[Federal Register Volume 59, Number 95 (Wednesday, May 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12041]
[[Page Unknown]]
[Federal Register: May 18, 1994]
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SECUITIES AND EXCHANGE COMMISSION
[Release No. 34-34023; File No. SR-NYSE-94-08]
May 6, 1994.
Self-Regulatory Organizations; New York Stock Exchange, Inc.;
Proposed Rule Change Relating to the Same-Day Comparison of Initial
Trade Data in Listed Stocks Through the NYSE's On-Line Comparison
System
Pursuant to section 19(b) of the Securities Exchange Act of 1934
(``Act'')\1\ notice hereby is given that on March 10, 1994, the New
York Stock Exchange, Inc. (``NYSE'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-NYSE-94-08) as described in Items I, II, and III below, which items
have been prepared primarly by the NYSE, a self-regulatory organization
(``SRO''). The Commission is publishing this notice to solicit comments
on the proposed rule change from interested parties.
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\1\15 U.S.C. 78s(b).
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I. SRO's Statement of the Terms of Substance of the Proposed Rule
Change
The NYSE proposed to require the submission of trade data in listed
stocks on trade date for initial comparison through the Exchange's On-
Line Comparison System.
II. SRO'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
text of these statements may be examined at the places specified in
Item IV below. The NYSE has prepared summaries, set forth in sections
(A), (B), and (C) below, of the most significant aspects of such
statements.
(A) SRO's Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule Change
(1) Purpose
The NYSE has decided to implement an On-Line Comparison System with
a target date of June 30, 1995 for full implementation. The NYSE is
filing this proposal with the Commission to provide the NYSE community
with almost eighteen months advance notice in order that they will have
time to plan and implement the changes that may be necessary.\2\ A
phased implementation will be used, similar to that which was used to
implement T+1 overnight comparion of NYSE transactions.\3\
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\2\The NYSE has distributed to its members a circular, dated
January 29, 1994, describing implemention of trade data comparison.
\3\For a discussion of T+1 overnight comparison, refer to
Securities Exchange Act Release No. 26627) (March 14, 1989) 54 FR
11470 [File No. SR-NYSE-88-36] (order approving proposed rule
change).
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Beginning on June 1, 1994, the NYSE will require its member
clearing firms to submit to it periodically during the trading day
trade data for transactions in listed stocks, rights, and warrants
effected on the NYSE for ``regular way,'' ``next day,'' ``cash,'' and
``seller's option'' settlement. All stocks traded on an ``issued,''
``when issued'' and ``when distributed'' basis will be included. The
NYSE's existing Overnight Comparison System will be the main processor
of the data submitted for initial comparison. Accordingly, the NYSE has
changed that system's name to the On-Line Comparison System Compared
trades will be submitted by the NYSE to a ``qualified clearing agency''
to complete the clearance and settlement process.
The required changes may affect numerous clearing and non-clearing
firms' operations, including such things as trading floor operations,
purchase and sales department procedures, clearing operations, and
internal account balancing and reconciliation procedures. Because of
these possible, significant changes, the NYSE has established two
communities, a steering committee and a working group, to advise it on
the best methods by which trade-date comparison may be achieved.
Additionally, this program is being implemented in conjunction with the
National Securities Clearing Corporation and the American Stock
Exchange, Inc.
Since 1988, the NYSE has sought to improve clearing operations and
to reduce exposure to losses associated with market volatility by
reducing the comparison cyce in stocks first from five business days
(``T+5'') to three business days (``T+3'') and then to one business day
(``T+1''). Thereafter, the principle of ``T+1 compared or close out''
also was made applicable first to listed options\4\ and then to listed
bonds.\5\ The NYSE notes that currently more than 75 percent of all
trades taking place on its trading floors are captured and locked-in
electronically. The NYSE views the capture of the remaining 25 percent,
which primarily occurs in the trading crowd, as a major goal of the On-
Line Comparison System.
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\4\For a discussion of T+1 comparison or close-out for options,
refer to Securities Exchange Act Release No. 30293 (January 27,
1992), 57 FR 4229 [File No. SR-NYSE-91-36].
\5\For a discussion of T+1 comparison of close-out for bonds,
refer to Securities Exchange Act Release No. 31826 (Feburary 4,
1993), 58 FR 8075 [File No. SR-NYSE-92-32].
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The NYSE is not proposing any formal changes to its Rules at this
time. It believes that it already has sufficient authority under its
Rule 130 to require its clearing members to submit trade data in listed
stocks for trade-date comparison. Rule 130 was amended by the NYSE to
provide for this result in its File No. SR-NYSE-92-32 when, among other
things, the T+1 Overnight Comparison System was applied to NYSE bond
transactions.\6\ In that filing, the NYSE stated:
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\6\Id.
In preparing amendments to the comparison rules described below
[Rule 130], the Exchange is aware that such amendments permit the
acceptance of initial comparison data in any security admitted to
dealings at any time it chooses to do so. This should not, however,
be construed to mean that the Exchange intends to commence the
initial comparison of all securities traded on it now. Should the
Exchange's experience with initial comparison of listed bond
transactions indicate that initial comparison of other types of
securities traded on the Exchange is feasible, the Exchange at that
time will submit an appropriate filing to the Commission pursuant to
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Rule 19b-4 at that time.
The NYSE believes that this filing, File No. SR-NYSE-94-08, is
consistent with that statement. As the final implementation date of
June 30, 1995, approaches, the NYSE will file any other rule changes
with the Commission pursuant to Rule 19b-4\7\ that it considers
appropriate and necessary.
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\7\17 CFR 240.19b-4 (1993).
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Implementation of trade-date comparison, will require clearing
firms to meet three general requirements. First, they will have to
suppress certain comparison data submissions to qualified clearing
agencies as the NYSE locks-in additional trades. Second, they will have
to submit their comparison data to the NYSE for comparison, rather than
to a qualified clearing agency. Third, they will have to submit
comparison data to the NYSE during the trading session rather then
after the close of trading.
As mentioned above, the implementation of on-line comparison will
be a phased approach, which the NYSE found successful in implementing
T+1 overnight comparison. The NYSE anticipates that the initial window
for submission of trade data will be within two hours of trade
execution at the inception of on-line comparison on June 1, 1994, and
then gradually will be reduced to one hour in August 1994. These time
frames are flexible and may be altered by the NYSE as it evaluates
clearing firms' abilities to comply. The NYSE intends to closely
monitor the implementation of each phase and will not implement a new
phase until it is satisfied that no significant operational problems
exist.
The main objectives that will be sought as the NYSE moves toward
complete implementation of its On-Line Comparison System include:
Increasing the percentage of locked-in trades; maintaining a
satisfactory uncompared rate during the various phases of the project;
comparison of those trades that cannot be captured by an electronic
order entry system; and elimination of redundant comparison processing.
It is important to note that as the On-Line Comparison System moves
through its various implementation phases, the current NYSE Rule
130(a), which requires each transaction effected on the NYSE to be
compared or closed out by the close of business on the NYSE on the
business day following the day of the contract, shall remain in effect.
(2) Statutory Basis for the Proposed Rule Change
The NYSE believes that its proposal to accept initial trade data
from its clearing firms and to compare as much of that data as is
practical on trade date will help protect investors and the public
interest as called for in Section 6(b)(5) of the Act.\8\ The NYSE
believes that the proposal meets other requirements of Section 6(b)(5)
in that it will help prevent fraudulent and manipulative acts and
practices, will promote just and equitable principles of trade, and
will foster cooperation and coordination with persons engaged in
regulating and facilitating transactions in securities. Secondly, the
Exchange believes that the proposal will meet the goals of Section
17A(a)(1) of the Act in that it will help eliminate inefficient
procedures for clearance and settlement that impose unnecessary costs
on investors and persons facilitating transactions by and on behalf of
investors.\9\
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\8\15 U.S.C. 78f(b)(5).
\9\15 U.S.C. 78q-1(a)(1).
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B. SRO's Statement on Burden on Competition
The NYSE believes that the proposed rule change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
(C) SRO's Statement on Comments on the Proposed Rule Change Received
From Members, Participants or Others
The NYSE has neither solicited nor received any comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within thirty-five days of the date of the publication of this
notice in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it finds
such longer period to be appropriate and publishes its reasons for such
finding or (ii) as to which the SRO consents, the Commission will:
(A) By order approve such 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 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 changes that are filed with the
Commission, and all written communications relating to the proposed
rule changes 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 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-94-08 and should be
submitted by June 8, 1994.
For the Commission by the Division of Market Regulations,
pursuant to delegated authority.\10\
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\10\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-12041 Filed 5-17-94; 8:45 am]
BILLING CODE 8010-01-M
