[Federal Register Volume 59, Number 127 (Tuesday, July 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16188]
[[Page Unknown]]
[Federal Register: July 5, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34269; File No. SR-NYSE-94-16]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc., Relating to Audit Trail
Account Identification Codes
June 28, 1994.
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
20, 1994, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'')
filed with the Securities and Exchange (``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. 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 the addition of identification
codes to the Exchange's audit trail to indicate transactions that are
exempt from the short sale rules.
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
(a) Purpose
NYSE Rule 132 requires a clearing member firm submitting a trade to
comparison to include specified audit trail data elements, including a
specification of the account type for which that trade was effected
according to specified account categories. Currently, the Exchange uses
12 identifiers. Three additional account type identifiers, relating to
orders of competing dealers, have been approved by the Commission, but
have not yet been implemented.\1\ These three identifiers would be
implemented upon Commission approval of the new identifiers being
proposed herein.
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\1\The three identifiers recently approved by the Commission
consist of O, T, and R and will denote that a transaction was
effected for the account of a competing dealer. The identifier ``O''
denotes a proprietary order for the account of a competing dealer.
The identifier ``T'' denotes an order where one member is acting as
an agent for another member's competiting dealer account. The
identifier ``R'' denotes an order for the account of a non-member
competiting dealer. See Securities Exchange Act Release No. 33662
(February 23, 1994), 59 FR 10027 (March 2, 1994) (order approving
File No. SR-NYSE-91-46).
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The Exchange is proposing to expand use of the audit trail account
type field to require designation of a type of trade, namely, ``short
exempt'' trades. Four identifiers would be added to the audit trail
account type field to identify ``short exempt'' trades for:
The proprietary account of a clearing member organization
or an affiliated member/member organization--to be designated E.
The proprietary account of an unaffiliated member/member
organization--to be designated F.
An Individual customer account--to be designated H.
Other agency customer account--to be designated B.
In addition, three identifiers would be added to identify ``short
exempt'' trades of competing dealers. A competing dealer is defined as
a registered specialist on another stock exchange or a marker-maker
bidding and offering over-the-counter in a NYSE traded security. The
identifiers, as proposed, are:
L--to designate a ``short exempt'' transaction for the account of a
competing dealer that is a member or member organization trading for
its own account
X--to designate a ``short exempt'' transaction where one member is
acting as agent for another member's competing dealer account
Z--to designate a ``short exempt'' transaction for the account of a
non-member competing dealer.
The Exchange is proposing the addition of older type identifiers to
enhance its ability to identify violations of SEC Rule 10a-1\2\ and
Exchange Rule 440B, which prohibit short selling under specified
circumstances. The rules require orders to sell to be marked as
``long,'' or ``short,'' or ``exempt.''\3\
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\2\SEC Rule 10a-1 states, in part, that no person shall, for his
own account or for the account of any other person, effect a short
sale of any security registered on, or admitted to unlisted trading
privileges on, a national securities exchange, if trades in such
security are reported pursuant to an effective transaction reporting
plan as defined in Rule 11Aa3-1, and information as to such trades
is made available in accordance with such plan on a real-time basis
to vendors of market transaction information, (A) below the price at
which the last sale thereof, regular way, was reported pursuant to
an effective transaction reporting plan; or (B) at such price unless
such price is above the next preceding different price at which a
sale of such security, regular way, was reported pursuant to an
effective transaction reporting plan. See 17 CFR 240.10a-1 (1993).
\3\SEC Rule 10a-1 requires only that orders be marked ``long''
or ``short.'' NYSE Rule 440B.20 provides, in effect, that orders
relying on an exception to Rule 10a-1 should be marked ``short
exempt.''
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SEC Rule 10a-1(e)\4\ provides exemptions for certain orders to the
prohibitions against short selling. These are limited to types of
trades that are believed to be beneficial to the market or that carry
little risk of the kind of manipulative or destabilizing trading that
Rule 10a-1 was designed to address. By requiring identification of
``short exempt'' orders in the Exchange's post trade audit trail
process, the Exchange will enhance its ability to examine whether
trades effected pursuant to such orders were in compliance with the
exceptions set forth in SEC Rule 10a-1(e).
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\4\17 CFR 240.10a-1(e) (1993).
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Member firms would be given a reasonable period of time
(approximately six months) to make their own system enhancements so
that they may be in compliance with the new trade type identification
requirements.
The Exchange is also proposing to amend its definition of competing
dealer and to change the term ``competing dealer'' to ``competing
market-maker'' in order to correspond more closely with the definition
of market-maker included in the Act.\5\
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\5\The term ``competing market-maker'' is proposed to be defined
as any person acting as a market-maker, as defined in Section
3(a)(38) of the Act, in a NYSE traded security. A person acting
solely in the capacity of a block positioner would not be considered
to be a competing market-maker.
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(b) Statutory Basis
The basis under the Act for this 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
a national market system and, in general, to protect investors and the
public interest. The Exchange believes the addition of the identifiers
for ``short exempt'' trades will add to the protection of investors by
enhancing the Exchange's surveillance capabilities with respect to
``short'' sales.
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, 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 NYSE. All
submissions should refer to File No. SR-NYSE-94-16 and should be
submitted by July 26, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16188 Filed 7-1-94; 8:45 am]
BILLING CODE 8010-01-M
