No. 2 to the proposed rule change.\4\ 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) and (d)(1) (1988).
\2\17 CFR 240.19b-4 and 19d-1(c)(2) (1991).
\3\See letter from Donald Siemer, Director, Market Surveillance,
NYSE, to Diana Luka-Hopson, Branch Chief, Commission, submitted on
June 9, 1993 by which the NYSE made corrections to its current Rule
476A Violations List.
\4\See letter from Robert J. McSweeney, Senior Vice President,
Market Surveillance, to Sandra Sciole, Special Counsel, Commission,
dated December 23, 1993. Amendment No. 2 withdrew Rule 401 from the
list of proposed additions to the Rule 476A list of minor rule
violations and limited the violations of Rule 72(b) that would be
eligible to be fined under Rule 476A to instances of proprietary
participation with the cross.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
This proposal would revise the Rule 476A Violations List for
imposition of fines for minor violations of rules and/or policies by
adding to the list violations of Exchange Rule 410A and the provision
in Rule 72(b) which prohibits proprietary participation in a cross
transaction.\5\ The Exchange proposes to adopt the following
amendment:\6\
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\5\The NYSE also has requested approval, under Rule 19d-1(c)(2),
17 CFR 240.19d-1(c)(2), to amend its Rule 19d-1 Minor Rule Violation
Enforcement and Reporting Plan (``Plan'') to include Rules 72(b),
401 and 410A. See letter from James E. Buck, Senior Vice President
and Secretary, NYSE, to Sharon Lawson, Assistant Director, Exchange
and Options Regulation, Division of Market Regulation, Commission,
dated May 26, 1993. Subsequent to this request, the Exchange amended
the proposal to withdraw Rule 401 from the list of minor rule
violations and to add violations of Rule 72(b) involving instances
of proprietary participation with the cross to the list of minor
rules. See Amendment No. 2, supra note 4.
\6\With respect to the following amendment, italicizing
indicates new material and brackets indicate material to be deleted.
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List of Exchange Rule Violations and Fines Applicable Thereto
Pursuant to Rule 476A
Rule 72(b) requirements for ``clean'' agency crosses which
cannot be broken up at the cross price\7\
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\7\As noted above, the minor rule list would include only the
section of Rule 72(b) which prohibits instances of proprietary
participation with the cross transaction. See Amendment No. 2,
supra, note 4.
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Rule 410A requirements for automated submission of trading
data
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
Rule 476A\8\ provides that the Exchange may impose a fine, not to
exceed $5,000, or 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
Exchange rules.\9\
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\8\Rule 476A was approved by the Commission on January 25, 1985.
See Securities Exchange Act Release No. 21688 (January 25, 1985), 50
FR 5025 (February 5, 1985). Subsequent additions of rules to the
Rule 476A Violations List were made in: Securities Exchange Act
Release No. 22037 (May 14, 1985); 50 FR 12213 (May 21, 1985);
Securities Exchange Act Release No. 22496 (October 2, 1985), 50 FR
41084 (October 8, 1985); Securities Exchange Act Release No. 23104
(April 11, 1986), 51 FR 13307 (April 18, 1986); Securities Exchange
Act Release No. 24985 (October 22, 1987), 52 FR 23820 (October 29,
1987); Securities Exchange Act Release No. 25763 (May 27, 1988), 54
FR 20925 (June 7, 1988); Securities Exchange Act Release No. 27878
(April 4, 1990), 55 FR 13345 (April 10, 1990); Securities Exchange
Act Release No. 28003 (May 9, 1990), 55 FR 20004 (May 14, 1990),
Securities Exchange Act Release No. 28505 (October 2, 1990), 55 FR
41288 (October 10, 1990); Securities Exchange Act Release No. 28995
(March 28, 1991), 56 FR 12967 (March 28, 1991); Securities Exchange
Act Release No. 30280 (January 22, 1992), 57 FR 34522 (January 29,
1992); Securities Exchange Act Release No. 30536 (March 31, 1992),
57 FR 12357 (April 9, 1992); and Securities Exchange Act Release No.
32421 (June 7, 1993), 58 FR 32973 (June 14, 1993).
\9\See Securities Exchange Act Release No. 21013 (June 1, 1984),
49 FR 23838 (June 8, 1984). Pursuant to paragraph (c)(1) of Rule
19d-1, an SRO is required to file promptly with the Commission
notice of any ``final'' disciplinary action taken by the SRO.
Pursuant to paragraph (c)(2) of Rule 19d-1, any disciplinary action
taken by an SRO for a violation of an SRO rule that has been
designated a minor rule violation pursuant to the Plan shall not be
considered ``final'' for purposes of Section 19(d)(1) of the Act if
the sanction imposed consists of a fine not exceeding $2,500 and the
sanctioned person has not sought an adjudication, including a
hearing, or otherwise exhausted his or her administrative remedies.
By deeming unadjudicated minor violations as not final, the
Commission permits the SRO to report violations on a periodic, as
opposed to immediate, basis.
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The purpose of Rule 476A procedure is to provide for a response to
a rule violation when a meaningful sanction is appropriate but when
initiation of a disciplinary proceeding under Rule 476 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.\10\ 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 list of rules
which are eligible for 476A procedures specifies those rule violations
which may be the subject of fines under the rule and also includes a
schedule of fines.
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\10\NYSE Rule 476 sets forth procedures for disciplinary
proceedings involving charges against members, member organizations,
allied members, approved persons or employees.
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In SR-NYSE-84-27, which initially set forth the provisions and
procedures of 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 Rule 476A as experience with it was
gained.\11\
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\11\See Securities Exchange Act Release No. 21688, supra note 8.
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The Exchange is presently seeking approval to add the following
Exchange Rules to the List of Rules subject to possible imposition of
fines under Rule 476A procedures:
Rule 72(b) which establishes conditions under which
``clean'' agency crosses of 25,000 shares or more cannot be broken
at the cross price;\12\
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\12\As amended, the minor rule list would include only the
section of Rule 72(b) which prohibits instances of proprietary
participation with cross transaction. See supra notes 4 and 7. NYSE
Rule 72(b) states that when a member has an order to buy and an
order to sell an equivalent amount of the same security, and both
orders are of 25,000 shares or more and are for the accounts of
persons who are not members or member organizations, the member may
``cross'' those orders at a price at or within the prevailing
quotation. The member's bid or offer shall be entitled to priority
at such cross price, irrespective of pre-existing bids or offers at
that price. The member shall follow the crossing procedures of Rule
76, and another member may trade with either the bid or offer side
of the cross transaction only to provide a price which is better
than the cross price as to all or part of such bid or offer. A
member who is providing a better price to one side of the cross
transaction must trade with all other market interest having
priority at that price before trading with any part of the cross
transaction. No member may break up the proposed cross transaction,
in whole or in part, at the cross price.
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Rule 410A which requires members and member
organizations to submit certain information concerning transactions
in an automated format as requested by the Exchange;\13\
\13\See NYSE Rule 410A for the list of trade data elements
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required to be submitted to the NYSE under this Rule.
The purpose for the proposed change to Rule 476A is to facilitate
the Exchange's ability to induce compliance with all aspects of the
above-named Rules.
The Exchange believes failure to comply with the requirements of
these Rules should be addressed with an appropriate sanction and seeks
Commission approval to add violations of these requirements to the Rule
476A List.
(b) Statutory Basis
The proposed rule change will advance the objectives of Section
6(b) (6) of the Act 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 proposed rule
change 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 Exchange 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
Within 35 days of the publication of this notice in the Federal
Register or within such other 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. 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 communication 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, 450 Fifth Street, NW., Washington,
DC 20549. Copies of the 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-93-27 and should be submitted by March 1,
1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-2770 Filed 2-7-94; 8:45 am]
BILLING CODE 8010-01-M
