[Federal Register Volume 60, Number 211 (Wednesday, November 1, 1995)]
[Notices]
[Pages 55626-55628]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27005]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36416; File No. SR-NYSE-95-33]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. (``NYSE'' or ``Exchange'') filed with the Securities and Exchange, 
Inc., Relating to Additions to List of Rule Violations and Fines 
Administered Pursuant to NYSE Rule 476A

October 25, 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 October 
2, 1995, 

[[Page 55627]]
the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'' filed with 
the Securities and Exchange Commission (``SEC'' or ``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 NYSE proposes to add the following options rules to the ``List 
of Exchange Rule Violations and Fines Applicable Thereto Pursuant to 
Rule 476A'' (``Rule 476 List''): (1) the requirement under NYSE Rule 
750(e)(i) that options specialists establish bid/ask spreads no greater 
than the maximum permitted Competitive Options Traders (``COTs''), 
based on the price of the option or the bid/ask differential of the 
underlying security; (2) the requirement under NYSE Rule 
758(b)(i)(C)(1) that COTs establish bid/ask spreads within specified 
parameters, based on the price of the option or the bid/ask 
differential of the underlying security; (3) the requirement under NYSE 
Rule 780(b)(i) that members and member organizations indicate to the 
Exchange the final decisions of equity option holders to exercise or 
not to exercise expiring equity options by a specified time; and (4) 
the requirement under NYSE Rule 780(f) that members and member 
organizations make, keep, and file with the Exchange records concerning 
every final exercise decision for which a contrary exercise advice is 
required.\1\ The NYSE also plans to amend its 19d-1 reporting plan\2\ 
for NYSE Rule 476A violations to include the rules added to the Rule 
476A List.3

    \1\A contrary exercise advice is a form that the Exchange 
prescribes for use by a member or member organization to convey a 
final exercise decision of an equity option holder either (1) not to 
exercise an equity option that would otherwise by exercised 
automatically pursuant to the exercise-by exception procedure of 
Options Clearing Corporation Rule 805; or (2) to exercise an equity 
option that would otherwise not be so exercised.
    \2\Pursuant to Rule 19d-1(c)(1) under the act, a self-regulatory 
organization (``SRO'') is required to file promptly with the 
Commission notice of any ``final'' disciplinary action taken by that 
SRO. Pursuant to Rule 19d-1(c)(2), however, any disciplinary action 
taken by an SRO for a violation of an SRO rule, which has been 
designated as a minor rule violation pursuant to a Commission 
approved plan, shall not be considered ``final'' if the sanction 
imposed consists of a fine not exceeding $2,500 and the sanctioned 
person does not seek an adjudication, including a hearing, or 
otherwise exhaust his or her administrative remedies. By deeming 
that unadjudicated minor rule violations are not final, the 
Commission permits the SRO to report such violations on a periodic 
basis. The Commission approved the NYSE's minor rule plan, contained 
in NYSE Rule 476A, in 1985. See Securities Exchange Act Release No. 
21688 (January 25, 1985), 50 FR 5025 (February 5, 1985) (ordered 
approving File No. SR-HYSE-84-27) (``Minor Rule Plan Approval 
Order''). Accordingly, the Exchange is relieved of current reporting 
requirements under Section 19(d)(1) with respect to those 
disciplinary actions taken pursuant to NYSE Rule 476A.
    \3\See Letter from Daniel Parker Odell, Assistant Secretary, 
NYSE, to Glen Barrentine, Senior Counsel, Division of Market 
Regulation, Commission, dated September 29, 1995.
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    The text of the proposed rule change is available at the Office of 
the Secretary, NYSE, and at the Commission.

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

(a) Purpose
    NYSE Rule 476A\4\ provides that the Exchange may impose a fine, not 
to exceed $5,000, on any member, member organization, allied member, 
approved person, or registered or non-registered employee of a member 
or member organization for a minor violation of certain specified NYSE 
rules.

    \4\NYSE Rule 476A was approved by the Commission on January 25, 
1985. See Minor Rule Plan Approval Order, supra note 2. Subsequent 
additions of rules to the Rule 476A List were approved in Securities 
Exchange Act Release Nos. 22307 (May 14, 1985), 50 FR 21008 (May 21, 
1985) (order approving File No. SR-NYSE-85-15); 23104 (April 11, 
1986), 51 FR 13307 (April 18, 1986) (order approving File No. SR-
NYSE-86-12); 24895 (October 5, 1987), 52 FR 41643 (October 29, 1987) 
(order approving File No. SR-NYSE-86-21); 25763 (May 27, 1988), 53 
FR 20925 (June 7, 1988) (order approving File No. SR-NYSE-87-10); 
27878 (April 4, 1990), 55 FR 13345 (April 10, 1990) (order approving 
File No. SR-NYSE-89-44); 28003 (May 8, 1990), 55 FR 20004 (May 14, 
1990) (order approving File No. SR-NYSE-91-09); 28505 (October 2, 
1990), 55 FR 41288 (October 10, 1990) (order approving File No. SR-
NYSE-90-04); 28995 (March 21, 1991), 56 FR 12967) (March 28, 1991) 
(order approving File No. SR-NYSE-91-04); 30280 (January 22, 1992), 
57 FR 3452 (January 29, 1992) (order approving File No. SR-NYSE-91-
38); 30536 (March 31, 1992), 57 FR 12357 (April 9, 1992) (order 
approving File No. SR-NYSE-91-42); 32421 (June 7, 1993), 58 FR 32978 
(June 14, 1993) (order approving File No. SR-NYSE-93-24); 33403 
(December 28, 1993), 59 FR 641 (January 5, 1994) (order approving 
File No. SR-NYSE-95-35); 33816 (March 25, 1994), 59 FR 15471 (April 
1, 1994) (order approving File No. SR-NYSE-93-27); and 34230 (June 
17, 1994), 59 FR 32727 (June 24, 1994) (order approving File No. SR-
NYSE-94-05).
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    The purpose of the NYSE Rule 476A procedure is to provide for a 
response to a rule violation when a meaningful sanction is appropriate 
but when the initiation of a disciplinary proceeding under NYSE Rule 
476, ``Disciplinary Proceedings Involving Charges Against Members, 
Member Organizations Allied Members, Approved Persons, Employees, or 
Others,'' is not suitable because such a proceeding would be more 
costly and time-consuming than would be warranted given the minor 
nature of the violation. NYSE Rule 476A provides for an appropriate 
response to minor violations of certain Exchange rules while preserving 
the due process rights of the party accused through specified, required 
procedures. The Rule 476A List specifies those rule violations which 
may be the subject of fines under the rule and also includes a fine 
schedule.
    In the Minor Rule Plan Approval Order,\5\ which initially set forth 
the provisions and procedures of NYSE Rule 476A, the Exchange indicated 
it would amend the list of rules from time to time, as it considered 
appropriate, in order to phase-in the implementation of NYSE Rule 476A 
as experience with it was gained.

    \5\See note 2, supra.
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    The Exchange presently seeks approval to add to the list of rules 
subject to possible imposition of fine under NYSE Rule 476A procedures 
the failure by members or member organizations to comply with various 
options rules. Specifically, these include NYSE Rule 750(e)(i) and 
758(b)(i)(C) (1), which establish maximum bid/ask spreads which options 
specialists and COTs may make based on the price of the option or the 
bid/ask differential of the underlying security; NYSE Rule 780(b)(i), 
which requires members and member organizations to indicate final 
decisions of equity options holders either to exercise or not to 
exercise expiring equity options by a specified time; and NYSE Rule 
780(f), which requires members and member organizations to make, keep, 
and file with the Exchange records with respect to final exercise 
decisions made with respect to options in certain circumstances.
    The NYSE notes that while the Exchange, upon investigation, may 
determine that a violation of these procedures is a minor violation of 
the 

[[Page 55628]]
type which is properly addressed by the procedures adopted under NYSE 
Rule 476A, in those instances where investigation reveals a more 
serious violation of the above-described rules, the Exchange will 
provide an appropriate regulatory response.
(b) Statutory Basis
    The NYSE believes that the proposed rule change is consistent with 
Section 6(b) of the Act, in general, and, in particular, with Section 
6(b)(6), in that it will provide a procedure whereby member 
organizations can be ``appropriately disciplined'' in those instances 
when a rule violation is minor in nature, but a sanction more serious 
than a warning or cautionary letter is appropriate. The NYSE believes 
that the proposal provides a fair procedure for imposing such 
sanctions, in accordance with the requirements of Sections 6(b)(7) and 
6(d)(1) of the Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The NYSE 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

    Because the foregoing rule change: (1) Does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; (3) was provided to the 
Commission for its review at least five business days prior to the 
filing date; and (4) does not become operative for 30 days after 
October 2, 1995, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(e)(6) thereunder. In particular, 
the Commission believes that the proposal does not significantly affect 
the protection of investors or the public interest and does not impose 
any significant burden on competition. At any time within 60 days of 
the filing of such proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.

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, 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 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. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by November 22, 
1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\

    \6\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27005 Filed 10-31-95; 8:45 am]
BILLING CODE 8010-01-M