[Federal Register Volume 62, Number 161 (Wednesday, August 20, 1997)]
[Notices]
[Pages 44298-44299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22058]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38930; File No. SR-NYSE-97-23]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc., Relating to the Regulation of 
Market Data Used on the Exchange Floor

August 12, 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 July 1, 1997, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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).
    \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 introduce new Rule 39 (Market Data 
Restrictions and Liability Limitations) into its rules in order to 
regulate the receipt and use of the market data that the Exchange, with 
the assistance of various other parties, makes available on the Floor 
of the Exchange.

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, 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

    The Exchange uses its facilities to make various categories of 
market information--including last sale prices, bids and offers, 
related sizes and the like--available on the Exchange Floor for use by 
Exchange members in the course of performing their membership 
functions. Typically, the Exchange enters into arrangements with 
traditional vendors of market data services in order to have the 
vendors assist the Exchange in making market information available on 
the Floor. The Exchange proposes to add a new Rule 39 (Market Data 
Restrictions and Liability Limitations) to regulate the provision of 
market data to the Floor of the Exchange through Exchange facilities. 
The proposed rule seeks to accomplish three purposes:
    1. It would exculpate the Exchange, market data vendors, market 
data sources and others that assist in the process of making market 
information available on the Floor through the facilities of the 
Exchange from members' claims of liability as the result of the 
dissemination of inaccurate or delayed information or the omission of 
information. The exculpation applies in respect of any such party's 
negligence or any cause beyond its reasonable control. It would not 
exculpate any party for gross negligence or willful misconduct.
    2. It would clarify that each of the derivative sources of market 
data retains proprietary rights to the market data that it makes 
available.
    3. It would prohibit members from redistributing the market data 
that the Exchange makes available on the Floor to any other person, 
except for the occasional furnishing of limited amounts of information 
in the regular course of a member's securities business on the Floor.
    The Exchange considers its members' easy and complete access to 
market information on the Floor of the Exchange to constitute a 
singularly important aspect of the Exchange's trading environment. The 
Exchange believes such access is essential to the process of making 
markets and to the capital-raising process. By providing basic 
protections from liability to market data vendors, sources of market 
data and those that assist in the process of making market data 
available, the proposed rule change will allow each of those entities 
to perform their respective roles. As a result, the Exchange believes 
the proposed rule change would greatly facilitate the Exchange's 
ability to enter into working relationships with those entities and 
improve the Exchange's ability to place market information in the hands 
of its members.
    The Exchange believes the proposed legal protections would act as 
surrogates for direct contractual relationships between the Exchange 
and/or vendors on the one hand and Exchange members that receive access 
to market data on the Floor on the other. That is, the Exchange 
traditionally requires professional end users of the market data that 
is made available under the CTA Plan and the CQ Plan to execute 
contracts. Similarly, vendors traditionally require each of their 
market data service subscribers to execute contracts. Each such 
contract typically contains counterpart provisions to the ones that the 
Exchange is proposing for its new rule.\3\ By placing those provisions 
into an Exchange rule, the Exchange intends to obviate the need for 
those contracts.
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    \3\ For instance, the proposed provisions mimic clauses found in 
the standard form of agreement that the Exchange and the other CTA 
Plan Participants enter into with vendors and subscribers. The 
Commission has approved contracts containing those provisions on 
several occasions. See, for example, the form of vendor contract 
contained in Exhibit C to the Second Restatement of the CTA Plan, 
which the Commission approved last year. (Release No. 34-37191; File 
No. SR-CTA/CQ-96-1; May 9, 1996.)
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    In addition, the adoption of rules designed to protect a securities 
market's agents and contractors and to induce those agents and 
contractors to assist the securities markets in providing its 
traditional services is nothing new. For instance, Exchange rules 
presently contain similar exculpatory provisions for the calculation of 
index values \4\ and for basket information.\5\ Other equity markets 
have similar protections in their rules.\6\
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    \4\ See Paragraph (b) of Exchange Rule 702 (Rights and 
Obligations of Holders and Writers).
    \5\ See Exchange Rule 813 (Limitation of Liability).
    \6\ See, for instance, American Stock Exchange Rules 902C and 
1003 and Chicago Board Options Exchange Rules 6.7, 7.11 and 23.14.
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    The Exchange believes that Article II, Section 6 (Use of Exchange 
Facilities) of the Exchange Constitution already exculpates the 
Exchange from liability for damages that grow out of the use or 
enjoyment of the Exchange's facilities. The Exchange has always deemed 
that Constitutional provision to implicitly protect the Exchange's 
agents and contractors in the same manner as it protects the Exchange 
and the proposed rule change is intended to supplement, not limit, the 
applicability of that provision. The Exchange believes the proposed 
rule change would merely codify and expound upon that reading of the 
provision and clarify the Exchange's interpretation.

[[Page 44299]]

    The Exchange believes the proposed rule change is consistent with 
the requirements of Section 6(b)(5) of the Act \7\ that an exchange 
have rules that are designed to promote just and equitable principles 
of trade, and, in general, to protect investors and the public 
interest.
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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 proposed rule change does not 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 not solicited, and does not intend to solicit, 
comments on the proposed rule change. The Exchange has not received any 
unsolicited written comments from members or other interested parties.

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 such proposed rule change, or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interest 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 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. An 
submissions should refer to File No. SR-NYSE-97-23 and should be 
submitted by September 10, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-22058 Filed 8-19-97; 8:45 am]
BILLING CODE 8010-01-M