[Federal Register Volume 64, Number 140 (Thursday, July 22, 1999)]
[Notices]
[Pages 39547-39548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18656]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41623; File No. SR-NYSE-99-10]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. to Amend Rule 123A.40
July 16, 1999.
Pursuant to Section 19(b)(1) of the Security Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 19, 1999, 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 NYSE. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 C.F.R. 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change would amend NYSE Rule 123A.40 to allow
specialists to elect stop orders at a bid or offer that betters the
market and would eliminate the requirement for specialists to obtain
Floor Official approval, unless the price of the specialist's electing
transaction is more than \4/16\ point away from the previous sale.
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
[[Page 39548]]
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 Sections 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
NYSE Rule 123A.40 generally prohibits a specialist from making a
transaction for his or her own account that would result in electing
stop orders.\3\ However, the Rule permits a specialist to be party to
the election of a stop order under two sets of circumstances: (i) when
the specialist's bid or offer is made with the prior approval of a
Floor Official, has the effect of bettering the market, and the
specialist guarantees that the stop order will be executed at the same
price as the electing sale; and (ii) when the specialist purchases or
sells stock at the current bid or offer in order to facilitate
completion of a member's order at a single price, where the depth of
the current bid or offer is not sufficient.
---------------------------------------------------------------------------
\3\ A stop order is an order that becomes an executable market
order, or limit order, once the specified price (``stop price'') is
reached. A stop order is elected when the stock trades at or beyond
the stop price and, thus, may not necessarily be executed at that
price. See NYSE Rule 13.
---------------------------------------------------------------------------
The Exchange proposes to amend part (i) of the Rule to allow the
specialist to make a bid or offer that betters the market at a price
that would elect stop orders and eliminate the requirement to obtain
Floor Official approval, unless the price of the specialist's electing
transactions is more than \4/16\ point away from the previous sale. The
Rule would retain the requirement that the specialist guarantee that
stop orders be executed at the same price as the electing sale.
A review of specialists' stop order electing transactions shows
that a significant percent of trades occur at little or no change in
price. For example, a study of the difference between the electing stop
price and last sale price for September through November 1998 shows
that 86% of the electing sales took place at \4/16\ point change or
less from the last sale price. The proposed change follows the
philosophy that smaller variation trades do not require immediate
scrutiny by a Floor Official. The Exchange's program for surveying stop
order elections would not be affected by the proposed change to NYSE
Rule 123A.40.
Based on these statistics, therefore, the proposal would eliminate
approximately 86% of required Floor Official approvals in this area. A
comparison of Stop Election Forms (Floor Official approval slips)
submitted during July and August 1997 versus the same weeks in 1998
shows that the number of such forms (and therefore requests for Floor
Official approval) doubled in 1998. In 1998, on average, more than 800
Stop Election Forms a day were submitted during this period. The
proposed change would significantly reduce the administrative burden on
Floor Official and specialists without compromising the Exchange's
ability to survey stop order elections.
2. Statutory Basis
The basis under the Act for the proposed rule change is the
requirement under Section 6(b)(5) \4\ 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.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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 NW, Washington, DC 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 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-99-10 and should be submitted by August 12,
1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-18656 Filed 7-21-99; 8:45 am]
BILLING CODE 8010-01-M
