[Federal Register Volume 64, Number 169 (Wednesday, September 1, 1999)]
[Notices]
[Pages 47883-47885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22693]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41787; File No. SR-NYSE-99-31]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Amending Exchange Rules
902, 903 and 906
August 25, 1999.
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 June 30, 1999, 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, II,
and III below, which Items have been prepared by the Exchange. 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 proposed to amend NYSE Rules 902, 903 and 906 to
permit coupled orders to be submitted after the official closing of the
9:30 a.m. to 4:00 p.m. trading session until 5:00 p.m. (the period
after the 4:00 p.m. close until 5:00 p.m. hereafter referred to as
``Crossing Session 1'') where both sides represent member or member
organization interest, in circumstances in which a specialist has
included another member's or member organization's interest in
offsetting the imbalance when setting a closing price. The text of the
proposed rule change is available at the Exchange, 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 Exchange 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 Exchange 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
In 1991, the Exchange established its ``Off-Hours Trading
Facility.'' In connection with its implementation, the Exchange adopted
the ``900'' series of rules to govern trading, order eligibility, order
entry and record keeping requirements.
At 4:00 p.m. each day, the Exchange completes its normal procedure
for the close of trading of the 9:30 a.m.-4:00 p.m. trading session.
After 4:00 p.m., a common message switch broadcast message is published
announcing the commencement of Crossing Session 1, which runs until
5:00 p.m.
[[Page 47884]]
During Crossing Session 1, the Off-Hours Trading Facility permits
members and member organizations to enter orders to be executed at the
NYSE closing price, that is, the price established by the last regular
way sale in a security at the official closing of the 9:30 a.m. to 4:00
p.m. trading session. Orders may be entered for any Exchange listed
issue, other than a security that is subject to a trading halt at the
close of the regular trading session (including a Rule 80B trading
halt) or is halted after 4:00 p.m.
The Exchange proposed to modify certain rules pertaining to
Crossing Section 1 in an effort to reduce volatility and price
dislocations at the 4:00 p.m. close by enabling the specialist to
reflect legitimate market interest that was willing to participate in
the close, but could not enter a timely order.
In circumstances in which a stock has an imbalance of market-on-
close or limit-on-close orders, or when the closing price will elect a
significant volume of stop orders, there may be little time to attract
offsetting orders. A member, member organization or a customer may be
willing to offset the imbalance, but be unable to enter an order before
4:00 p.m. The specialist may then have to acquire a substantial
position or halt trading.
Under NYSE Rule 902, coupled orders to buy and sell the same amount
of the same security may be entered into Crossing Session 1. However,
such coupled orders may not be entered if they are both for an account
of a member or member organization, or for an account in which an
``associated person'' of a member or member organization has an
interest.
Therefore, while a specialist member organization may enter an
order coupled with a contra-side order from a non-member in Crossing
Section 1, it may not enter an order coupled with an order for a
member's or member organization's account.
The Exchange proposes to amend NYSE Rule 902 to permit coupled
orders to be submitted to Crossing Session 1 where both sides represent
member or member organization interest, in circumstances in which a
specialist has included another member's or member organization's
interest in offsetting the imbalance when setting a closing price.
Thus, the specialist will increase his or her participation at the
close in anticipation of trading with a member or member organization
in Crossing Session 1 and the closing price will reflect less of an
imbalance.
Under NYSE Rule 903, orders entered in Crossing Session 1,
including coupled orders, are executed at the 5:00 p.m. close of the
session. Under NYSE Rule 906, if the Exchange determines that material
news is disclosed between 4:00 p.m. and 5:00 p.m., such as about a
corporate development, it will cancel orders received in Crossing
Session 1 and will preclude the entry of any subsequent orders.
However, in the circumstances, outlined above, it is the Exchange's
view that a good faith negotiation tied to establishing the closing
price should not be affected by a subsequent event which ``halts''
trading.
Therefore, the Exchange proposes to amend NYSE Rules 903 and 906 to
permit trades for the account of a specialist and a member, member
organization or a non-member to be executed immediately when entered
into Crossing Session 1 and not at 5:00 p.m. regardless of whether the
Exchange has determined that all other Crossing Session 1 orders be
canceled and precluded from entry. In addition, the specialist will be
required to obtain Floor Official approval for the entry of his or her
order into Crossing Session 1 if such order is not to be at the risk of
the market, i.e., it will be executed immediately and will not be
precluded from entry because of a trading ``halt.'' This requirement
will help to insure that these orders, which are intended to offset the
specialist's participation at the close, have been reflected when the
closing price was established. Other coupled orders would continue to
be executed at 5:00 p.m., subject to the stock not being withdrawn from
Crossing Session 1. The Exchange believes that retaining this provision
for other orders is appropriate for the protection of investors who may
not be aware of the corporate development.
Total executed volume for coupled orders which are executed either
immediately upon entry or at 5:00 p.m. would be reported to the tape as
a single print, and will continue to be reported as ``sold.''
2. Statutory Basis
The basis under the Act for the proposed rule change is the
requirement under Section 6(b)(5) \3\ 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, in general, to protect investors and the public interest.
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\3\ 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 reasons for so finding; or (ii) as
to which the Exchange 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
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, N.W., 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 to file number SR-NYSE-99-31 and
should be submitted by September 22, 1999.
[[Page 47885]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-22693 Filed 8-31-99; 8:45 am]
BILLING CODE 8010-01-M
