[Federal Register Volume 62, Number 161 (Wednesday, August 20, 1997)]
[Notices]
[Pages 44298-44299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22058]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38930; File No. SR-NYSE-97-23]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by New York Stock Exchange, Inc., Relating to the Regulation of
Market Data Used on the Exchange Floor
August 12, 1997.
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 July 1, 1997, 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 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).
\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 Exchange proposes to introduce new Rule 39 (Market Data
Restrictions and Liability Limitations) into its rules in order to
regulate the receipt and use of the market data that the Exchange, with
the assistance of various other parties, makes available on the Floor
of the Exchange.
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
The Exchange uses its facilities to make various categories of
market information--including last sale prices, bids and offers,
related sizes and the like--available on the Exchange Floor for use by
Exchange members in the course of performing their membership
functions. Typically, the Exchange enters into arrangements with
traditional vendors of market data services in order to have the
vendors assist the Exchange in making market information available on
the Floor. The Exchange proposes to add a new Rule 39 (Market Data
Restrictions and Liability Limitations) to regulate the provision of
market data to the Floor of the Exchange through Exchange facilities.
The proposed rule seeks to accomplish three purposes:
1. It would exculpate the Exchange, market data vendors, market
data sources and others that assist in the process of making market
information available on the Floor through the facilities of the
Exchange from members' claims of liability as the result of the
dissemination of inaccurate or delayed information or the omission of
information. The exculpation applies in respect of any such party's
negligence or any cause beyond its reasonable control. It would not
exculpate any party for gross negligence or willful misconduct.
2. It would clarify that each of the derivative sources of market
data retains proprietary rights to the market data that it makes
available.
3. It would prohibit members from redistributing the market data
that the Exchange makes available on the Floor to any other person,
except for the occasional furnishing of limited amounts of information
in the regular course of a member's securities business on the Floor.
The Exchange considers its members' easy and complete access to
market information on the Floor of the Exchange to constitute a
singularly important aspect of the Exchange's trading environment. The
Exchange believes such access is essential to the process of making
markets and to the capital-raising process. By providing basic
protections from liability to market data vendors, sources of market
data and those that assist in the process of making market data
available, the proposed rule change will allow each of those entities
to perform their respective roles. As a result, the Exchange believes
the proposed rule change would greatly facilitate the Exchange's
ability to enter into working relationships with those entities and
improve the Exchange's ability to place market information in the hands
of its members.
The Exchange believes the proposed legal protections would act as
surrogates for direct contractual relationships between the Exchange
and/or vendors on the one hand and Exchange members that receive access
to market data on the Floor on the other. That is, the Exchange
traditionally requires professional end users of the market data that
is made available under the CTA Plan and the CQ Plan to execute
contracts. Similarly, vendors traditionally require each of their
market data service subscribers to execute contracts. Each such
contract typically contains counterpart provisions to the ones that the
Exchange is proposing for its new rule.\3\ By placing those provisions
into an Exchange rule, the Exchange intends to obviate the need for
those contracts.
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\3\ For instance, the proposed provisions mimic clauses found in
the standard form of agreement that the Exchange and the other CTA
Plan Participants enter into with vendors and subscribers. The
Commission has approved contracts containing those provisions on
several occasions. See, for example, the form of vendor contract
contained in Exhibit C to the Second Restatement of the CTA Plan,
which the Commission approved last year. (Release No. 34-37191; File
No. SR-CTA/CQ-96-1; May 9, 1996.)
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In addition, the adoption of rules designed to protect a securities
market's agents and contractors and to induce those agents and
contractors to assist the securities markets in providing its
traditional services is nothing new. For instance, Exchange rules
presently contain similar exculpatory provisions for the calculation of
index values \4\ and for basket information.\5\ Other equity markets
have similar protections in their rules.\6\
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\4\ See Paragraph (b) of Exchange Rule 702 (Rights and
Obligations of Holders and Writers).
\5\ See Exchange Rule 813 (Limitation of Liability).
\6\ See, for instance, American Stock Exchange Rules 902C and
1003 and Chicago Board Options Exchange Rules 6.7, 7.11 and 23.14.
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The Exchange believes that Article II, Section 6 (Use of Exchange
Facilities) of the Exchange Constitution already exculpates the
Exchange from liability for damages that grow out of the use or
enjoyment of the Exchange's facilities. The Exchange has always deemed
that Constitutional provision to implicitly protect the Exchange's
agents and contractors in the same manner as it protects the Exchange
and the proposed rule change is intended to supplement, not limit, the
applicability of that provision. The Exchange believes the proposed
rule change would merely codify and expound upon that reading of the
provision and clarify the Exchange's interpretation.
[[Page 44299]]
The Exchange believes the proposed rule change is consistent with
the requirements of Section 6(b)(5) of the Act \7\ that an exchange
have rules that are designed to promote just and equitable principles
of trade, and, in general, to protect investors and the public
interest.
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\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not 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 not solicited, and does not intend to solicit,
comments on the proposed rule change. The Exchange has not received any
unsolicited written comments from members or other interested parties.
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 such proposed rule change, or
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interest 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 in 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. An
submissions should refer to File No. SR-NYSE-97-23 and should be
submitted by September 10, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-22058 Filed 8-19-97; 8:45 am]
BILLING CODE 8010-01-M
