[Federal Register Volume 60, Number 226 (Friday, November 24, 1995)]
[Notices]
[Pages 58123-58124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28624]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36489; File No. SR-NYSE-95-37]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Relating to a Pilot Program to Display Price Improvement on the 
Execution Report Sent to the Entering Firm

November 16, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
November 6, 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. On November 16, 1995, the NYSE filed Amendment No. 1 to 
the proposed rule change.\1\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.

    \1\ See letter from James E. Buck, Senior Vice President and 
Secretary, NYSE, to Howard Kramer, Associate Director, Division of 
Market Regulation, SEC, dated November 16, 1995. Amendment No. 1 
modified the original filing by removing the Exchange's proposal to 
calculate price improvement based on size. Amendment No. 1 also 
modified the pilot to make the program available to all NYSE member 
organizations starting in January 1996.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change consists of additional descriptions of the 
pilot program whereby the Exchange will test and evaluate a means of 
calculating and displaying, on the execution reports sent to member 
firms, the dollar amounts realized as savings to their customers as a 
result of price improvement in the execution of their orders on the 
Exchange.\2\ Initially, the Exchange expects to work with Merrill 
Lynch, Pierce, Fenner & Smith, Incorporated (``Merrill Lynch'') in 
testing and evaluating the proposed methodology. Assuming the results 
of the pilot program are successful, the Exchange will make this 
program available to all its member organizations in January 1996.

    \2\ See Securities Exchange Act Release No. 36421 (October 26, 
1995), 60 FR 55625 (November 1, 1995) (notice of filing and 
immediate effectiveness of proposed rule change by the NYSE relating 
to a six-month pilot program to display price improvement on the 
execution report sent to the entering firm) (File No. SR-NYSE-95-35) 
(``Pilot Filing'').
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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
    As noted in the Pilot Filing, the purpose of the six month pilot 
program is to develop, test, and evaluate a methodology and program for 
calculating and displaying, on an execution report sent to member firms 
entering orders, the dollar value saved by their customers as a result 
of price improvement of orders executed on the Exchange. This program 
does not in any way affect the actual execution of orders. The Exchange 
refers to this calculated dollar savings as the ``NYSE PRIME SM.''

    \SM\ NYSE is a service mark of the New York Stock Exchange.
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    In the Pilot Filing, the Exchange presented several examples of how 
NYSE PRIME is intended to work. Herein, the Exchange is providing an 
additional example as to how NYSE PRIME will operate in situations when 
an order is stopped against the prevailing bid or offer and then 
exposed at a better price in an effort to obtain price improvement for 
the order.
    Assume the NYSE market quote is 50-50\3/8\, with 500 shares bid and 
10,000 offered, and that the best offer displayed in the National 
Market System is 50\1/4\ for 200 shares. A market order to buy 1,000 
shares, entered on the NYSE is stopped at 50\3/8\, meaning it is 
guaranteed to buy at 50\3/8\ or a better price. The order is 
subsequently executed at 50\1/4\ on the NYSE. Because in this situation 
there is not complete price improvement, there would be no 
representation of NYSE PRIME price improvement on the execution report.
    The NYSE PRIME program operates in the same manner when an order is 
not stopped, but is executed at a price equal to the best price 
displayed in the National Market System if that quotation size is 200 
shares or more.\3\

    \3\ The Commission notes that this filing initially proposed to 
modify the program, as soon as practicable, to reflect price 
improvement on 800 shares in the above example, whether or not the 
order was stopped. In Amendment No. 1, the NYSE indicated that it 
will not modify the PRIME program to represent price improvement as 
initially proposed in this filing. See supra note 1.
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2. Statutory Basis
    The basis under the Act for this 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. This rule change is designed to perfect the mechanism of a 
free and open market in that it enhances the information provided to 
investors by displaying to them the dollar value of the price 
improvement their orders may have received when executed on the NYSE.

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

    The Exchange does not believe that the rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. In fact, the Exchange believes 
that the NYSE PRIME program can reasonably be expected to enhance 
competition by disclosing to investors the amount of savings they may 
realize as a result of the price improvement their orders may receive 
when executed on the NYSE.

[[Page 58124]]


C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    This rule change is filed pursuant to paragraph (A) of Section 
19(b)(3) of the Act, and paragraphs (e)(5)(i), (ii), and (iii) of Rule 
19b-4 thereunder. The NYSE PRIME program will entail enhancements to 
the Exchange's CMS (common message switch), SuperDOT and Post Trade 
systems. This program does not significantly affect the protection of 
investors or the public interest, does not impose any significant 
burden on competition, and does not have the effect of limiting access 
to or availability of any Exchange order entry or trading system. As 
such, this rule change, as amended on November 16, 1995,\4\ may take 
effect immediately upon filing with the Commission, to modify the 
program described in SR-NYSE-95-35.\5\ At any time within 60 days of 
the filing of such 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.

    \4\ See supra note 1.
    \5\ See supra note 2.
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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 Exchange. All 
submissions should refer to File No. SR-NYSE-95-37 and should be 
submitted by December 15, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-28624 Filed 11-22-95; 8:45 am]
BILLING CODE 8010-01-M