[Federal Register Volume 62, Number 88 (Wednesday, May 7, 1997)]
[Notices]
[Pages 25011-25013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11843]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38551; File No. SR-NYSE-97-13]


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

April 28, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on April 
24, 1997, 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 proposed rule change extends for three months (until July 24, 
1997) the pilot program most recently extended in Securities Exchange 
Act Release No. 37812 (October 12, 1996), 61 FR 54477 (October 18, 
1996) (File No. SR-NYSE-

[[Page 25012]]

 96-28) (extension of pilot until April 24, 1997.).\1\ This is a 
program to calculate and display, 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.
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    \1\ This program was originally filed as a pilot in Securities 
Exchange Act Release Nos. 36421 (October 26, 1995), 60 FR 55625 
(November 1, 1995) (File No. SR-NYSE-95-35) and 36489 (November 16, 
1995), 60 FR 58123 (November 24, 1995) (File No. SR-NYSE-95-37). The 
initial pilot program subsequently was extended until October 24, 
1996 in Securities Exchange Act Release No. 37151 (April 29, 1996), 
61 FR 20302 (May 6, 1996) (File No. SR-NYSE-96-10).
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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 and is set forth in Section A, B, 
and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to extend for three 
months a pilot program for calculating and displaying, on execution 
reports 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. The program does not in any way affect the actual 
execution orders. The Exchange refers to this calculated dollar savings 
as the ``NYSE PRIMESM.'' \2\
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    \2\ NYSE PRIME is a service market of the New York Stock 
Exchange, Inc.
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    NYSE PRIME is available to all member organizations \3\ for intra-
day market orders entered via the Exchange's SuperDOT system that are 
not tick-sensitive and are entered from off the Floor.\4\ In 
calculating the dollar value of price improvement, NYSE PRIME utilizes 
the Best Pricing Quote (``BPQ'') as approved by the Commission in 
connection with the Exchange's pricing of odd-lot orders.\5\
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    \3\ The Commission notes that member organizations electing to 
receive NYSE PRIME information are required to enter into an 
agreement with the Exchange regarding the use of NYSE PRIME 
information and the NYSE PRIME service mark. Among other things, the 
agreement provides that in any publication or use of NYSE PRIME 
information (unless the Exchange otherwise agrees), the member 
organization must employ the NYSE PRIME service mark.
    \4\ Also excluded from the NYSE PRIME feature are booth entered 
or booth routed orders, booked orders, combination orders (e.g., 
switch orders) and orders diverted to sidecar.
    \5\ See Securities Exchange Act Release No. 27981 (May 2, 1990), 
55 FR 19407 (May 9, 1990) (File No. SR-NYSE-90-06). The BPQ is the 
highest bid and lowest offer, respectively disseminated by the 
Exchange or another market center participating in the Intermarket 
Trading System (``ITS'') at the time the order is received by the 
Exchange. In order to protect against the inclusion of incorrect or 
stale quotations in the BPQ, however, the Exchange includes 
quotations in a stock from other markets only if: (1) the stock is 
included in ITS in that other market; (2) the quotation size is for 
more than 100 shares; (3) the bid or offer is not more than one-
quarter point away from the NYSE's bid or offer; (4) the quotation 
conforms to NYSE Rule 62 governing minimum variations; (5) the 
quotation does not create a locked or crossed market; (6) the market 
disseminating the quotation is not experiencing operational or 
system problems with respect to the dissemination of quotation 
information; and, (7) the quotation is ``firm'' pursuant to Rule 
11Ac1-1 under the Act, 17 CFR 240.11Ac1-1, and the market's rules.
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    Data from the operation of the pilot during 1996 show price 
improvement on 25.3% of the execution reports for eligible post-opening 
market orders entered on the Exchange. The Exchange believes that the 
NYSE PRIME enhances the information made available to investors and 
improves their understanding of the auction market.
    The most recent extension of the NYSE PRIME pilot program began on 
October 24, 1996 and continues until April 24, 1997. The proposed rule 
change extends the pilot program for an additional three months, to 
July 24, 1997.\6\
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    \6\ The Commission notes that any data regarding NYSE Prime must 
be submitted to the Commission no later than May 27, 1997 in order 
to be considered by the Commission with regard to future requests to 
extend or permanently approve the NYSE Prime pilot program.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \7\ 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 proposed 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 a price improvement their orders may have received 
when executed on the NYSE.
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    \7\ 15 U.S.C. 78f(b)(5).
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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 any written 
comments on the proposed rule change.

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

    Because the foregoing proposed rule change: (i) does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) does not have the effect of limiting access to or 
availability of any Exchange order entry or trading system, the 
extension of the NYSE PRIME program has become effective pursuant to 
Section 19(b)(3)(A) of the Act \8\ and subparagraph (e)(5) of Rule 19b-
4 thereunder.\9\ At any time within 60 days of the filing of such 
proposed 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.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(e)(5).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. In addition, the Commission 
recognizes that it is possible for a customer order to receive negative 
price ``improvement,'' or price disimprovement, instead of price 
improvement. Price disimprovement occurs when an order is executed at a 
price that is inferior to the best contra-side bid or ask quote 
prevailing among the markets and market makers trading the security at 
the time the order arrived at the market or market maker. The 
Commission is interested in comment about the appropriateness of an 
exchange providing price improvement information to members on a trade-
by-trade basis without also providing price disimprovement information 
on the same basis.
    Persons making written submissions should file six copies thereof 
with the

[[Page 25013]]

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. 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-97-13 and should be submitted by May 28, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 97-11843 Filed 5-6-97; 8:45 am]
BILLING CODE 8010-01-M