[Federal Register Volume 61, Number 62 (Friday, March 29, 1996)]
[Notices]
[Pages 14185-14187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7703]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37016; International Series Release No. 956; File No.
SR-NYSE-96-04]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of a Proposed Rule Change by the New York
Stock Exchange, Inc. Relating to an Amendment of NYSE
March 22, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 11, 1996, 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 and II below, which Items have been
prepared by the NYSE. The Commission is approving the proposal on an
accelerated basis, in addition to publishing this notice to solicit
comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1) (1988).
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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 an amendment to NYSE Rule 104
to facilitate trading in Investment Company Units (``Units''),\2\
including CountryBaskets.\3\
\2\ NYSE Listed Company Manual Section 703.16 defines a Unit as
a security that represents an interest in a registered investment
company that could be organized as a unit investment trust, an open-
end management investment company, or a similar entity.
\3\ ``CountryBasket,'' ``CountryBaskets'' and ``CB'' are
trademarks of Deutsche Bank Securities Corporation).
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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 specificed in Item IV below. The self-regualtory
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
The Exchange proposes to amend its Rule 104 to facilitate
specialist market
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making in Units, including CountryBaskets. Trading in CountryBaskets is
expected to begin on March 25, 1996.\4\
\4\ CountryBasket securities represent an interest in a
registered investment company that will hold securities that are
component stocks of nine different indices. The nine CountryBaskets
are Australia, France, Germany, Hong Kong, Italy, Japan, South
Africa, the United Kingdom and the United States.
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Currently, Rule 104 requires that specialists obtain the approval
of an Exchange Floor Official when effecting a destabilizing
transaction on a direct plus or direct minus tick. The Exchange
proposes to amend Rule 104 by adding new Supplementary Material .10(7)
to provide that the requirement to obtain Floor Official approval for
transactions on a direct plus tick or a direct minus tick for a
specialist's own account contained in Rule 104 Supplementary Material
.10(5)(i)(A), (B), (C) and (6)(i)(A) will not apply to transactions
that are effected for the purpose of bringing the price of a Unit into
parity with the value of the portfolio on which it is based, or the net
asset value of the Unit.
Direct destabilizing transactions that are leading, rather than
following, the underlying component portfolio would continue to require
Floor Official approval. Specialists would remain subject to all other
requirements of Rule 104 with respect to their affirmative and negative
obligations to maintain a fair and orderly market.
The Exchange believes that its proposal is consistent with the Act
in that it is 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 NYSE has requested that the proposed rule change be given
accelerated effectiveness pursuant to Section 19(b)(2) of the Act
because trading in CountryBaskets is expected to begin on March 25,
1996. The Exchange believes that approval of the proposal should
enhance the ability of specialists to make markets in such securities.
(B) Self-Regulatory Organization's Statement on Burdeon 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
Written comments on the proposed rule change were neither solicited
or received.
III. Findings and Conclusions
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of Section 6(b)(5) \5\ that the rules of
an exchange be designed to promote just and equitable principles of
trade, prevent fraudulent and manipulative acts, and, in general,
protect investors and the public interest.
\5\ 15 U.S.C. 78f(b)(5) (1988).
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The Commission believes that the Exchange's proposal to add
Supplemental Material .10(7) to its Rule 104 to facilitate specialist
market making in Units, including CountryBaskets, is consistent with
the Act. The Exchange's proposal is limited to ``parity'' transactions
on direct destabilizing ticks to bring Units, including CountryBaskets,
into line with the value of their corresponding underlying component
portfolio. Moreover, the only change being effected by the proposals is
that such transactions would not require the Floor Official approval
currently mandated by Rule 104. As discussed below, such transactions
must still comply with all of the other requirements of NYSE Rule 104.
The Commission believes that it is appropriate to allow such
transactions without Floor Official approval, given that the
derivatives nature of Units in effect renders them equity securities
that have a pricing and trading relationship linked to the portfolio
upon which they are based. Hence, upon change in the underlying
portfolio, a Units specialist may determine that it needs to engage in
a ``parity'' transactions to bring Units into line with the value of
the corresponding underlying portfolio. The requirement to secure Floor
Official approval could delay the specialist from effecting such
transactions, during which time the value of the portfolio could
continue to move. The Commission believes, therefore, that it is
reasonable for the Exchange to remove the need for Floor Official
approval to address this situation. Direct destabilizing transactions
that are leading, rather than following,the underlying portfolio would
continue to require Floor Official approval.
The Commission notes that the Exchange's proposal does not relieve
Units specialists from the general requirement of NYSE Rule 104 that
they effect transactions that are reasonably necessary for them to
maintain a fair and orderly market in Units. Units specialists also
will remain subject to the specific obligations imp;imposed on them by
rule 104. Thus, consistent wit the maintenance of a fair and orderly
market, transactions for a specialists own account should be such that
they maintain rice continuity with reasonable depth,and minimize the
effects of temporary disparities between supply and demand.\6\
Similarly, a specialist's quotation made for transactions on his own
account should bear a proper relation to preceding transactions and
anticipated succeeding transactions.\7\ Finally, Unit specialist
transactions will be subject to the Exchange's rules governing the
auction market principles of priority. Parity, and precedence of
orders.\8\
\6\ NYSE Rule 104, Supplementary material .10 (1)-(3).
\7\ NYSE Rule 104, Supplementary Material .10(4).
\8\ NYSE Rule 72.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof in the Federal Register. As discussed above, the
Exchange's proposal is narrowly circumscribed to address certain
situations that may arise in connection with specialist market making
in Units, specifically CountryBaskets. Moreover, accelerated approval
will allow specialists to avail themselves of the proposed provision
from the inception of trading, expected to be March 25, 1996.
Accordingly, the Commission believes that it is consistent with Section
6(b)(5) and 19(b)(2) of the Act to approve the proposed rule change on
an accelerated basis.
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
[[Page 14187]]
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 in the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 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 File No. SR-NYSE-96-04 and should be
submitted by April 19, 1996.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-NYSE-96-04) is approved.
\9\ 15 U.S.C.78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
\10\ 17 CFR 200.30-3(a)(12) (1993).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-7703 Filed 3-28-96; 8:45 am]
BILLING CODE 8010-01-M