[Federal Register Volume 61, Number 86 (Thursday, May 2, 1996)]
[Notices]
[Pages 19651-19653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10924]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37145; File No. SR-NYSE-96-09]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc. Relating to Amendments to Rule 
80B (Trading Halts Due to Extraordinary Market Volatility) and Rule 51 
(Hours of Business)

April 26, 1996.
    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 
April 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, 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 Exchange proposes to amend Rule 80B to modify the time periods 
for halting trading on the Exchange when the Dow Jones Industrial 
Average (``DJIA'')* has declined by 250 or 400 points. The Exchange 
proposes to amend Rule 51 to permit closing transactions after 4 p.m. 
if Rule 80B is put into effect during the last half-hour of trading (in 
the event of a 250-point decline) or during the last hour of trading 
(in the event of a 400-point decline).
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    *``Dow Jones Industrial Average'' is a service mark of Dow Jones 
& Company, Inc.

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[[Page 19652]]

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, wet 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

2. Purpose
    Rule 80B provides, in part, that if the DJIA falls 250 or more 
points below its previous trading day's closing value, trading in all 
stocks on the Exchange will halt for one hour. It further provides 
that, if on the same day the DJIA drops 400 or more points from its 
previous trading day's close, trading on the Exchange will halt for two 
hours. The Exchange is now proposing to revise those time periods to 
one-half hour and one hour, respectively.\1\
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    \1\ The NYSE has represented to the Commission that it will use 
the intermarket telecommunications system known as Information 
Network for Futures, Options, and Equities (``INFOE'') system as 
well as the Consolidated Tape to announce the precise time when the 
circuit breaker thresholds are reached. Telephone conversation 
between Brian McNamara, Vice President, Market Surveillance, NYSE, 
and Alton Harvey, Office Head, Division of Market Regulation, SEC on 
April 24, 1996.
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    Rule 80B currently also provides that if the 250-point trigger is 
reached during the last hour, but before the last half-hour, of 
trading, or if the 400-point trigger is reached during the last two 
hours, but before the last hour, of trading, the Exchange may use 
abbreviated reopening procedures either to permit trading to reopen 
before 4:00 p.m. or to establish closing prices. Rule 80B further 
provides that if the 250-point trigger is reached during the last half-
hour, or if the 400-point trigger is reached during the last hour, the 
Exchange shall not reopen for trading on that day. The Exchange is 
proposing to amend Rule 80B to provide that if the 250-point trigger is 
reached during the last half-hour of trading, or if the 400-point 
trigger is reached during the last hour of trading, the Exchange may 
use abbreviated reopening procedures to establish new last sale 
prices.\2\
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    \2\ The text of the proposed rule change provides that the NYSE 
may use abbreviated reopening procedures to establish new last sale 
prices when the 250-point or 400-point trigger is reached at 3:30 
p.m. or 3:00 p.m. respectively. Notwithstanding the Rule's reference 
to specific times, however, the Exchange has interpreted its 
proposed rule change as allowing the use of such reopening 
procedures anytime the 250-point or 400-point levels are triggered 
thirty minutes or one hour before the scheduled close, in the event 
that the Exchange is scheduled to close earlier than 4:00 p.m. 
Telephone conversation between Brian McNamara, Vice President, 
Market Surveillance, NYSE, and Alton Harvey, Office Head, Division 
of Market Regulation, SEC on April 24, 1996.
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    Such closing transactions may need to be effected after 4:00 p.m. 
Accordingly, the Exchange is proposing to amend Rule 51 to provide that 
the 9:30 a.m. to 4:00 p.m. trading session may be extended to permit 
closing transactions pursuant to Rule 80B. The Exchange proposes to 
amend Rule 51 on a permanent basis.
    Based on constituent input and in consultation with the Working 
Group on Financial Markets (``Working Group''),\3\ the Exchange 
believes that it is appropriate to reduce the time period during which 
trading will be halted, particularly given the current level of 
automation support for the trading process. These revised time periods 
should be sufficient to provide a meaningful ``time out'' for 
participants to evaluate changing market conditions, without unduly 
constraining trading activity. The Exchange is not proposing, at this 
time, to revise the 250/400 point triggers. The Exchange intends to 
continue discussions with its constituents as to whether any revisions 
to these point parameters might be appropriate.
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    \3\ The Working Group on Financial Markets was established by 
the President in March 1988 to determine what coordinated regulatory 
actions were necessary to strengthen the nation's financial markets 
in the aftermath of the October 1987 market break. The Working Group 
consists of the heads of the Commission, the Board of Governors of 
the Federal Reserve System, the Commodity Futures Trading 
Commission, and the Department of the Treasury.
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    With respect to the use of abbreviated reopening procedures, the 
Exchange believes that if the trigger value is reached and trading 
halted during the last half-hour, respectively, of trading, it may be 
appropriate to provide the opportunity to establish new last sale 
prices. In that regard, the Exchange will be assessing whether 
additional procedures to facilitate a single trade auction are 
appropriate. Such procedures would be filed with the Commission for 
approval.
    Rule 80B was approved by the Commission on a pilot basis on October 
19, 1988, and has been extended for an additional one year period every 
year since then, currently running to October 31, 1996. The Exchange is 
proposing to adopt these amendments to Rule 80B to coincide with that 
year-to-year pilot.
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 Exchange believes that amending Rule 80B on a one-
year pilot basis and amending Rule 51 is consistent with these 
objectives in that the revised trading halt periods and opportunity to 
establish new last sale prices during a period of significant stress 
can be expected to provide market participants with a reasonable 
opportunity to become aware of and respond to significant price 
movements, thereby facilitating, in an orderly manner, the maintenance 
of an equilibrium between buying and selling interest.

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

    The Exchange does not believe that the proposed rule change will 
impose any inappropriate burden on competition.

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 longer 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.,

[[Page 19653]]

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-96-09 and should be submitted by May 23, 1996.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-10924 Filed 5-1-96; 8:45 am]
BILLING CODE 8010-01-M