[Federal Register Volume 63, Number 130 (Wednesday, July 8, 1998)]
[Notices]
[Pages 36985-36987]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18002]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40146; File No. SR-NYSE-98-10]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc., and Amendment No. 1
Thereto, To Amend Exchange Rule 115 Regarding Disclosure of
Specialists' Orders
June 30, 1998.
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 March 17, 1998, the New York Stock Exchange, Inc. (the ``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the
Exchange. On June 23, 1998, the NYSE filed an amendment to the
proposal.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Agnes M. Gautier, Vice President, Market
Surveillance, NYSE, to Richard Strasser, Assistant Director,
Division of Market Regulation, Commission, dated June 17, 1998
(``Amendment No. 1''). In Amendment No. 1, the NYSE clarifies that
percentage orders, under the proposed rule change, will be treated
the same as other orders other than stop orders. The NYSE also notes
that the proposed amendment to NYSE Rule 115, permitting a
specialist to respond to an issuer's inquiry regarding buying and
selling interest in its stock, is consistent with NYSE Rule 106,
recent changes to the Exchange's Allocation Policy, and the duties
of a specialist in that the proposal should promote a positive
professional relationship between the specialist and the exchange-
listed company. Furthermore, the Exchange notes it believes that
non-member, non-issuer market participants are not disadvantaged by
communications between the issuer and the specialist because the
same information is available through a member's market probe of the
specialist. The Exchange represents that under the proposed rule
change issuers will not have direct access to the floor of the
Exchange.
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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 amendments to Exchange Rule
115, Disclosure of Specialists' Orders Prohibited. The text of the
proposed rule change is available at the Office of the Secretary, the
NYSE, and at the Commission.
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 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. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Exchange Rule 115 prohibits disclosure of information in regard to
orders on a specialist's book except in certain limited circumstances.
This policy was first adopted as a rule in February 1934. Limited
exceptions were adopted for disclosure when demonstrating methods of
trading to visitors in 1938 and to implement the Intermarket Trading
System in 1978. A third exception, approved in 1991, allows a
specialist to provide
[[Page 36986]]
information about buying or selling interest in the market at or near
the prevailing quote in response to a market probe of a member.\4\ The
specialist must make this same information available, in a fair and
impartial manner, to all members making a similar inquiry. The
specialist must also be expressly authorized to release the names of
buyers and sellers by the member who entered the order. The names of
buyers and sellers refers to the names of members or member
organizations entering orders or expressing interest with the
specialist, and not the names of their customers.
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\4\ Securities Exchange Act Release No. 29318 (June 17, 1991) 56
FR 28937 (June 25, 1991).
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The Exchange is proposing to amend Rule 115 to permit a specialist,
acting solely in his or her capacity as a market maker (i.e., while on
the Floor), and responding to a market probe by a member, to give any
information concerning buying and selling interest or orders he or she
holds on the book in a stock.\5\ This proposal deletes the limitation
that such disclosed interest be ``at or near the prevailing quote.''
However, with respect to stop orders on the book for a stock,\6\ a
specialist may disclose this information when the specialist judges
that the member conducting the market probe has the intention to trade
in the stock at a price at which such stop orders would be relevant.
The additional restriction on the disclosure of stop orders will permit
disclosure in legitimate circumstances, e.g., when a proposed trade
would be effected at a price which would trigger stop orders.
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\5\ The proposal includes not only orders on the specialist's
book, but also any percentage orders held by the specialist. See
Amendment No. 1, supra note 3.
\6\ A stop order is an order to buy or sell at the market when a
definite price is reached either above (on a buy) or below (on a
sell) the price that prevailed when the order was given. A stop
order becomes a market order after a transaction at the stop price
occurs. A stop-limit order is a stop order that designates a price
limit. A stop-limited order becomes a limit order when a transaction
takes place at the stop price. See NYSE Rule 13.
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The proposal would also permit the specialist to disclose the
identity of any buyer or seller represented on his book without being
required to have express authorization from the member who entered the
order to disclose the names of buyers and sellers, i.e., the members or
member organizations who are representing the buying and selling
interest. Nevertheless, a member may request that the identity of a
buyer or seller not be disclosed at any time, or in respect to a
particular order left with a specialist.
The rule will continue to require a specialist to make any
information available in a fair and impartial manner.
The Exchange believes that enabling specialists to provide
information under amended Rule 115 will facilitate the bringing
together of buyers and sellers in a more efficient manner. For example,
information will be given to members acting in the capacity of agents
for their customers, and thus, the benefits of having this information
will inure to these customers by giving them a more complete picture of
trading interest.
An added exception to Rule 115 is proposed to permit specialists to
disclose information about orders on the book in their stock to listed
companies, except for information pertaining to stop orders in the
stock. The Exchange believes this will provide the opportunity for
specialists to respond to listed companies' requests to be kept
apprised concerning the market for their stocks.
2. Statutory Basis
The basis under the Act for this proposed rule change is section
11(b),\7\ which prohibits a specialist from disclosing information on
orders he or she holds ``which is not available to all members. * * *''
The Exchange believes that the change to NYSE Rule 115 is consistent
with Section 11(b) \8\ because it provides a mechanism for the fair and
impartial disclosure of information by the specialist in a manner that
is neither anti-competitive nor discriminatory. The specialist must
respond to market probes by members with the same information being
disclosed to each such member. With respect to the disclosure of stop
orders, the rule's requirement that the specialist have a reasonable
belief that the inquiry is fostered by an intent to trade at a relevant
price supports the aims of Section 6(b)(5) of the Act \9\ concerning
the prevention of fraudulent or manipulative acts. Disclosure of
certain information to issuers also supports the provisions of Section
6(b)(5) \10\ with respect to creating a free and open market.
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\7\ 15 U.S.C. 78k(b).
\8\ Id.
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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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 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 its 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, as amended, is consistent with the Act. Specifically, the
Commission requests comments on whether the proposed provisions
regarding issuer access to the specialist's book is consistent with the
Act, including Section 6(b)(5) of the Act.\11\ Persons making written
submissions should file six copies therof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of the submissions, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filled 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 in the Commission's Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549.
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\11\ Id.
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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-98-10 and should be submitted by July 29,
1998.
[[Page 36987]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-18002 Filed 7-7-98; 8:45 am]
BILLING CODE 8010-01-M
