[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)]
[Notices]
[Pages 43802-43804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20630]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41703; File No. SR-NYSE-99-24]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. To Amended Rules 13 and 72
August 4, 1999.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 10, 1999, the New York Stock Exchange, Inc. (``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 NYSE.
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).
\2\ 17 CFR 240.19b-4.
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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 NYSE Rules 13
and 72 to define XPress orders and describe how such orders are to be
executed. Below is the text of the proposed rule change. Proposed new
language is in italics.
* * * * *
Rule 13 Definitions of Orders
XPress order
An order to buy or sell a security for no less than such number
of shares as the Exchange shall from time to time determine and no
more than the displayed size of an XPress quote, as defined below,
which order is to be executed in whole or in part at the price of
the XPress quote, if available, or at a better price if obtainable.
The portion not so executed shall be treated as cancelled.
An XPress quote is a quote so indicated by the Exchange. In
order to be indicated as an XPress quote, a published bid or offer
must be at the same price, for no less than the number of shares and
the minimum period of time that the Exchange shall from time to time
determine. If the XPress bid or offer price changes or the published
bid or offer size is less than such number of shares, the bid or
offer shall no longer be indicated as an XPress quote. (See also
Rule 72.50.)
The Exchange shall make known to its membership to minimum size
for XPress orders and the minimum size and time requirements for
XPress quotes.
Rule 72 Priority and Precedence of Bids and Offers
* * * * *
(f) Except as provided in .50 below, a sale shall remove all
bids from the Floor except that if the number of shares of stock or
principal amount of bonds offered exceeds the number of shares or
principal amount specified in the bid having priority or precedence,
a sale of the unfilled balance to other bidders shall be governed by
the provisions of these Rules as though no sales had been made to
the bidders having priority or precedence.
* * * * *
.50 XPress Orders.--An execution of an XPress order, in whole or
in part, shall not remove bids or offers from the Floor. Once an
XPress order has been represented in the Crowd, no part of the
XPress bid or offer against which the XPress order is to be executed
shall be withdrawn, except to provide price improvement to all or
part of the XPress order. When an XPress order has been executed in
part at an improved price, the remainder of such order shall be
executed at the XPress bid or offer up to the number of shares then
available, regardless of whether such number is less than the
minimum size for an XPress quote. All XPress orders shall be
executed in strict time priority with respect to each other. A
member who is providing a better price to an XPress order must trade
with all other market interest having priority at that price before
trading with the XPress order.
[[Page 43803]]
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 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
As part of its continuing efforts to enhance participation in its
auction market, the Exchange proposes to create a new type of order,
known as an ``XPress Order.'' The Exchange believes this order type
responds to the needs of market participants for ``clean'' executions
when entering large-size orders in response to bids and offers which
have been displayed for a minimum time period. NYSE Rule 13 would be
amended to define XPress order and XPress quote. NYSE Rule 72 would be
amended to provide the requirements for executing XPress orders.
An XPress order is an order of a specified minimum size which is to
be executed against a displayed XPress quote, or at an improved price,
if obtainable. In order to be indicated as an XPress quote, a published
bid or offer must be for no less than the specified minimum share size
at the same price for no less than 30 seconds. The Exchange proposes to
initially set the minimum size for XPress orders and XPress quotes at
25,000 shares. Within six months after implementation, as experience is
gained with XPress orders, the NYSE proposes to reduce the minimum size
to 15,000 shares, unless experience indicates that it would not be
appropriate to do so. The 30 second minimum requirement for XPress
quotes would also be reviewed by the NYSE at such time, with
consideration given to possibly decreasing this minimum.
It is possible for one or both sides of a quote to be indicated as
XPress. If the XPress bid or offer price changes or the published bid
or offer size becomes less than the specified minimum size, the bid or
offer will no longer be indicated as an XPress quote. For example, if
there is an XPress offer of 40,000 shares at 50 and the offer changes
to 40,000 shares at 49\15/16\, the offer is no longer XPress, as it has
not been the same price for 30 seconds.
XPress orders will be delivered to the specialist's post via the
Exchange's automated order routing system. Multiple XPress orders in
the same stock will be executed in strict time priority with respect to
each other and with respect to other orders. The size of the XPress
order may not exceed the size of the XPress bid or offer against which
it is to be executed at the time of order entry. An XPress order is
guaranteed an execution at the XPress quote price up to the full size
of the displayed XPress quote, if available.
If an XPress order is received at the specialist's post and the
quote is no longer XPress, the XPress order will be cancelled. For
example, assume there is an XPress offer of 30,000 shares when an
XPress order to buy 25,000 shares is entered and a broker in the Crowd
buys 25,000 shares (i.e., takes 25,000 shares of the offer) before the
XPress order is received at the post. The XPress order will be
cancelled as the 5,000 share offer is less than the minimum size
required and therefore is no longer an XPress offer. however, if the
quote had been reduced in size from time of order entry, but was still
an XPress quote (i.e., still greater than minimum size), the full size
of the XPress order would be represented and be given an opportunity
for price improvement. Any portion of the XPress order not executed, at
either the XPress or an improved price, would be cancelled.
All or part of an XPress order may be executed at an improved
price, if available. An execution of an XPress order, in whole or in
part, does not remove bids or offers from the Floor. This means that an
XPress order that has been executed in part at an improved price
retains its priority \3\ (i.e., is first in line for execution) and
does not have to compete (i.e., be on parity) with newly entered bids
or offers at the XPress quote. For example, if 30,000 shares are
offered at 50\2/16\ (XPress), an XPress order could come in to buy
30,000 at 50\2/16\ and be partially executed at an improved price
(e.g., 15,000 at 50\1/16\). The remainder of the XPress order would
retain priority to be executed at 50\2/16\ (the XPress offer price) and
would not have to compete on parity with other subsequent bidders at
50\2/16\. (Without this proposed provision, Rule 72(f), which provides
that a trade clears the Floor, would apply; in which case, once 15,000
traded 50\1/16\, all bids and offers would be removed from the Floor
and a new auction would begin. If that were the case, the XPress bid to
buy the remaining 15,000 shares at 50\2/16\ would no longer have
priority and would be on a parity with any other bids made at that
price, thereby defining the purpose of the XPress order type.)
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\3\ Exchange Rules 71 and 72 provide that the first bid made at
the highest price has priority. Similarly, the first offer at the
lowest price has priority.
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Once the specialist has represented an XPress order in the Crowd,
no part of the XPress bid or offer against which the XPress order is to
be executed may be withdrawn, except to provide price improvement to
all or part of the XPress order. The remainder of such order would be
executed at the XPress bid or offer up to the number of shares then
available, regardless of whether such number is less than the minimum
size for an XPress quote.
For example, assume there is an XPress offer of 30,000 shares at 50
which consists of 20,000 shares offered by Broker A and 10,000 shares
offered by Broker B. If an XPress order to buy 25,000 shares arrives at
the post, the specialist will ask if anyone is willing to offer price
improvement to a 25,000 share XPress order to buy at 50. Broker B could
withdraw 10,000 shares offered at 50 and offer to sell 10,000 shares at
49\15/16\. The XPress order would then buy 10,000 shares at the
improved price of 49\15/16\. Broker A could not then withdraw 20,000
shares offered at 50 because the XPress order has already been
represented. The XPress order is entitled to 15,000 at 50 to complete
the order, even though the quote is now below the minimum size.
All or part of the balance of an XPress bid or offer could be
withdrawn after an XPress order has been executed and before any
subsequent XPress orders are represented.
A member who is providing a better price to an XPress order must
trade with all other market interest having priority at that price
before trading with the XPress order. For example, assume the market is
quoted 49\15/16\ bid for 5,000 shares and 60,000 shares offered at 50
which is an XPress offer. If an XPress order to buy 30,000 shares at 50
comes in and a broker in the Crowd offers to improve the price by
selling 30,000 shares at 49\15/16\, the broker must first trade with
the 5,000 share bid at 49\15/16\ which has priority. The XPress order
would then buy 25,000 shares at 49\15/16\ and would complete the order
by buying 5,000 shares at 50.
The effective date of the proposed rule change will be based on the
implementation of enhancements to NYSE systems as well as the state of
readiness of the member firm community. The preliminary target is to
[[Page 43804]]
complete NYSE systems enhancements to support XPress orders by the
third quarter of 2000.
2. Statutory Basis
The Exchange believes that the basis under the Act for this
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 a national market system and, in general,
to protect investors and the public interest. The NYSE believes the
proposed rule change would perfect the mechanism of a free and open
market by permitting orders that meet the rule's requirements to
interact with exposed XPress bids and offers to the fullest extent
possible, thus providing more options for market participants. The
Exchange believes that the proposed rule change is designed to protect
investors and the public interest by requiring that bids and offers be
of a minimum size and be displayed for a minimum period of time before
becoming XPress, and thus should give brokers and non-XPress orders the
opportunity to interact with the quote before coming XPress eligible.
In addition, brokers may interact with an XPress order by providing
price improvement. The Exchange believes that the proposed rule change
should protect bids and offers on the book or in the Crowd that have
priority at an improved transaction price and all orders are executed
in time and price priority.
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\4\ 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 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 reason 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 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.
Copies of such filing will also be available for inspection and
copying at the principal office of the NYSE. All submissions should
refer File No. SR-NYSE-99-24 and should be submitted by September 1,
1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-20630 Filed 8-10-99; 8:45 am]
BILLING CODE 8010-01-M
