[Federal Register Volume 60, Number 92 (Friday, May 12, 1995)]
[Notices]
[Pages 25751-25752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11774]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35687; File No. SR-NYSE-95-17]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc. Relating to Specialists 
Displaying the Full Size of Certain Orders

May 8, 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 April 
21, 1995, 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 an Information Memo which 
discusses procedures under Exchange rules with respect to specialists 
displaying orders received through the SuperDOT order routing system 
and the full size of orders received by specialists manually which are 
subsequently entered into the electronic book.

II. Self-Regultory 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
    The Exchange is proposing to issue an Information Memo outlining 
its policy with respect to displaying certain orders received by a 
specialist.\1\ The policy requires specialists to display the full 
size\2\ of all orders received through the SuperDOT order routing 
system and the full size of all orders received by specialists manually 
which are subsequently entered into the electronic book. This 
requirement includes increasing the size of a quotation for orders at 
the same price as the current bid or offer. The policy also sets forth 
the specialist's responsibility when a member who gives an order 
requests that less than the full size of the order be shown in the 
quotation. In that situation, a specialist is only responsible to enter 
in the electronic book and show the size requested. The portion not 
requested to be shown will be handled manually as a ``held'' order, but 
will be last in terms of time priority to all other orders on the 
specialist's electronic book at that price. If the specialist is 
subsequently requested to show an additional portion, or the remainder, 
of the order, the specialist would enter the price and size into the 
electronic book, with the order so entered having priority on the book 
vis-a-vis other orders as of the time of entry on the book. The 
specialist would increase the quotation size to reflect the additional 
amount entered on the book.

    \1\In Information Memo No. 93-12, the Exchange has previously 
advised specialists that, pursuant to NYSE Rule 79A.10, all orders 
received by specialists through the SuperDOT system are deemed to be 
accompanied by an instruction that they be quoted at the limit price 
on the order when such limit price is better than the current 
quotation.
    \2\Currently the Exchange is capable of displaying quotations up 
to 99,900 shares. The Exchange plans to expand this capability in 
the future.
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    The Exchange believes that this policy is consistent with Exchange 
Rule 104, which requires the effective execution of agency orders 
received by specialists, and with NYSE Rule 60(e).\3\ The Exchange 
expects that specialists would display as soon as practicable any order 
which, in relation to current market conditions in a particular 
security, [[Page 25752]] represents a material change in the supply or 
demand for that security. For example, if the market in XYZ security is 
20 bid to 20\1/4\ offered, 1,000 shares bid and 1,000 shares offered, 
and the specialist receives an order to sell 10,000 shares at 20\1/4\, 
the specialist would be expected to change the size of the offer to 
11,000 shares as soon as he or she becomes aware of the order. If the 
quotation already reflects significant supply (demand), and the 
specialist receives an order that is relatively de minimis in relation 
to such supply (demand), the specialist may take a reasonable period of 
time, which should not generally exceed two minutes, before updating 
the quotation, so as to avoid constant revisions of quotations that do 
not reflect material changes in supply and demand. For example, if the 
market in XYZ security is 20 bid to 20\1/4\ offered, 5,000 shares bid 
and 50,000 shares offered, and the specialist receives an order to sell 
200 shares at 20\1/4\, the specialist would be permitted to wait a 
reasonable period of time before changing the size of the offer to 
50,200 shares.

    \3\NYSE Rule 60(e) requires a specialist to promptly report the 
highest bid and lowest offer made in the trading crowd and the 
associated quotation size that he wishes to make available to 
quotation vendors. The rule also requires a specialist to promptly 
report whenever a bid, offer or quotation size he previously 
reported is to be revised and whenever a bid and/or offer he 
previously reported is to be cancelled or withdrawn.
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    Under exceptional circumstances, the specialist would not 
necessarily display the full quotation size. For example, as noted in 
Information Memo 94-32, when a member proposes to effect a block 
transaction at a significant premium or discount from the prevailing 
market and the specialist is aware of interest on the contra side, it 
may be more appropriate for the specialist and Floor Official(s) to gap 
the quotation in a security for a brief period, generally not exceeding 
five minutes, with a view toward contacting and/or attracting contra 
market interest. In such case, the bid or asked price should touch the 
prior sale price and reflect size of 100 shares by 100 shares. The same 
principles would also apply to a situation where there is a sudden 
influx of market orders on one side of the market which would be likely 
to result in a significant price change.
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 
policy with respect to displaying full size of orders received by 
specialists enhances the purposes of the Act by assuring that accurate 
and complete information with respect to the current market on the 
Exchange for any stock is available to market participants.

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

    No written comments were either solicited or received.

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. Sec. 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-95-17 and should be 
submitted by June 2, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11774 Filed 5-11-95; 8:45 am]
BILLING CODE 8010-01-M