01-7710. Self-Regulatory Organizations; New York Stock Exchange, Inc.; Order Approving Proposed Rule Change Rescinding Parts of, or the Entire Text of, Exchange Rule 112A.10, Rule 321.25, Rule 392, Rule 393 and Rule 395, Which Reference Rescinded ...

March 22, 2001.

I. Introduction

On August 16, 2000, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),^[1] and Rule 19b-4 thereunder,^[2] a proposed rule change to rescind parts of, or the entire text of, NYSE Rules that either reference rescinded NYSE Rule 390 or restrict off-Board transactions. The proposed rule change was published for comment in the Federal Register on September 27, 2000.^[3] No comments were received on the proposal. This order approves the NYSE's proposal.

II. Description of the Proposal

Former Exchange Rule 390, the NYSE's off-Board trading rule, prohibited Exchange members and their affiliates from effecting transactions in exchange-listed securities away from a national securities exchange. The Commission approved the recission of Exchange rule 390 on May 5, 2000.^[4] As a result, the NYSE is proposing to rescind parts of, or the entire text of, the following Exchange rules that reference rescinded Exchange Rule 390, or off-Board trading restrictions: Rule 112A.10, Rule 321.25, Rule 392, Rule 393 and Rule 395.^[5]

Rule 112A.10: Reports by Off-Floor Traders (Form 82-P)

Rule 112A.10 requires members or members organizations to send a weekly report on Form 82-P covering off-Floor trading, upon the request of the Exchange. Since Rule 390 has been rescinded, this practice is no longer in effect and the report is no longer needed.

Rule 321.25: Formation or Acquisition of Subsidiaries—Off-Board transactions

Section .25 of Rule 321 requires subsidiaries of members or member organizations to obtain Exchange permission before effecting a transaction in a listed stock off the Floor of the Exchange. Since Rule 390 has been rescinded, such permission will no longer be needed before effecting a transaction in a listed stock off the Floor of the Exchange.

Rule 392: Notification Requirements for Offerings of Listed Securities

The reference in this Rule to “secondary distributions pursuant to Rule 393” is no longer necessary, as the Exchange is proposing to rescind Rule 393 (see below).

Rule 393: Secondary Distributions

Rule 393 requires the prior approval of the Exchange for member organizations to participate in an “over-the-counter” or “off-board” secondary distribution of a security admitted to dealing on the Exchange. The Exchange is proposing to rescind this Rule as it is an off-Board transaction restriction.

Rule 395: Off-Floor Transactions in Listed Rights

Rule 395 mandates that members, member organizations, and affiliated persons not effect any transaction in any subscription right admitted to dealing on the Exchange, in the over-the-counter market, either as principal or agent (subject to certain exceptions). The rescission of Rule 390 necessitates the rescission of this Rule because it is a restriction against off-Floor transactions; members, member organizations, and affiliated persons are no longer restricted from trading as principal or agent in the over-the-counter market in a covered security.

III. Discussion

The Commission finds that the proposal is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. Specifically, the Commission believes that the proposal is consistent with the requirements of Section 6(b)(5) of the Act ^[6] because it is 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.^[7] The Commission believes that the proposal will correct inconsistencies in the NYSE Rules created by the rescission of Exchange Rule 390, by revising or eliminating Exchange Rules that either reference rescinded Exchange Rule 390, or restrict off-Board transactions in general. Moreover, by removing barriers to off-Board trading, the rescission of Rule 390 and revisions to these related Exchange Rules will help to support free and open markets within the national market system.

IV. Conclusion

For the foregoing reasons, the Commission finds that the proposal is consistent with the requirements of the Act and rules and regulations thereunder.

It Is Therefore Ordered, pursuant to Section 19 (b)(2) of the Act,^[8] that the proposed rule change (SR-NYSE-00-37) is approved.

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.⁹

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240,19b-4.

3.  Securities Exchange Act Release No. 43309 (September 20, 2000), 65 FR 58137.

4.  Securities Exchange Act Release No. 42758 (May 5, 2000), 65 FR 30175 (SR-NYSE-99-48).

5.  For purposes of this notice, the terms “off-Floor” and “off-Board” are used interchangeably.

6.  15 U.S.C. 78f(b)(5).

7.  In approving this rule, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

8.  15 U.S.C. 78s(b)(2).

9.  17 CFR 200.30-3(a)(12).