[Federal Register Volume 62, Number 91 (Monday, May 12, 1997)]
[Notices]
[Pages 25984-25985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12284]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38574; File No. SR-NYSE-97-10]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Amendments to 
Rule 104.10(5) Pertaining to Specialists Establishing a Position.

May 5, 1997.
    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 March 25, 1997, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by the NYSE. 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 NYSE, pursuant to Rule 19b-4 of the Act, proposes to amend 
Exchange Rule 104.10 to remove certain restrictions on specialists' 
stabilizing purchases and sales. The text of the proposed rule change 
is available at the Office of the Secretary, the NYSE and at the Office 
of the Secretary, the NYSE and at the Commission.

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 Section 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 104 governs specialists' dealings in their specialty stocks. 
In particular, Rule 104.10(5)(i) describes certain types of 
transactions to establish or increase a specialist's position which are 
not to be effected unless they are ``reasonably necessary to render the 
specialist's position adequate to'' the needs of the market. Currently, 
these restrictions apply equally to transactions that are against the 
market trend (``stabilizing'') and those that are with the market trend 
(``destabilizing''). The Exchange is proposing to apply these 
restrictions only to destabilizing transactions.
    Specifically, the revision to Rule 104.10(5)(i)(B) would prohibit 
the specialist from establishing or increasing his or her long position 
by purchasing more than 50% of the stock offered for sale in the market 
on a zero-plus tick (i.e., at a price equal to the last sale and above 
the previous different price sale). There would be no restriction on 
purchasing stock on a zero-minus tick to establish or increase a 
position, as such transactions are stabilizing in nature and are 
perceived as being beneficial to the market.
    Paragraph (C) of Rule 104 would be deleted to permit the specialist 
to establish or increase his or her short position by selling stock to 
the bid without restriction on a zero-plus tick, as these transactions 
are stabilizing in nature. Prohibitions on short sales on zero-minus 
ticks are contained in SEC Rule 10a-1 under the Act and Exchange Rule 
440B.
    References to paragraph 104.(5)(i)(C) elsewhere in the rule would 
be removed and paragraph (D) would be renumbered as (C).
    The proposed amendments are intended to enhance the specialist's 
ability to deal for his or her own account to provide support to the 
market. Under the revised rules, specialists will, to a greater degree, 
be able to counter the market trend in a stock through effecting 
proprietary transactions that are stabilizing. In today's markets, 
characterized by increased volatility and institutional activity, the 
use of dealer capital in this fashion can add liquidity in a manner 
beneficial to the market.
2. Statutory Basis
    The NYSE believes that the proposed rule change is consistent with 
Section 6(b) of the Act in general and furthers the objectives of 
Section 6(b)(5) \3\ in that it is designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and practices, and to remove impediments to, and perfect the 
mechanism of a free and open market and a national market system, as 
well as to protect investors and the public interest.
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    \3\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The NYSE 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 solicited or received with respect to 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549.

[[Page 25985]]

    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 the file number in the 
caption above and should be submitted by June 2, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12284 Filed 5-9-97; 8:45 am]
BILLING CODE 8010-01-M