[Federal Register Volume 63, Number 58 (Thursday, March 26, 1998)]
[Notices]
[Pages 14747-14750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7920]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39770; File No. SR-NYSE-97-36]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to Revisions to
Exchange Policy for Entry of MOC/LOC Orders and Publication of
Imbalances
March 18, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 29, 1997, 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 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. Sec. 78s(b)(1)
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[[Page 14748]]
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change consists of changes to the Exchange's
policy for entry of market-on-close (``MOC'') and limit-at-the-close
(``LOC'') orders and publication of imbalances, for both expiration and
non-expiration days.\2\
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\2\ On March 18, 1998, at the Commission staff's request, the
NYSE amended the filing by submitting a chart which clarifies the
proposed procedures and contains the authority and sources for the
NYSE's proposed policy change for entry of MOC and LOC orders and
for the publication of imbalances, for both expiration and non-
expiration days. See Letter from Donald Siemer, Director, Market
Surveillance, NYSE, to Richard Strasser, Assistant Director,
Division of Market Regulation, Commission, dated march 13, 1998
(``Amendment No. 1''). The chart is provided in Exhibit A, below.
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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 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
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
Special procedures regarding the entry of MOC and LOC orders have
been in effect for more than ten years. These procedures are designed
to alleviate excess volatility at the close by providing MOC imbalance
information to market participants in a timely manner in order to
attract contra-side interest. The procedures have been refined over the
years based on the Exchange's experience and input from constituents.
The Exchange is now proposing additional refinements to the procedures
in order to enhance their usefulness.
The current procedures require the MOC and LOC orders in any stock
be entered by 3:40 p.m. on expiration days, and by 3:50 p.m. on non-
expiration days. No cancellation or reduction of any MOC or LOC order
in any stock may take place after 3:40 p.m. on expiration days or 3:50
p.m. on non-expiration days, (except in a case of legitimate error or
to comply with the provisions of Exchange Rule 80A). In addition, Floor
brokers representing any MOC orders must indicate their MOC interest to
the specialist by 3:40 p.m. or 3:50 p.m., for expiration and non-
expiration days, respectively.
For the selected stocks identified by the Exchange (formerly known
as ``pilot stocks'') and published in its ``special stock list,'' a
single publication of imbalances of 50,000 shares or more is required
to be made as soon as practicable after 3:40 p.m. on expiration days or
3:50 p.m. on non-expiration days. On expiration days, stocks on the
special stock list that do not have an imbalance of 50,000 shares or
more at 3:40 p.m. must publish a ``no imbalance'' status. Imbalances of
50,000 shares or more must also be published for stocks going into or
out of an index. For any other stock, an imbalance of 50,000 shares or
more may be published at the request of the specialist, with Floor
Official approval. After the 3:40 p.m. or 3:50 p.m. imbalance
publication, MOC and LOC orders may be entered only to offset a
published imbalance. No MOC or LOC orders may be entered if there is no
imbalance publication. On expiration days, the entry of MOC or LOC
orders after 3:40 p.m. to establish or liquidate positions related to a
strategy involving derivative instruments is not permitted, even if
such orders might offset published imbalances.
In July of 1997, the NYSE's Market Performance Committee appointed
a subcommittee to review MOC procedures. The subcommittee made several
recommendations to increase the effectiveness of the procedures. These
changes, which the Exchange is proposing to implement, are:
3:40 p.m. deadline for entry of MOC and LOC orders and
indication of MOC interest to specialists by Floor brokers representing
any MOC orders, every day. This earlier deadline on non-expiration days
would provide additional time to attract contra-side interest.
Integration of marketable LOC orders in the imbalance
publication. Currently, imbalance publications indicate MOC interest
but not LOC interest. See Amendment No. 1. The Exchange is proposing to
include both MOC and marketable LOC orders in the imbalance
publication. The determination of whether an LOC order is
``marketable'' would be based upon the last sale price at 3:40 or 3:50
p.m. This means that LOC orders to buy at a higher price would be
included with the buy MOC orders; LOC orders to sell at a lower price
would be included with the sell MOC orders. LOC orders with a limit
equal to the last sale price would not be included in the imbalance
calculation. This would provide a more complete picture to market
participants of the potential size of the imbalance at the close.
The Exchange is also proposing mandatory publication of
all MOC/LOC imbalances of 50,000 shares or more in all stocks on any
trading day as soon as practicable after 3:40 p.m. As discussed above
and in Amendment No. 1, currently, the Exchange requires mandatory
publication of imbalances of 50,000 shares or more only in stocks on
special stock lists (formerly ``pilot stocks'') and stocks being added
to or dropped from an index on expiration days as soon as practicable
after 3:40 p.m. (or 3:50 p.m. for non-expiration days). Publication of
an imbalance of less than 50,000 shares may be made at that time with
the approval of a Floor Official. This proposed new provision would
permit but not require the publication of an imbalance which, although
less than 50,000 shares, may be significantly greater than average
daily volume in a stock. This would enhance information available to
market participants concerning stocks with significant imbalances.
The Exchange also proposed a new procedure to permit non-
mandatory publication of MOC/LOC imbalances of any size between 3:00
and 3:40 p.m., with Floor Official approval; these publications would
be informational only, with no effect on MOC/LOC order entry. Imbalance
information would be required to be updated at 3:40 p.m. for all stocks
on all days, regardless of size, in order to provide timely imbalance
information to market participants.
An additional imbalance publication on both expiration and
non-expiration days, must be made at 3:50 p.m. for any stock that had
an imbalance publication at 3:40 p.m.\3\ If the imbalance at 3:50 p.m.
is less than 50,000 shares, a ``no imbalance'' status must be
published, except that an imbalance of less than 50,000 shares may be
published with Floor Official approval, provided there had been an
imbalance publication at 3:40 p.m. If there were no imbalance
publication at 3:40 p.m., there would not be a publication at 3:50
p.m., since MOC and LOC orders could not be entered during the interim
to change the imbalance. If the 3:50 p.m. imbalance publication
reversed the first imbalance publication, only MOC and LOC orders which
offset the 3:50 p.m. imbalance would be permitted to be entered
thereafter. This would present market participants with
[[Page 14749]]
a more timely and more accurate picture of imbalances before the close.
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\3\ Currently, the Exchange requires only a single imbalance
publication at 3:40 p.m. on expiration days and at 3:50 p.m. on non-
expiration days. See Amendment No. 1.
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MOC/LOC order entry is precluded after 3:40 p.m. in all
stocks on all days, unless an imbalance is published, in which case
entry of MOC/LOC orders would be permitted only on the contra side of
the published imbalance.
The Exchange believes that these revisions would provide more
timely and more complete information to market participants concerning
MOC/LOC order imbalances and improve the effectiveness of the
procedures.
2. Statutory Basis
The basis under the Act for this proposed 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. The proposed changes to MOC/LOC procedures are
designed to respond to constituent advice that more timely and more
complete information with respect to MOC/LOC imbalances would improve
the Exchange's closing procedures.
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
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Within 35 days of the date of 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 proposed rule
change to consistent with the Act. 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 in
the Commission's Public Reference Room in 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 NYSE. All
submissions should refer to File No. SR-NYSE-97-36 and should be
submitted by April 16, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
Exhibit A.--MOC and LOC Changes Proposed in File No. SR-NYSE-97-36
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Proposed policy Current policy Sources for current policy
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3:40 p.m. deadline for 3:40 p.m. deadline for Expiration day MOC
entry of MOC and LOC orders on entry of MOC and LOC orders on procedures permanent approval (File
expiration days and non-expiration expiration days. No. SR-NYSE-96-31, Release No. 34-
days. 37894, October 30, 1996);
Information Memo No. 96-34,
November 8, 1996.
LOC order entry procedures
pilot approval (File No. SR-NYSE-97-
21, Release No. 34-37969, November
20, 1996 and File No. SR-NYSE-97-
19, Release No. 34-38865, July 23,
1997); Information Member No. 97-
25, May 13, 1997.
Same as above.............. 3:50 p.m. deadline for Non-expiration day MOC
entry of MOC and LOC orders on non- procedures permanent approval (File
expiration days. No. SR-NYSE-94-44, Release No. 34-
35589, April 10, 1995); Information
Memo No. 95-21, May 12, 1995.
LOC order entry procedures
pilot approval (File No. SR-NYSE-96-
21, Release No. 34-37969, November
20, 1996 and File No. SR-NYSE-97-
19, Release 34-38865, July 23,
1997); Information Memo No. 97-25,
May 13, 1997.
Integration of marketable Imbalance publication Expiration day MOC
LOC orders in the imbalance indicates MOC interest only. procedures permanent approval (File
publication, (i.e., include both No. SR-NYSE-96-31, Release No. 34-
MOC and marketable LOC orders in 37894, October 30, 1996);
imbalance publication). Information Memo No. 96-34,
November 8, 1996.
[[Page 14750]]
Mandatory publication of Mandatory publication of Expiration day of MOC
all MOC/LOC imbalances of 50,000 MOC imbalances of 50,000 shares or procedures permanent approval (File
shares or more in all stocks on any more in stocks on special stocks No. SR-NYSE-96-31, Release No. 34-
trading day (i.e., expiration and lists (formerly known as pilot 37894, October 30, 1996);
non-expiration days) as soon as stocks) and stocks being added to Information Memo No. 96-34,
practicable after 3:40 p.m. or dropped from an index, on November 8, 1996.
expiration days as soon as
practicable after 3:40 p.m.
Same as above.............. Mandatory publication of Non-expiration day MOC
MOC imbalances of 50,000 shares or procedures permanent approval (File
more in stocks on special stock No. SR-NYSE-94-44, Release No. 34-
lists (formerly--known as pilot 35589, April 10, 1995); Information
stocks) and stocks being added to Memo No. 95-21, May 12, 1995.
or dropped from an index, on non-
expiration days as soon as
practicable after 3:50 p.m.
Non-mandatory publication New. ....................................
of MOC/LOC imbalances of less than
50,000 shares at 3:40 p.m. with
Floor Official approval.
Non-mandatory publication New. ....................................
of MOC/LOC imbalances of any size
between 3:00 and 3:40 p.m., with
Floor Official approval. These
would be informational only with no
effect on MOC/LOC order entry.
Imbalance information would be
required to be updated at 3:40
p.m., regardless of size.
Additional imbalance Single imbalance Expiration day MOC procedures
publication on both expiration and publication at 3:40 p.m., on permanent approval (File No. SR-
non-expiration days, at 3:50 p.m. expiration days and at 3.50 p.m. on NYSE-96-31, Release No. 34-37894,
for any stock which had an non-expiration days. October 30, 1996); Information Memo
imbalance publication at 3:40 p.m. No. 96-34, November 8, 1996.
Non-expiration day MOC
procedures permanent approval (File
No. SR-NYSE-94-44, Release No. 34-
35589, April 10, 1995); Information
Memo No. 95-21, May 12, 1995.
After 3:40 and 3:50 p.m. After imbalance Expiration day MOC procedures
imbalance publications on any publications at 3:40 p.m. on permanent approval (File No. SR-
trading day, MOC/LOC orders may be expiration days and 3:50 p.m. on NYSE-96-31, Release No. 34-37894,
entered only to offset a published non-expiration days, MOC/LOC orders October 30, 1996); Information Memo
imbalance. may be entered only to offset a No. 96-34, November 8, 1996.
published imbalance.
Non-expiration day MOC
procedures permanent approval (File
No. SR-NYSE-94-44, Release No. 34-
35589, April 10, 1995); Information
Memo No. 95-21, May 12, 1995.
LOC order entry procedures
pilot approval (File No. SR-NYSE-96-
21, Release No. 34-37969, November
20, 1996 and File No. SR-NYSE-97-
19, Release No. 34-38865, July 23,
1997); Information Memo No. 97-25,
May 13, 1997.
If the imbalance at 3:50 New. ....................................
p.m. is less than 50,000 shares,
either (1) a ``no imbalance''
status must be published; or (2)
Floor Official approval must be
sought to publish an imbalance of
less than 50,000 shares.
If there were no imbalance
publication at 3:40 p.m., there
would not be a publication at 3:50
p.m..
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[FR Doc. 98-7920 Filed 3-25-98; 8:45 am]
BILLING CODE 8010-01-M
