[Federal Register Volume 60, Number 85 (Wednesday, May 3, 1995)]
[Notices]
[Pages 21839-21840]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10853]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35653; File No. SR-NYSE-95-09]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Entry of Limit-
at-the-Close Orders

April 27, 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 March 3, 
1995, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change, and on April 18, 1995, filed 
Amendment No. 1 to the proposed rule change,\1\ 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.

    \1\Amendment No. 1 made non-substantive, clarifying changes to 
the proposal. See Letter from James E. Buck, Senior Vice President 
and Secretary, NYSE, to Glen Barrentine, Team Leader, SEC dated 
April 17, 1995.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would provide for a one-year pilot for the 
entry of limit-at-the-close (``LOC'') orders\2\ to offset a market-at-
the-close (``MOC'') order\3\ imbalance of 50,000 shares or more in all 
stocks for which MOC order imbalances are published.

    \2\A LOC order is a limited price order entered for execution at 
the closing price if the closing price is within the limit 
specified. See Securities Exchange Act Release No. 33706 (March 3, 
1994), 59 FR 111093.
    \3\A MOC order is a market order to be executed in its entirety 
at the closing price on the Exchange. See NYSE Rule 13.
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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. [[Page 21840]] 

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to expand the universe 
of stocks in which LOC orders may be entered to all stocks for which 
MOC imbalances are published pursuant to such procedures regarding time 
of order entry and order cancellation as the Exchange may establish 
from time to time. The Exchange intends to keep the 3:55 p.m. cutoff 
time for the entry of LOC orders, except to correct a bona fide error. 
On expiration days,\4\ LOC orders will continue to be irrevocable after 
3:40 p.m., except to correct a bona fide error. For non-expiration 
days, cancellation of LOC orders would be prohibited after 3:55 p.m., 
except to correct errors.

    \4\The term ``expiration days'' refers to both (1) the trading 
day, usually the third Friday of the month, when some stock index 
options, stock index futures and options on stock index futures 
expire or settle concurrently (``Expiration Fridays'') and (2) the 
trading day on which end of calendar quarter index options expire 
(``QIX Expiration Days'').
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    In SR-NYSE-92-37, the Exchange filed a proposed amendment to 
Exchange Rule 13 to provide that LOC orders may be entered to offset 
published imbalances of MOC orders of 50,000 shares or more in stocks 
selected from the expiration day pilot stocks.\5\ The Commission 
approved this proposal on a 15-month pilot basis through July 15, 
1995.\6\

    \5\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.
    \6\See Securities Exchange Act Release No. 33706 (March 3, 
1994), 59 FR 11093.
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    The LOC pilot currently consists of only five of the expiration day 
``pilot stocks.'' Thus far, the LOC order type has been used rarely. 
Members cite the limited number of stocks for which this order type may 
be entered as a primary reason for not committing resources to effect 
system program changes necessary to support this order type.
    The Exchange believes that by expanding the universe of eligible 
LOC stocks, the Exchange will make it more feasible for member firms to 
effect the systems changes required to use this order type. The 
Exchange is therefore proposing to expand the pilot to permit the entry 
of LOC orders to offset a MOC order imbalance of 50,000 shares or more 
in all stocks for which MOC order imbalances are published.\7\

    \7\Currently, MOC imbalances are published for pilot stocks on 
expiration days and non-expiration days. In addition, on non-
expiration days, MOC imbalances are published for stocks that are 
being added to or dropped from an index and, upon the request of a 
specialist, any other stock with the approval of a Floor Official. 
See Securities Exchange Act Release No. 35589 (April 10, 1995), 60 
FR 19313.
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    The Exchange believes that the LOC order type may be a useful means 
to help address the prospect of excess market volatility that may be 
associated with an imbalance of MOC orders at the close. Therefore, the 
Exchange believes it is appropriate to expand the current pilot for LOC 
orders to all stocks for which MOC imbalances are published and to 
extend the pilot for LOC orders one year from the date of approval of 
this proposed rule change.\8\

    \8\Given the limited use of the LOC order type in the current 
pilot for five stocks, the Exchange proposes that the existing pilot 
be replaced with the one year pilot for LOCs in all stocks proposed 
herein.
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2. Statutory Basis
    The basis under the Act for this 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 
a national market system and, in general, to protect investors and the 
public interest. The proposed rule change perfects the mechanism of a 
free and open market by providing investors with the ability to use LOC 
orders as a vehicle for managing risk 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 proposes 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 date, 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. Sec. 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 the File No. SR-NYSE-95-09 and should be 
submitted by May 24, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-10853 Filed 5-2-95; 8:45 am]
BILLING CODE 8010-01-M