[Federal Register Volume 59, Number 233 (Tuesday, December 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29934]


[[Page Unknown]]

[Federal Register: December 6, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35019; File No. SR-NYSE-94-38]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc. Relating to Amendments to 
Exchange Rule 104.13

November 29, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on October 
26, 1994, 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 self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

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 Rule 104.13 
regarding investment account transactions of specialists and related 
parties. The text of the proposed rule change is as follows, with 
language to be deleted in brackets and language to be added in italics:

Rule 104

.13 Investment Transactions

    (a) Any transactions effected for the benefit of any of the 
following [accounts] persons in stocks in which a specialist is 
registered must be for investment purposes:
* * * * *
    (d) [Specialists should not originate orders in the stocks in 
which they are registered for any accounts over which they exercise 
investment discretion.] No specialist, and no member, allied member, 
approved person (other than an approved person entitled to an 
exemption from this rule pursuant to Rule 98) affiliated with such 
specialist, officer, employee or person active in the business of 
the specialist shall originate orders in stocks in which such 
specialist is registered for any account over which they exercise 
investment discretion.
    (e) Transactions in a stock in which a specialist is registered 
effected for trust accounts, including ``blind'' accounts, for the 
benefit of such specialist or any person specified in paragraph (a) 
shall be subject to the provisions of this rule. Transactions in a 
fund which invests broadly in securities and which may from time to 
time invest in a securities in which a specialist is registered, 
shall not be subject to this rule.

Rule 98 Guidelines

    (a) * **
    The Exchange Rules listed below impose certain restrictions on 
an approved person who is associated with the specialist member 
organization.
* * * * *
     Rule 104.13 provides that any transaction for the 
[account] benefit of an approved person associated with a specialist 
member organization, in any stock in which a specialist in the 
specialist member organization is registered, must be for investment 
purposes and effected in a stabilizing manner, and precludes an 
approved person from originating an order in such stock for any 
account over which such approved person exercises investment 
discretion.

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

1. Purpose
    Rule 104.13 requires that transactions effected in speciality 
stocks for the accounts of specified persons affiliated with or related 
to a specialist must be for investment purposes and executed in 
accordance with certain restrictions relating to the price at which 
transactions may take place, known as ``tick'' restrictions. The 
accounts specified in the rule include accounts of employees or parties 
active in the business of the specialist, the spouse or children 
residing in the same household as a specialist or persons active in the 
specialist business, and any approved person (individual or entity in a 
control relationship) of the specialist, other than an approved person 
entitled to an exemption pursuant to Exchange Rule 98.\1\
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    \1\NYSE Rule 98 and its Guidelines provide exemptions from 
various Exchange rules affecting approved persons affiliated with 
specialists, including Rule 104.13. The exemption is predicated on 
the existence of procedures to achieve a functional separation 
between the specialist organization and the approved person.
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    The Exchange believes it is appropriate to amend Rule 104.13 to 
make it clear that the investment account transaction requirements 
contained in the rule apply to transactions effected ``for the benefit 
of'' the parties specified in the rule, rather than simply to 
transactions effected for the ``account'' of such parties. This would 
apply, for example, to situations where transactions may not be 
effected directly for the ``account'' of one of the parties specified 
in the rule, but may be effected for an account in which one of these 
specified parties has a beneficial interest. The rule would also make 
it clear that specialists, and persons associated with specialists, may 
not originate orders in specialty stocks for any accounts over which 
they exercise investment discretion.
    The Exchange also is proposing to amend NYSE Rule 104.13 to make it 
clear that the rule applies to transactions effected for the benefit of 
trust accounts, including so-called ``blind'' trust accounts, of any 
person specified in the rule. NYSE Rule 104.13 would be further amended 
to provide that transactions in a broad-based fund, which may from time 
to time invest in a specialty stock in the course of investing in 
numerous stocks, would not be subject to the rule.
    The Exchange also is proposing to amended the Guidelines to Rule 98 
to reflect the amendments to NYSE Rule 104.13 noted above.
2. Statutory Basis
    The basis for the proposed rule change is the requirement under 
Section 6(b)(5) of the Act 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. The 
proposed amendments are consistent with these objectives in that they 
ensure that the restrictions contained in Rule 104.13 are appropriately 
applied to accounts that benefit the persons subject to its provisions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition that is not necessary or 
appropriate in futherance 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 publication of this notice in the Federal 
Register or within such other 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 the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interests 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 NW., Washington, DC 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 at the 
Commission's Public Reference Section, 450 Fifth Street NW., 
Washington, DC 20549. 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-94-38 and should be 
submitted by December 27, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-29934 Filed 12-5-94; 8:45 am]
BILLING CODE 8010-01-M