[Federal Register Volume 60, Number 92 (Friday, May 12, 1995)]
[Notices]
[Pages 25751-25752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11774]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35687; File No. SR-NYSE-95-17]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by New York Stock Exchange, Inc. Relating to Specialists
Displaying the Full Size of Certain Orders
May 8, 1995.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April
21, 1995, 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change consists of an Information Memo which
discusses procedures under Exchange rules with respect to specialists
displaying orders received through the SuperDOT order routing system
and the full size of orders received by specialists manually which are
subsequently entered into the electronic book.
II. Self-Regultory 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
The Exchange is proposing to issue an Information Memo outlining
its policy with respect to displaying certain orders received by a
specialist.\1\ The policy requires specialists to display the full
size\2\ of all orders received through the SuperDOT order routing
system and the full size of all orders received by specialists manually
which are subsequently entered into the electronic book. This
requirement includes increasing the size of a quotation for orders at
the same price as the current bid or offer. The policy also sets forth
the specialist's responsibility when a member who gives an order
requests that less than the full size of the order be shown in the
quotation. In that situation, a specialist is only responsible to enter
in the electronic book and show the size requested. The portion not
requested to be shown will be handled manually as a ``held'' order, but
will be last in terms of time priority to all other orders on the
specialist's electronic book at that price. If the specialist is
subsequently requested to show an additional portion, or the remainder,
of the order, the specialist would enter the price and size into the
electronic book, with the order so entered having priority on the book
vis-a-vis other orders as of the time of entry on the book. The
specialist would increase the quotation size to reflect the additional
amount entered on the book.
\1\In Information Memo No. 93-12, the Exchange has previously
advised specialists that, pursuant to NYSE Rule 79A.10, all orders
received by specialists through the SuperDOT system are deemed to be
accompanied by an instruction that they be quoted at the limit price
on the order when such limit price is better than the current
quotation.
\2\Currently the Exchange is capable of displaying quotations up
to 99,900 shares. The Exchange plans to expand this capability in
the future.
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The Exchange believes that this policy is consistent with Exchange
Rule 104, which requires the effective execution of agency orders
received by specialists, and with NYSE Rule 60(e).\3\ The Exchange
expects that specialists would display as soon as practicable any order
which, in relation to current market conditions in a particular
security, [[Page 25752]] represents a material change in the supply or
demand for that security. For example, if the market in XYZ security is
20 bid to 20\1/4\ offered, 1,000 shares bid and 1,000 shares offered,
and the specialist receives an order to sell 10,000 shares at 20\1/4\,
the specialist would be expected to change the size of the offer to
11,000 shares as soon as he or she becomes aware of the order. If the
quotation already reflects significant supply (demand), and the
specialist receives an order that is relatively de minimis in relation
to such supply (demand), the specialist may take a reasonable period of
time, which should not generally exceed two minutes, before updating
the quotation, so as to avoid constant revisions of quotations that do
not reflect material changes in supply and demand. For example, if the
market in XYZ security is 20 bid to 20\1/4\ offered, 5,000 shares bid
and 50,000 shares offered, and the specialist receives an order to sell
200 shares at 20\1/4\, the specialist would be permitted to wait a
reasonable period of time before changing the size of the offer to
50,200 shares.
\3\NYSE Rule 60(e) requires a specialist to promptly report the
highest bid and lowest offer made in the trading crowd and the
associated quotation size that he wishes to make available to
quotation vendors. The rule also requires a specialist to promptly
report whenever a bid, offer or quotation size he previously
reported is to be revised and whenever a bid and/or offer he
previously reported is to be cancelled or withdrawn.
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Under exceptional circumstances, the specialist would not
necessarily display the full quotation size. For example, as noted in
Information Memo 94-32, when a member proposes to effect a block
transaction at a significant premium or discount from the prevailing
market and the specialist is aware of interest on the contra side, it
may be more appropriate for the specialist and Floor Official(s) to gap
the quotation in a security for a brief period, generally not exceeding
five minutes, with a view toward contacting and/or attracting contra
market interest. In such case, the bid or asked price should touch the
prior sale price and reflect size of 100 shares by 100 shares. The same
principles would also apply to a situation where there is a sudden
influx of market orders on one side of the market which would be likely
to result in a significant price change.
2. Statutory Basis
The basis under the Act for the 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, in general, to protect investors and the public interest. The
policy with respect to displaying full size of orders received by
specialists enhances the purposes of the Act by assuring that accurate
and complete information with respect to the current market on the
Exchange for any stock is available to market participants.
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
No written comments were either solicited or received.
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, 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 at
the Commission's Public Reference Section, 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-95-17 and should be
submitted by June 2, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11774 Filed 5-11-95; 8:45 am]
BILLING CODE 8010-01-M
