[Federal Register Volume 59, Number 130 (Friday, July 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16570]
[[Page Unknown]]
[Federal Register: July 8, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34303; File No. SR-NYSE-93-48]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the New York
Stock Exchange, Inc. Relating to Procedures for Handling Block Crosses
at Significant Premiums or Discounts
July 1, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 20, 1993, 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 and
II 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.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1993).
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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 current Exchange Rules for handling block
crosses that are proposed to be executed at significant premiums or
discounts from the last 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 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 III 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 purpose of the proposed rule change is to review the Exchange's
existing procedures for handling block crosses that are proposed to be
executed at significant premiums or discounts from the prevailing
market in the subject security. These procedures are designed to ensure
that such block transactions are subject to appropriate oversight and
exposure to other market interest.
There are three types of decisions that may be made, as
appropriate, when a block cross is proposed to be effected at a
significant premium or discount. First, pursuant to Exchange Rule
79A.30, whenever any transaction is to be effected at a price that is
$1 or more away from a last sale in the subject security under $20, or
$2 or more away from a last sale of $20 or more, it must be approved by
a Floor Official. In addition, in the case of a proposed block
transaction which would be effected at a significant price change from
the last sale (and particularly any trade at a price which would be the
lesser of 10% or three points from the previous sale in the subject
security, or five points if the previous sale was $100 or more), a
floor Governor, a Senior Floor Official, or two Floor Officials, should
make a determination whether the expected price change suggests that
the overall market in that security would be better served by a trading
halt, with telescoping price indications that come progressively closer
to the re-opening price.
Third, in exceptional circumstances, a Floor Governor or a Senior
Floor Official may determine that it is appropriate to continue trading
rather than calling a trading halt. In such a case, 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, the specialist, with approval of a Floor
Governor or Senior Floor official, may widen the quotation for a brief
period, generally not to exceed five minutes, to try to contact and/or
attract contra side market interest. In the case of a significant
discount, the bid would represent the proposed cross price, the offer
would touch the last sale price and the quotation size would be 100
shares by 100 shares. Conversely, in the case of a significant premium,
the bid would touch the last sale and the offer would represent the
proposed cross price, with the quotation size being 100 shares by 100
shares. The same principles would also apply to a situation where a
sudden influx of market orders on only one side of the market make a
significant price change likely.
All block transactions are subject to the Exchange's auction market
rules (e.g., Rules 72, 76, and 127), which provide the opportunity for
other market participants to improve the price for one side or the
other of the proposed cross. However, if a block transaction at a
significant premium or discount is proposed very near the close of
trading, there may not be sufficient time to implement the procedures
described above and a Floor Governor or a Senior Floor Official, or two
Floor Officials may determine that it is therefore appropriate to halt
trading.
Specialists must be prepared to participate in such transactions,
as dealer, to the extent necessary to maintain a fair and orderly
aftermarket following the execution of such transactions. Any situation
where there is a disagreement between the specialist and the broker
representing the block orders as to the extent of the needs of the
specialist should be referred to a Floor Official for resolution.
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
a national market system and, in general, to protect investors and the
public interest.
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. 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, NW., Washington, DC 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, 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-93-48 and should be
submitted by July 29, 1994.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the NYSE's proposal is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange. Specifically, the
Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act,\3\ which requires that an exchange have
rules that are designed to prevent fraudulent and manipulative acts and
practices, 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.
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\3\15 U.S.C. 78f(b)(5) (1988).
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The Commission believes that the Exchange's policy requiring the
approval of a Floor Governor, Senior Floor Official, or two Floor
Officials for block transactions effected at significant price changes
from the last sale provides appropriate Exchange oversight of
specialists' conduct and is consistent with Section 6(b)(5) of the Act
in that this oversight may tend to prevent fraudulent and manipulative
acts and practices and assist specialists in maintaining fair and
orderly markets by ensuring that block transactions are properly priced
and exposed to other market interest.
The Commission believes the rule change is consistent with NYSE
Rule 79A.30, which requires that all transactions that are made at one
point or more away from a last sale in a security priced under $20, or
two points or more away from a last sale of $20 or more must be
approved by a Floor Official. Where a block transaction is proposed
that would result in a more significant price change than the one or
two point parameter discussed in Rule 79A.30, the Information Memo
states that consultation should involve a Floor Governor, a Senior
Floor Official or two Floor Officials. The Commission believes that in
such situations, a trading halt or a gap quotation may be needed to
maintain orderly markets, and that consultations with the specified
officials could aid specialist in fulfilling their market making
responsibilities.\4\
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\4\Nothing in the rule change effects the Exchange's current
rules regarding execution of block transactions, such as NYSE Rule
72 (Priority and Precedence of Bids and Offers), NYSE Rule 76
(``Crossing'' Orders), NYSE Rule 78 (Sell and Buy Orders Coupled at
Same Price), and NYSE 127 (Block Positioning).
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The Commission believes that the Information Memo highlights the
responsibilities of specialists in terms of block crosses that are
already set forth in the Exchange's Rules and policies. In addition,
the Commission believes that the adoption of the Information Memo will
ensure that floor members are aware of their obligation to consult with
floor officials when proposing to execute block crosses at prices that
would result in significant price changes from the last sale. The
Commission therefore finds good cause for approving the proposed rule
change prior the thirtieth day after the date of publication of notice
of filing thereof in the Federal Register.
It is therefore ordered, pursuant to Section 19(b)(2)\5\ that the
proposed rule change is hereby approved.
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\5\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\17 CFR 200.30-3(a)(12) (1993).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-16570 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M
