[Federal Register Volume 62, Number 88 (Wednesday, May 7, 1997)]
[Notices]
[Pages 25011-25013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11843]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38551; File No. SR-NYSE-97-13]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the New York Stock Exchange,
Inc. Relating to Three-Month Extension of Pilot Program to Display
Price Improvement on the Execution Report Sent to the Entering Firm
April 28, 1997.
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
24, 1997, 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 extends for three months (until July 24,
1997) the pilot program most recently extended in Securities Exchange
Act Release No. 37812 (October 12, 1996), 61 FR 54477 (October 18,
1996) (File No. SR-NYSE-
[[Page 25012]]
96-28) (extension of pilot until April 24, 1997.).\1\ This is a
program to calculate and display, on the execution reports sent to
member firms, the dollar amounts realized as savings to their customers
as a result of price improvement in the execution of their orders on
the Exchange.
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\1\ This program was originally filed as a pilot in Securities
Exchange Act Release Nos. 36421 (October 26, 1995), 60 FR 55625
(November 1, 1995) (File No. SR-NYSE-95-35) and 36489 (November 16,
1995), 60 FR 58123 (November 24, 1995) (File No. SR-NYSE-95-37). The
initial pilot program subsequently was extended until October 24,
1996 in Securities Exchange Act Release No. 37151 (April 29, 1996),
61 FR 20302 (May 6, 1996) (File No. SR-NYSE-96-10).
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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 and is set forth in Section A, B,
and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to extend for three
months a pilot program for calculating and displaying, on execution
reports sent to member firms entering orders, the dollar value saved by
their customers as a result of price improvement of orders executed on
the Exchange. The program does not in any way affect the actual
execution orders. The Exchange refers to this calculated dollar savings
as the ``NYSE PRIMESM.'' \2\
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\2\ NYSE PRIME is a service market of the New York Stock
Exchange, Inc.
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NYSE PRIME is available to all member organizations \3\ for intra-
day market orders entered via the Exchange's SuperDOT system that are
not tick-sensitive and are entered from off the Floor.\4\ In
calculating the dollar value of price improvement, NYSE PRIME utilizes
the Best Pricing Quote (``BPQ'') as approved by the Commission in
connection with the Exchange's pricing of odd-lot orders.\5\
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\3\ The Commission notes that member organizations electing to
receive NYSE PRIME information are required to enter into an
agreement with the Exchange regarding the use of NYSE PRIME
information and the NYSE PRIME service mark. Among other things, the
agreement provides that in any publication or use of NYSE PRIME
information (unless the Exchange otherwise agrees), the member
organization must employ the NYSE PRIME service mark.
\4\ Also excluded from the NYSE PRIME feature are booth entered
or booth routed orders, booked orders, combination orders (e.g.,
switch orders) and orders diverted to sidecar.
\5\ See Securities Exchange Act Release No. 27981 (May 2, 1990),
55 FR 19407 (May 9, 1990) (File No. SR-NYSE-90-06). The BPQ is the
highest bid and lowest offer, respectively disseminated by the
Exchange or another market center participating in the Intermarket
Trading System (``ITS'') at the time the order is received by the
Exchange. In order to protect against the inclusion of incorrect or
stale quotations in the BPQ, however, the Exchange includes
quotations in a stock from other markets only if: (1) the stock is
included in ITS in that other market; (2) the quotation size is for
more than 100 shares; (3) the bid or offer is not more than one-
quarter point away from the NYSE's bid or offer; (4) the quotation
conforms to NYSE Rule 62 governing minimum variations; (5) the
quotation does not create a locked or crossed market; (6) the market
disseminating the quotation is not experiencing operational or
system problems with respect to the dissemination of quotation
information; and, (7) the quotation is ``firm'' pursuant to Rule
11Ac1-1 under the Act, 17 CFR 240.11Ac1-1, and the market's rules.
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Data from the operation of the pilot during 1996 show price
improvement on 25.3% of the execution reports for eligible post-opening
market orders entered on the Exchange. The Exchange believes that the
NYSE PRIME enhances the information made available to investors and
improves their understanding of the auction market.
The most recent extension of the NYSE PRIME pilot program began on
October 24, 1996 and continues until April 24, 1997. The proposed rule
change extends the pilot program for an additional three months, to
July 24, 1997.\6\
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\6\ The Commission notes that any data regarding NYSE Prime must
be submitted to the Commission no later than May 27, 1997 in order
to be considered by the Commission with regard to future requests to
extend or permanently approve the NYSE Prime pilot program.
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \7\ 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 a national market system and, in general, to protect
investors and the public interest. This proposed rule change is
designed to perfect the mechanism of a free and open market in that it
enhances the information provided to investors by displaying to them
the dollar value of a price improvement their orders may have received
when executed on the NYSE.
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\7\ 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 any written
comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (i) does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) does not have the effect of limiting access to or
availability of any Exchange order entry or trading system, the
extension of the NYSE PRIME program has become effective pursuant to
Section 19(b)(3)(A) of the Act \8\ and subparagraph (e)(5) of Rule 19b-
4 thereunder.\9\ At any time within 60 days of the filing of such
proposed rule change, the Commission may summarily abrogate such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(e)(5).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing. In addition, the Commission
recognizes that it is possible for a customer order to receive negative
price ``improvement,'' or price disimprovement, instead of price
improvement. Price disimprovement occurs when an order is executed at a
price that is inferior to the best contra-side bid or ask quote
prevailing among the markets and market makers trading the security at
the time the order arrived at the market or market maker. The
Commission is interested in comment about the appropriateness of an
exchange providing price improvement information to members on a trade-
by-trade basis without also providing price disimprovement information
on the same basis.
Persons making written submissions should file six copies thereof
with the
[[Page 25013]]
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. 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 Exchange. All submissions should refer
to File No. SR-NYSE-97-13 and should be submitted by May 28, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 97-11843 Filed 5-6-97; 8:45 am]
BILLING CODE 8010-01-M
