[Federal Register Volume 61, Number 163 (Wednesday, August 21, 1996)]
[Notices]
[Pages 43284-43285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21318]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37564; File No. SR-NYSE-96-22]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change Relating to the Extension of Rule 103A (Specialist Stock
Reallocation)
August 14, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 6, 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.
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\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The NYSE proposes to extend the effectiveness of Rule 103A,
Specialist Stock Reallocation, until September 10, 1997.
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 NYSE 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 NYSE 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 intent of Rule 103A is to encourage a high level of market
quality and performance in Exchange listed securities. Rule 103A grants
authority to the Exchange's Market Performance Committee to develop and
administer systems and procedures, including the determination of
appropriate standards and measurements of performance, designed to
measure specialist performance and market quality on a periodic basis
to determine whether or not particular specialist units need to take
actions to improve their performance. Based on such determinations, the
Market Performance Committee is authorized to conduct a formal
Performance Improvement Action in appropriate cases.
On May 10, 1995 the SEC extended the effectiveness of the rule
until September 10, 1996.\3\ In its approval order, the Commission
stated its continued belief that the Exchange should develop objective
performance standards to measure specialist performance.\4\ In this
regard, the Exchange notes that it has previously developed two
objective measures of specialist performance. It should be noted,
however, that these measures are not currently included in the Rule
103A program. The first objective measure of performance pertains to
specialist capital utilization. Adopted in December 1993 on a pilot
basis, the capital utilization measure of specialist performance
focuses on a specialist unit's use of its own capital in relation to
the total dollar value of trading activity in the unit's stocks.\5\ The
capital utilization measure pilot has been extended until September 10,
1996.\6\ The Exchange's Allocation Committee is being provided with
specialist capital utilization information for its use in allocation
decisions.
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\3\ See Securities Exchange Act Release No. 35704 (May 10,
1995), 60 FR 26060 (May 16, 1995) [File No. SR-NYSE-95-18].
\4\ See id. The Commission notes that the Exchange's current
evaluation criteria under Rule 103A.10 include objective standards
that measure specialist performance at the opening (both regular and
delayed), systematized order turnaround, and the timeliness of a
unit's response to status requests. Specialist performance also is
measured by the Exchange's Specialist Performance Evaluation
Questionnaire.
\5\ See Securities Exchange Act Release No. 33369 (December 23,
1993), 58 FR 69431 (December 30, 1993) [File No. SR-NYSE-93-30].
\6\ See Securities Exchange Act Release No. 35926 (June 30,
1995), 60 FR 35760 (July 11, 1995) [File No. SR-NYSE-95-24].
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The second objective measure of performance, which was recently
developed, pertains to ``near neighbors.'' On June 30, 1995, the
Commission approved this filing on a fifteen month pilot basis through
September 10, 1996.\7\ The ``near neighbors'' measure compares certain
performance measures of a given stock (price continuity, depth,
quotation spread and capital utilization) to those of its ``near
neighbors'' (i.e., stocks that have certain similar characteristics).
The Exchange would provide ``near neighbors'' information to the
Allocation Committee for its use in allocating newly-listed stocks.\8\
On July 1, 1996, the Exchange filed to extend the pilot programs for
both the near neighbor and capital utilization measure of specialist
performance.\9\ During the next twelve months, the Exchange expects to
work with outside consultants and appropriate constituent groups to
develop performance standards applicable to these objective
[[Page 43285]]
measures for incorporation into Rule 103A.
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\7\ See Securities Exchange Act Release No. 35927 (June 30,
1995), 60 FR 35764 (July 11, 1995) [File No. SR-NYSE-95-05].
\8\ The near neighbor measure would provide the Allocation
Committee with performance data.
\9\ File No. SR-NYSE-96-17.
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Regarding the Intermarket Trading System (``ITS''), the Commission
has stated its belief that the mature status of the ITS as a market
structure facility warrants the incorporation of ITS turnaround and
``trade-through'' concerns into the NYSE's Rule 103A performance
standards. The Exchange continues to believe that ITS matters are more
appropriately addressed by means of the Exchange's regulatory process
rather than through its performance measurement system, but will
continue to study the matter.
2. Statutory Basis
The Exchange believes 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 Exchange believes the proposed extension of Rule 103A is
consistent with these objectives in that it will allow the Exchange to
continue to administer the rule on an uninterrupted basis, fostering
quality specialist performance.
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
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
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety 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 such 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 6 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-96-22 and should
be submitted by September 11, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)912) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-21318 Filed 8-20-96; 8:45 am]
BILLING CODE 8010-01-M