[Federal Register Volume 61, Number 245 (Thursday, December 19, 1996)]
[Notices]
[Pages 67087-67088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32235]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38047; File No. SR-NYSE-96-38]


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

December 13, 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 December 11, 1996, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change relating to 
certain market-wide circuit breaker provisions as described in Items I, 
II and III below, which Items have been prepared by the Exchange. 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).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its Rule 80B (Trading Halts Due to 
Extraordinary Market Volatility--``circuit breakers'') to increase the 
trigger levels for its circuit breakers. The existing circuit breakers 
would be triggered if the Dow Jones Industrial Average (``DJIA'') \3\ 
declines by 250 and 400 points, respectively, from its previous day's 
close. A 250 points decline would result in a one-half hour trading 
halt, while a 400 points decline would cause trading to halt for an 
additional hour. The Exchange proposes establishing new thresholds of 
350 and 550 points decline in the DJIA before the respective one-half 
hour and one hour circuit breakers are triggered. The Exchange seeks to 
effect these changes on a one-year pilot basis.
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    \3\ ``Dow Jones Industrial Average'' is a service mark of Dow 
Jones & Company, Inc.
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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. 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
    Rule 80B (Trading Halts Due to Extraordinary Market Volatility) is 
the Exchange's codification of the several recommendations for 
``circuit breakers'' which were made in the wake of the market break of 
1987. The current rule, which is due to expire April 30, 1997, provides 
that if the DJIA falls 250 or more points below its previous trading 
day's closing value, trading in all stocks on the Exchange shall halt 
for one-half hour. Further, the rule provides for an additional one 
hour trading halt if on that same day the DJIA declines by 400 points 
or more below its previous trading day's closing value.\4\ Although the 
Rule was amended in July 1996 to shorten the time periods for market-
wide trading halts, the levels of the circuit breakers themselves have 
not been adjusted since the rule was first adopted.\5\ The Exchange 
believes that, at this time, it is appropriate to amend Rule 80B to 
raise the circuit breakers from 250 points to 350 points and from 400 
points to 550 points.
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    \4\ See Securities Exchange Act Release No. 37890 (Oct. 29, 
1996) 61 FR 56983.
    \5\ See supra note 4. See also, Securities Exchange Act Release 
Nos. 36563 (December 7, 1995), 60 FR 64084; 36414 (Oct. 25, 1995) 60 
FR 55630; 26440 (January 10, 1989) 54 FR 1830; 26368 (December 16, 
1988), 53 FR 51942; and 26198 (October 19, 1988), 53 FR 41637.
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    Rule 80B was approved by the Commission in October 1988 as a one-
year pilot and has been extended on a year to year basis since then, 
except for

[[Page 67088]]

in October 1996, when it was extended for only six months until April 
30, 1997.\6\ When circuit breakers were first adopted, the DJIA was 
about 2100 points. A 250 point drop would have represented 
approximately a 12% decline, and a 400 point drop would have 
represented roughly a 19% decline in the average. Rule 80B has never 
been invoked, as the DJIA has not declined by 250 points or more since 
the rule was adopted. The largest decline occurred on March 8, 1996, 
when the DJIA fell intra-day 217 points below its previous day's 
closing value. Today, with the DJIA at about 6500 points, a 250 or 400 
point drop would represent a much smaller percentage decline in the 
average (3.8% and 6.2%, respectively).
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    \6\ See supra note 4.
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    The proposed circuit breakers of 350 and 550 points would represent 
around a 5.4% and 8.5% decline in the DJIA, which the Exchange 
considers to be significant market declines, and thus represent 
appropriate levels at which to halt trading. The proposed trigger 
values take into account the rise in market values since the Rule was 
first adopted, which also recognizing the fact that the original 
trigger values have never been reached. The Exchange believes that the 
new trigger values in Rule 80B should be stated in absolute numbers, 
rather than in terms of percentages of the DJIA, in order to facilitate 
understanding by all market participants as to exactly when the circuit 
breakers will be utilized.
    The Exchange seeks to effect these changes on a one-year pilot 
basis. The adoption of amendments to Exchange Rule 80B would be 
contingent upon the adoption of amended rules or procedures 
substantively identical to Rule 80B by:
    (1) all United States stock exchanges and the National Association 
of Securities Dealers with respect to the trading stocks, stock options 
and stock index options; and,
    (2) all United States futures exchanges with respect to the trading 
of stock index futures and options on such futures.
    The Exchange believes that an all-market trading halt requirement 
at appropriate levels will promote stability and investor confidence 
during a period of significant stress by providing 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.
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 is consistent with these objectives in that revised 
trigger levels take into consideration the rise in market values since 
the rule was first adopted, while recognizing that the original trigger 
levels have not been reached since they were adopted.

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 35 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 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., 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 in 
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 the File No. SR-NYSE-96-38 and should be 
submitted by January 9, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 96-32235 Filed 12-18-96; 8:45 am]
BILLING CODE 8010-01-M