[Federal Register Volume 64, Number 82 (Thursday, April 29, 1999)]
[Notices]
[Pages 23142-23143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10761]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41315; File No. SR-NYSE-98-42]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to the Proposed Rule Change by the New York
Stock Exchange, Inc. To Amend MOC/LOC Order Entry and Cancellation
Procedures During a Regulatory Halt
April 20, 1999.
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 November 25, 1998, 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
Exchange. On March 19, 1999, the Exchange submitted Amendment No. 1 to
the proposed rule change.\3\ The Commission is publishing this notice
to solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Letter from Donald Siemer, Director, Market Surveillance,
NYSE to Richard Strasser, Assistant Director, Division of Market
Regulation (``Division''), SEC, dated March 15, 1999 (``Amendment
No. 1''). In Amendment No. 1, the Exchange provided information
regarding the Exchange's regulatory trading halt policy and
clarified that the Exchange does not seek to amend its regulatory
trading halt policy in this proposed rule change.
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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 amendments to the market-on-
close (``MOC'') and limit-on-close (``LOC'') procedures permitting
entry and cancellation of MOC/LOC orders after 3:40 p.m. when a
regulatory trading halt is in effect.
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 Exchange 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Cancellation of MOC/LOC Orders During a Regulatory Halt. Under
Exchange policy, a trading halt in an Exchange-listed stock may be put
into effect when the Exchange determines that a regulatory condition
exists in that stock.\4\ The purpose of a regulatory halt is to allow
the market the time to absorb and react to the news or market
conditions. Trading halts may also be instituted when non-regulatory
conditions exist.\5\
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\4\ A regulatory condition may exist if news is pending about
the stock or if time is needed for new dissemination about the
stock. When instituting a regulatory halt, the Exchange follows
procedures contained in the section on Trading Halt and Suspension
Procedures of the Consolidated Tape Association Plan, which was
filed with the Commission. See Securities Exchange Act Release No.
10787 (May 10, 1994), 39 FR 17799; and Securities Exchange Act
Release No. 16983 (July 16, 1980), 45 FR 49414 (July 24, 1980).
\5\ A non-regulatory condition may exist if a stock has an order
imbalance of significant size or when there are equipment problems
affecting the trading in a stock. See Securities Exchange Act
Release No. 38225 (January 31, 1997), 62 FR 5875 (February 7, 1997)
and Exchange Information Memo No. 97-23 (May 8, 1997).
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Current Exchange procedures \6\ utilized for MOC and LOC orders
prohibit Exchange members from
[[Page 23143]]
canceling MOCs and LOCs after 3:40 p.m., except in the case where the
member entering the order made a legitimate error or the member must
cancel the order to comply with the provisions of Exchange Rule
80A(c).\7\ Therefore, if a regulatory halt for a particular stock is in
effect at 3:40 p.m. or occurs after that time, market participants are
not permitted to cancel their MOC and LOC orders in that stock, even if
the stock reopens at a price substantially different from the last
sale.
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\6\ For a description of the Exchange's current procedures see
Securities Exchange Act Release No. 40094 (June 15, 1998), 63 FR
38230 (July 15, 1998) and Exchange Information Memo No. 98-20 (June
22, 1998).
\7\ For example, Exchange Rule 80A(c) requires index arbitrage
orders in any stock in the Standard & Poor's 500 Stock Price Index
entered on the Exchange to be stabilizing (i.e., the order must be
marked either buy minus or sell plus) when the Dow Jones Industrial
Average advances or declines by the 2% point level determined by the
Exchange each quarter. See Securities Exchange Act Release No. 41041
(February 11, 1999), 64 FR 8424 (February 19, 1999). When Rule
80A(c) goes into effect, a MOC index arbitrage order without the
appropriate tick restriction must be canceled unless it is related
to an expiring derivative index product.
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The Exchange is proposing that when a regulatory halt is in effect
at 3:40 p.m. or occurs after that time, members may cancel MOC and LOC
orders until 3:50 p.m. or until the stock reopens, whichever occurs
first. The Exchange is not proposing any changes in the case of a non-
regulatory halt with respect to this position.
The Exchange believes that this exception to the no-cancellation
policy for MOC/LOC orders is appropriate because of the need of market
participants to be able to respond to information that was not
available before 3:40 p.m. Furthermore, by limiting the period of time
for canceling MOC and LOC orders to 3:50 p.m. at the latest,
specialists will have sufficient time to arrange an orderly close.
Entry of MOC/LOC Orders During a Regulatory Halt. Current Exchange
procedures prohibit members from entering MOC and LOC orders after 3:40
p.m. except to offset a published imbalance. If any type of halt is in
effect at 3:40 p.m., no imbalance of MOC or LOC orders would be
published,\8\ and, therefore, no MOC or LOC orders could be entered
after 3:40 p.m. If a regulatory halt occurs after an imbalance has been
published at 3:40 p.m., market conditions may differ substantially from
those that existed at the time of the imbalance publication.
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\8\ A specialist is required to publish tape indications to
reopen a stock after a trading halt. The Exchange's policy on tape
indications requires a minimum of ten minutes to elapse between the
first indication and the reopening of a stock and a minimum of five
minutes to elapse between the last indication and the reopening of a
stock, provided that a minimum of ten minutes has elapsed since the
first indication. See Securities Exchange Act Release No. 38225
(January 31, 1997), 62 FR 5875 (February 7, 1997) and Exchange
Information Memo No. 97-23 (May 8, 1997).
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Therefore, the Exchange is proposing that if a regulatory halt is
in effect at 3:40 p.m. or occurs after that time, members may enter MOC
and LOC orders on either side of the market until 3:50 p.m. or until
the stock reopens, whichever occurs first. If an order imbalance is
published following a regulatory halt, MOC and LOC order entry would be
permitted only to offset the published imbalance.
Order Imbalance Publication After Any Trading Halt. Finally, under
current Exchange policy, if a stock reopens at or before 3:50 p.m.
following any type of halt, the specialist in that stock will publish
an imbalance of 50,000 shares or more (or less than 50,000 shares with
the approval of a Floor Official) as soon as practicable after 3:50
p.m. The Exchange is proposing that if the stock opens after 3:50 p.m.,
the specialist must publish an imbalance of 50,000 shares or more (or
less than 50,000 shares with the approval of a Floor Official), if
practicable.\9\ If a halt occurs after 3:50 p.m., the stock will not
reopen on that day and MOC and LOC orders will not be executed.
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\9\ The decision of whether an imbalance shall be published for
a stock opening after 3:50 p.m. will be made by an Exchange Floor
Director or other Exchange Floor Official. Telephone call between
Betsy Lampert Minkin, Senior Project Specialist, NYSE and Kelly
McCormick, Attorney, Division, SEC, on January 13, 1999.
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The Exchange intends to issue an Information Memo to inform its
members of the revised MOC/LOC proceures.
2. Statutory Basis
The Exchange believes the basis under the Act for the proposed rule
change is the requirement under Section 6(b)(5) \10\ that the rules of
an Exchange be 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.
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\10\ 15 U.S.C. 78f(b)(5).
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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 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 is 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-
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 in 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-98-42 and should
be submitted by May 20, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-10761 Filed 4-28-99; 8:45 am]
BILLING CODE 8010-0-M
