[Federal Register Volume 59, Number 66 (Wednesday, April 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8163]
[[Page Unknown]]
[Federal Register: April 6, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33834; File No. SR-NYSE-94-05]
Self-Regulatory Organizations; Filing of Proposed Rule Change by
New York Stock Exchange, Inc. Relating to Additions to the ``List of
Exchange Rule Violations and Fines Applicable Thereto Pursuant to Rule
476A''
March 30, 1994.
Pursuant to sections 19 (b)(1) and (d)(1) of the Securities
Exchange Act of 1934 (``Act''), 15 U.S.C. 78s (b)(1) and (d)(1), notice
is hereby given that on March 2, 1994, the New York Stock Exchange,
Inc. (``NYSE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') the proposed rule change as
described in Items I, II and III below, which Items have been prepared
by the self-regulatory organization. On March 21, 1994, the NYSE
submitted to the Commission Amendment No. 1 to the proposed rule change
in order to clarify certain aspects of the original filing.\1\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\See letter from Donald Siemer, Director, Market Surveillance
Division, NYSE, to Beth Stekler, Attorney, Division of Market
Regulation, SEC, dated March 16, 1994 (``Amendment No. 1'')
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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 Exchange policy regarding a two-week probationary
period for execution of orders by new members on the Exchange trading
floor.\2\ As part of the proposed rule change, the NYSE is also seeking
approval of the policy itself.\3\
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\2\The Exchange also has requested approval, under Rule 19d-
1(c)(2), to amend its Rule 19d-1 Minor Rule Violation Enforcement
and Reporting Plan (``Plan'') to include its policy in regard to
execution of orders by new members. See letter from James E. Buck,
Senior Vice President and Secretary, NYSE, to Sandra Sciole, Special
Counsel, Division of Market Regulation, SEC, dated March 1, 1994.
\3\See Amendment No. 1, supra, note 1.
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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 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
1. Purpose
Rule 476A\4\ provides that the Exchange may impose a fine, not to
exceed $5,000, on 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.
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\4\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 Nos. 22037 (May 14, 1985), 50 FR 21008 (May 21, 1985); 23104
(April 11, 1986), 51 FR 13307 (April 18, 1986); 24985 (October 5,
1987), 52 FR 41643 (October 29, 1987); 25763 (May 27, 1988), 54 FR
20925 (June 7, 1988); 27878 (April 4, 1990), 55 FR 13345 (April 10,
1990); 28003 (May 8, 1990), 55 FR 20004 (May 14, 1990); 28505
(October 2, 1990), 55 FR 41288 (October 10, 1990); 28995 (March 21,
1991), 56 FR 12967 (March 28, 1991); 30280 (January 22, 1992), 57 FR
3452 (January 29, 1992); 30536 (March 31, 1992), 57 FR 12357 (April
9, 1992); 32421 (June 7, 1993), 58 FR 32973 (June 14, 1993).
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The purpose of the 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. Rule 476A
provides for an appropriate response to minor violations of certain
Exchange rules or policies, while preserving the due process rights of
the party accused through specified, required procedures. Violations of
these rules and policies that are deemed by the Exchange not to be
minor in nature are also subject to formal disciplinary proceedings
under Exchange Rule 476. The list of rules and policies which are
eligible for the Rule 476A procedures specifies those rule violations
which may be the subject of fines under the rule and also includes a
schedule of fines.
In File No. SR-NYSE-84-27, which initially set forth the provisions
and procedures of Rule 476A,\5\ 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.
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\5\See Securities Exchange Act Release No. 21688, supra, note 4.
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The Exchange is seeking approval to add to the list of rules
subject to possible imposition of fines under Rule 476A its policy with
respect to a requirement for new members of the Exchange to have their
order executions observed by another member for a period of two weeks.
As part of their training regimen, new Exchange members are
required to participate in a New Member Orientation Program
(``Program''). The Program, consisting of six one-hour sessions over a
two-week period, is designed to familiarize the new members with
regulations, systems and trading practices. Subsequent to the Program
and passing the member examination (Series 15), a new member is
required to wear a temporary badge (called on the Exchange today an
``orange badge'') for a minimum of two weeks, during which time the new
member may execute orders only under the direct supervision of another
experienced member.\6\
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\6\According to the NYSE, a new member may execute an order
under the direct supervision of any fully qualified NYSE member who
is a disinterested third party to the transaction. The experienced
member observes the trade, and reviews it for compliance with the
relevant Exchange rules and trading practices. This review is
evidenced by placing the experienced member's badge number on the
back of the order ticket. See Amendment No. 1, supra, note 1.
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The purpose for the proposed rule change is to facilitate the
Exchange's ability to ensure compliance with all aspects of the above-
named policy. New members would be informed that, if they are found to
have executed an order during the initial two-week period not under an
experienced member's supervision, the requirement to wear the temporary
badge and have their executions observed by an experienced member would
be extended for an additional week. A second violation of the policy
would result in a possible fine under the provisions of Rule 476A.\7\
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\7\The Exchange has clarified that, because the initial
violation of this policy would result in an extension of the
probationary period, the second violation would be subject to the
first time fine provided by Rule 476A. See Amendment No. 1, supra,
note 1.
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The Exchange believes failure to comply with the requirements of
this policy should be addressed with an appropriate sanction and seeks
Commission approval to add violations of these requirements to the Rule
476A List.
2. 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 members
and 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 Section 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 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 Section, 450 Fifth Street, NW.,
Washington, DC 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-94-05 and should be
submitted by April 27, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8163 Filed 4-5-94; 8:45 am]
BILLING CODE 8010-01-M
