96-7703. Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by the New York Stock Exchange, Inc. Relating to an Amendment of NYSE  

  • [Federal Register Volume 61, Number 62 (Friday, March 29, 1996)]
    [Notices]
    [Pages 14185-14187]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 96-7703]
    
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    [Release No. 34-37016; International Series Release No. 956; File No. 
    SR-NYSE-96-04]
    
    
    Self-Regulatory Organizations; Notice of Filing and Order 
    Granting Accelerated Approval of a Proposed Rule Change by the New York 
    Stock Exchange, Inc. Relating to an Amendment of NYSE
    
    March 22, 1996.
        Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act''),\1\ notice is hereby given that on March 11, 1996, 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 and II below, which Items have been 
    prepared by the NYSE. The Commission is approving the proposal on an 
    accelerated basis, in addition to publishing this notice to solicit 
    comments on the proposed rule change from interested persons.
    
        \1\ 15 U.S.C. 78s(b)(1) (1988).
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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 an amendment to NYSE Rule 104 
    to facilitate trading in Investment Company Units (``Units''),\2\ 
    including CountryBaskets.\3\
    
        \2\ NYSE Listed Company Manual Section 703.16 defines a Unit as 
    a security that represents an interest in a registered investment 
    company that could be organized as a unit investment trust, an open-
    end management investment company, or a similar entity.
        \3\ ``CountryBasket,'' ``CountryBaskets'' and ``CB'' are 
    trademarks of Deutsche Bank Securities Corporation).
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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 specificed in Item IV below. The self-regualtory 
    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
    
        The Exchange proposes to amend its Rule 104 to facilitate 
    specialist market
    
    [[Page 14186]]
    making in Units, including CountryBaskets. Trading in CountryBaskets is 
    expected to begin on March 25, 1996.\4\
    
        \4\ CountryBasket securities represent an interest in a 
    registered investment company that will hold securities that are 
    component stocks of nine different indices. The nine CountryBaskets 
    are Australia, France, Germany, Hong Kong, Italy, Japan, South 
    Africa, the United Kingdom and the United States.
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        Currently, Rule 104 requires that specialists obtain the approval 
    of an Exchange Floor Official when effecting a destabilizing 
    transaction on a direct plus or direct minus tick. The Exchange 
    proposes to amend Rule 104 by adding new Supplementary Material .10(7) 
    to provide that the requirement to obtain Floor Official approval for 
    transactions on a direct plus tick or a direct minus tick for a 
    specialist's own account contained in Rule 104 Supplementary Material 
    .10(5)(i)(A), (B), (C) and (6)(i)(A) will not apply to transactions 
    that are effected for the purpose of bringing the price of a Unit into 
    parity with the value of the portfolio on which it is based, or the net 
    asset value of the Unit.
        Direct destabilizing transactions that are leading, rather than 
    following, the underlying component portfolio would continue to require 
    Floor Official approval. Specialists would remain subject to all other 
    requirements of Rule 104 with respect to their affirmative and negative 
    obligations to maintain a fair and orderly market.
        The Exchange believes that its proposal is consistent with the Act 
    in that it 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 a national market system and, in general, to protect 
    investors and the public interest.
        The NYSE has requested that the proposed rule change be given 
    accelerated effectiveness pursuant to Section 19(b)(2) of the Act 
    because trading in CountryBaskets is expected to begin on March 25, 
    1996. The Exchange believes that approval of the proposal should 
    enhance the ability of specialists to make markets in such securities.
    
    (B) Self-Regulatory Organization's Statement on Burdeon 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
    
        Written comments on the proposed rule change were neither solicited 
    or received.
    
    III. Findings and Conclusions
    
        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, the requirements of Section 6(b)(5) \5\ that the rules of 
    an exchange be designed to promote just and equitable principles of 
    trade, prevent fraudulent and manipulative acts, and, in general, 
    protect investors and the public interest.
    
        \5\ 15 U.S.C. 78f(b)(5) (1988).
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        The Commission believes that the Exchange's proposal to add 
    Supplemental Material .10(7) to its Rule 104 to facilitate specialist 
    market making in Units, including CountryBaskets, is consistent with 
    the Act. The Exchange's proposal is limited to ``parity'' transactions 
    on direct destabilizing ticks to bring Units, including CountryBaskets, 
    into line with the value of their corresponding underlying component 
    portfolio. Moreover, the only change being effected by the proposals is 
    that such transactions would not require the Floor Official approval 
    currently mandated by Rule 104. As discussed below, such transactions 
    must still comply with all of the other requirements of NYSE Rule 104.
        The Commission believes that it is appropriate to allow such 
    transactions without Floor Official approval, given that the 
    derivatives nature of Units in effect renders them equity securities 
    that have a pricing and trading relationship linked to the portfolio 
    upon which they are based. Hence, upon change in the underlying 
    portfolio, a Units specialist may determine that it needs to engage in 
    a ``parity'' transactions to bring Units into line with the value of 
    the corresponding underlying portfolio. The requirement to secure Floor 
    Official approval could delay the specialist from effecting such 
    transactions, during which time the value of the portfolio could 
    continue to move. The Commission believes, therefore, that it is 
    reasonable for the Exchange to remove the need for Floor Official 
    approval to address this situation. Direct destabilizing transactions 
    that are leading, rather than following,the underlying portfolio would 
    continue to require Floor Official approval.
        The Commission notes that the Exchange's proposal does not relieve 
    Units specialists from the general requirement of NYSE Rule 104 that 
    they effect transactions that are reasonably necessary for them to 
    maintain a fair and orderly market in Units. Units specialists also 
    will remain subject to the specific obligations imp;imposed on them by 
    rule 104. Thus, consistent wit the maintenance of a fair and orderly 
    market, transactions for a specialists own account should be such that 
    they maintain rice continuity with reasonable depth,and minimize the 
    effects of temporary disparities between supply and demand.\6\ 
    Similarly, a specialist's quotation made for transactions on his own 
    account should bear a proper relation to preceding transactions and 
    anticipated succeeding transactions.\7\ Finally, Unit specialist 
    transactions will be subject to the Exchange's rules governing the 
    auction market principles of priority. Parity, and precedence of 
    orders.\8\
    
        \6\ NYSE Rule 104, Supplementary material .10 (1)-(3).
        \7\ NYSE Rule 104, Supplementary Material .10(4).
        \8\ NYSE Rule 72.
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        The Commission finds good cause for approving the proposed rule 
    change prior to the thirtieth day after the date of publication of 
    notice thereof in the Federal Register. As discussed above, the 
    Exchange's proposal is narrowly circumscribed to address certain 
    situations that may arise in connection with specialist market making 
    in Units, specifically CountryBaskets. Moreover, accelerated approval 
    will allow specialists to avail themselves of the proposed provision 
    from the inception of trading, expected to be March 25, 1996. 
    Accordingly, the Commission believes that it is consistent with Section 
    6(b)(5) and 19(b)(2) of the Act to approve the proposed rule change on 
    an accelerated basis.
    
    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
    
    [[Page 14187]]
    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 in the Commission's Public 
    Reference Section, 450 Fifth Street, N.W., Washington, D.C. Copies of 
    such filing will also be available for inspection and copying at the 
    principal office of the above-mentioned self-regulatory organization. 
    All submissions should refer to File No. SR-NYSE-96-04 and should be 
    submitted by April 19, 1996.
    
    V. Conclusion
    
        It is therefore ordered, pursuant to Section 19(b)(2) of the 
    Act,\9\ that the proposed rule change (SR-NYSE-96-04) is approved.
    
        \9\ 15 U.S.C.78s(b)(2) (1988).
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        For the Commission, by the Division of Market Regulation, 
    pursuant to delegated authority.\10\
    
        \10\ 17 CFR 200.30-3(a)(12) (1993).
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    Jonathan G. Katz,
    Secretary.
    [FR Doc. 96-7703 Filed 3-28-96; 8:45 am]
    BILLING CODE 8010-01-M
    
    

Document Information

Published:
03/29/1996
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
96-7703
Pages:
14185-14187 (3 pages)
Docket Numbers:
Release No. 34-37016, International Series Release No. 956, File No. SR-NYSE-96-04
PDF File:
96-7703.pdf