[Federal Register Volume 60, Number 11 (Wednesday, January 18, 1995)]
[Notices]
[Pages 3690-3691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1197]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35210; File No. SR-NYSE-94-44]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc. Relating to Amendments to 
Market-at-the-Close Order Handling Requirements for Expiration and Non-
Expiration Days

January 10, 1995.
    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 December 
5, 1994, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') 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 modifications to the order 
entry and imbalance display procedures for market-at-the-close 
(``MOC'') orders on expiration and non-expiration days, as described in 
two separate Information Memos. The Information Memo for expiration 
days would be issued before each application of the pilot program that 
allows the NYSE to use auxiliary closing procedures for handling MOC 
orders on expiration days (subject to Commission approval);\1\ the 
Information Memo for non-expiration days would be issued once this 
filing is approved.\2\ The term ``expiration days'' refers collectively 
to the last trading day before the one day a month that standardized 
contracts in stock index futures, stock index options and options on 
stock index futures expire (``Expiration Friday''), and the last 
trading day of each calendar expiration (``QIX'') options (``QIX 
Expiration Day'').

    \1\The Commission has approved the NYSE's auxiliary closing 
procedures for handling MOC orders on expiration days on a pilot 
basis until October 31, 1995. See Securities Exchange Act Release 
No. 34916 (October 31, 1994), 59 FR 55507 (November 7, 1994) (File 
No. SR-NYSE-94-32). The NYSE has requested that the revised 
procedures for expiration days, as proposed herein, be approved as 
part of the pilot program that is currently in effect. See letter 
from Donald Siemer, Director, Market Surveillance, NYSE, to Beth 
Stekler, Attorney, Division of Market Regulation, SEC, dated 
December 22, 1994 (``December 22nd letter'').
    \2\The Commission has approved the NYSE's closing procedures for 
non-expiration days on a permanent basis. See Securities Exchange 
Act Release No. 31291 (October 6, 1992), 57 FR 47149 (October 14, 
1992) (File No. SR-NYSE-92-12). The NYSE has requested that the 
revised procedures for non-expiration days, as proposed herein, be 
approved on a permanent basis. See December 22nd letter, supra, note 
1.
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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
    Under the current pilot program for expiration days,3 NYSE 
procedures require that MOC orders in any stock related to a strategy 
involving expiring index derivative products be entered for execution 
by 3:40 p.m., and that no cancellation or reduction of any MOC order in 
any stock take place after 3:40 p.m. For the pilot stocks on expiration 
days,4 imbalances of 50,000 shares or more are published as soon 
as practicable after 3:40 p.m. After the imbalance publication, MOC 
orders in the pilot stocks may be entered only to offset a published 
imbalance. MOC orders may not be entered if there is no imbalance 
publication. The Exchange proposes that all MOC orders in all stocks 
(regardless of strategy) be required to be entered by 3:40 p.m. on 
expiration days, except orders to offset imbalance publications.

    \3\See supra, note 1.
    \4\The Expiration Friday pilot stocks consist of the 50 most 
highly capitalized Standard & Poors (``S&P'') 500 stocks and any 
component stocks of the Major Market Index (``MMI'') not included 
therein. The QIX Expiration Day pilot stocks consist of the 50 most 
highly capitalized S&P 500 stocks, any component stocks of the MMI 
not included therein and the 10 highest weighted S&P Midcap 400 
stocks.
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    Currently, on non-expiration days, imbalances of 50,000 shares or 
more in [[Page 3691]] the pilot stocks5 or in stocks being added 
to or dropped from an index are published as soon as practicable after 
3:45 p.m. In contrast to the expiration day procedures described above, 
there is no deadline for the entry or cancellation of MOC orders on 
non-expiration days. Imbalance publications on non-expiration days are 
for information purposes only and do not preclude the entry or 
cancellation of MOC orders on either side of the market in such stocks.

    \5\See supra, note 4.
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    The Exchange is proposing to set a deadline of 3:50 p.m. for the 
entry of all MOC orders in all stocks on non-expiration days, except 
orders to offset imbalance publications. Brokers in the crowd would be 
required to make their MOC interest known to the specialist by this 
time. Imbalance publications of 50,000 shares or more in the pilot 
stocks, or in stocks being added to or dropped from an index, would be 
published as soon as practicable after 3:50 p.m. After 3:50 p.m., MOC 
orders may be entered only to offset published imbalances. The purpose 
of setting this deadline is to minimize excess market volatility that 
may be associated with large-size MOC orders that are entered very near 
the close on non-expiration days. MOC orders would be irrevocable after 
3:50 p.m. on non-expiration days.
    The pilot for limit-at-the-close (``LOC'') orders would continue to 
require that such orders be entered by 3:55 p.m. in response to a 
published imbalance in one of the LOC pilot stocks.6 Information 
Memos would be issued to announce these changes to the Exchange 
membership.

    \6\A LOC order is a limited price order entered for execution at 
the closing price if the closing price is within the limit 
specified. The Commission has approved LOC order entry on a pilot 
basis until July 15, 1995. See Securities Exchange Act Release No. 
33706 (March 3, 1994), 59 FR 11093 (March 9, 1994) (File No. SR-
NYSE-92-37). Under that pilot program, LOC orders may be entered 
only to offset a published imbalance of MOC orders. The deadline for 
LOC order entry is 3:55 p.m. LOC orders are irrevocable on 
expiration days; on non-expiration days, cancellation of LOC orders 
is prohibited after 3:55 p.m. Currently, the NYSE permits LOC order 
entry in five of the pilot stocks.
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2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) 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 
rule change does so by preventing a last-minute influx or disappearance 
of MOC orders which could potentially add to volatility at the close.

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 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

    Interested 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 at 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. All 
submissions should refer to File No. SR-NYSE-94-44 and should be 
submitted by February 8, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-1197 Filed 1-17-95; 8:45 am]
BILLING CODE 8010-01-M