[Federal Register Volume 63, Number 58 (Thursday, March 26, 1998)]
[Notices]
[Pages 14747-14750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7920]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39770; File No. SR-NYSE-97-36]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Revisions to 
Exchange Policy for Entry of MOC/LOC Orders and Publication of 
Imbalances

March 18, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 29, 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 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. Sec. 78s(b)(1)

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[[Page 14748]]

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change consists of changes to the Exchange's 
policy for entry of market-on-close (``MOC'') and limit-at-the-close 
(``LOC'') orders and publication of imbalances, for both expiration and 
non-expiration days.\2\
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    \2\ On March 18, 1998, at the Commission staff's request, the 
NYSE amended the filing by submitting a chart which clarifies the 
proposed procedures and contains the authority and sources for the 
NYSE's proposed policy change for entry of MOC and LOC orders and 
for the publication of imbalances, for both expiration and non-
expiration days. See Letter from Donald Siemer, Director, Market 
Surveillance, NYSE, to Richard Strasser, Assistant Director, 
Division of Market Regulation, Commission, dated march 13, 1998 
(``Amendment No. 1''). The chart is provided in Exhibit A, below.
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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 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 
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
    Special procedures regarding the entry of MOC and LOC orders have 
been in effect for more than ten years. These procedures are designed 
to alleviate excess volatility at the close by providing MOC imbalance 
information to market participants in a timely manner in order to 
attract contra-side interest. The procedures have been refined over the 
years based on the Exchange's experience and input from constituents. 
The Exchange is now proposing additional refinements to the procedures 
in order to enhance their usefulness.
    The current procedures require the MOC and LOC orders in any stock 
be entered by 3:40 p.m. on expiration days, and by 3:50 p.m. on non-
expiration days. No cancellation or reduction of any MOC or LOC order 
in any stock may take place after 3:40 p.m. on expiration days or 3:50 
p.m. on non-expiration days, (except in a case of legitimate error or 
to comply with the provisions of Exchange Rule 80A). In addition, Floor 
brokers representing any MOC orders must indicate their MOC interest to 
the specialist by 3:40 p.m. or 3:50 p.m., for expiration and non-
expiration days, respectively.
    For the selected stocks identified by the Exchange (formerly known 
as ``pilot stocks'') and published in its ``special stock list,'' a 
single publication of imbalances of 50,000 shares or more is required 
to be made as soon as practicable after 3:40 p.m. on expiration days or 
3:50 p.m. on non-expiration days. On expiration days, stocks on the 
special stock list that do not have an imbalance of 50,000 shares or 
more at 3:40 p.m. must publish a ``no imbalance'' status. Imbalances of 
50,000 shares or more must also be published for stocks going into or 
out of an index. For any other stock, an imbalance of 50,000 shares or 
more may be published at the request of the specialist, with Floor 
Official approval. After the 3:40 p.m. or 3:50 p.m. imbalance 
publication, MOC and LOC orders may be entered only to offset a 
published imbalance. No MOC or LOC orders may be entered if there is no 
imbalance publication. On expiration days, the entry of MOC or LOC 
orders after 3:40 p.m. to establish or liquidate positions related to a 
strategy involving derivative instruments is not permitted, even if 
such orders might offset published imbalances.
    In July of 1997, the NYSE's Market Performance Committee appointed 
a subcommittee to review MOC procedures. The subcommittee made several 
recommendations to increase the effectiveness of the procedures. These 
changes, which the Exchange is proposing to implement, are:
     3:40 p.m. deadline for entry of MOC and LOC orders and 
indication of MOC interest to specialists by Floor brokers representing 
any MOC orders, every day. This earlier deadline on non-expiration days 
would provide additional time to attract contra-side interest.
     Integration of marketable LOC orders in the imbalance 
publication. Currently, imbalance publications indicate MOC interest 
but not LOC interest. See Amendment No. 1. The Exchange is proposing to 
include both MOC and marketable LOC orders in the imbalance 
publication. The determination of whether an LOC order is 
``marketable'' would be based upon the last sale price at 3:40 or 3:50 
p.m. This means that LOC orders to buy at a higher price would be 
included with the buy MOC orders; LOC orders to sell at a lower price 
would be included with the sell MOC orders. LOC orders with a limit 
equal to the last sale price would not be included in the imbalance 
calculation. This would provide a more complete picture to market 
participants of the potential size of the imbalance at the close.
     The Exchange is also proposing mandatory publication of 
all MOC/LOC imbalances of 50,000 shares or more in all stocks on any 
trading day as soon as practicable after 3:40 p.m. As discussed above 
and in Amendment No. 1, currently, the Exchange requires mandatory 
publication of imbalances of 50,000 shares or more only in stocks on 
special stock lists (formerly ``pilot stocks'') and stocks being added 
to or dropped from an index on expiration days as soon as practicable 
after 3:40 p.m. (or 3:50 p.m. for non-expiration days). Publication of 
an imbalance of less than 50,000 shares may be made at that time with 
the approval of a Floor Official. This proposed new provision would 
permit but not require the publication of an imbalance which, although 
less than 50,000 shares, may be significantly greater than average 
daily volume in a stock. This would enhance information available to 
market participants concerning stocks with significant imbalances.
     The Exchange also proposed a new procedure to permit non-
mandatory publication of MOC/LOC imbalances of any size between 3:00 
and 3:40 p.m., with Floor Official approval; these publications would 
be informational only, with no effect on MOC/LOC order entry. Imbalance 
information would be required to be updated at 3:40 p.m. for all stocks 
on all days, regardless of size, in order to provide timely imbalance 
information to market participants.
     An additional imbalance publication on both expiration and 
non-expiration days, must be made at 3:50 p.m. for any stock that had 
an imbalance publication at 3:40 p.m.\3\ If the imbalance at 3:50 p.m. 
is less than 50,000 shares, a ``no imbalance'' status must be 
published, except that an imbalance of less than 50,000 shares may be 
published with Floor Official approval, provided there had been an 
imbalance publication at 3:40 p.m. If there were no imbalance 
publication at 3:40 p.m., there would not be a publication at 3:50 
p.m., since MOC and LOC orders could not be entered during the interim 
to change the imbalance. If the 3:50 p.m. imbalance publication 
reversed the first imbalance publication, only MOC and LOC orders which 
offset the 3:50 p.m. imbalance would be permitted to be entered 
thereafter. This would present market participants with

[[Page 14749]]

a more timely and more accurate picture of imbalances before the close.
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    \3\ Currently, the Exchange requires only a single imbalance 
publication at 3:40 p.m. on expiration days and at 3:50 p.m. on non-
expiration days. See Amendment No. 1.
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     MOC/LOC order entry is precluded after 3:40 p.m. in all 
stocks on all days, unless an imbalance is published, in which case 
entry of MOC/LOC orders would be permitted only on the contra side of 
the published imbalance.
    The Exchange believes that these revisions would provide more 
timely and more complete information to market participants concerning 
MOC/LOC order imbalances and improve the effectiveness of the 
procedures.
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 proposed changes to MOC/LOC procedures are 
designed to respond to constituent advice that more timely and more 
complete information with respect to MOC/LOC imbalances would improve 
the Exchange's closing procedures.

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

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, including whether the proposed rule 
change to consistent with the Act. 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 Room in 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-97-36 and should be 
submitted by April 16, 1998.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.

                       Exhibit A.--MOC and LOC Changes Proposed in File No. SR-NYSE-97-36                       
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           Proposed policy                       Current policy                  Sources for current policy     
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 3:40 p.m. deadline for        3:40 p.m. deadline for        Expiration day MOC         
 entry of MOC and LOC orders on        entry of MOC and LOC orders on        procedures permanent approval (File
 expiration days and non-expiration    expiration days.                      No. SR-NYSE-96-31, Release No. 34- 
 days.                                                                       37894, October 30, 1996);          
                                                                             Information Memo No. 96-34,        
                                                                             November 8, 1996.                  
                                                                             LOC order entry procedures 
                                                                             pilot approval (File No. SR-NYSE-97-
                                                                             21, Release No. 34-37969, November 
                                                                             20, 1996 and File No. SR-NYSE-97-  
                                                                             19, Release No. 34-38865, July 23, 
                                                                             1997); Information Member No. 97-  
                                                                             25, May 13, 1997.                  
 Same as above..............   3:50 p.m. deadline for        Non-expiration day MOC     
                                       entry of MOC and LOC orders on non-   procedures permanent approval (File
                                       expiration days.                      No. SR-NYSE-94-44, Release No. 34- 
                                                                             35589, April 10, 1995); Information
                                                                             Memo No. 95-21, May 12, 1995.      
                                                                             LOC order entry procedures 
                                                                             pilot approval (File No. SR-NYSE-96-
                                                                             21, Release No. 34-37969, November 
                                                                             20, 1996 and File No. SR-NYSE-97-  
                                                                             19, Release 34-38865, July 23,     
                                                                             1997); Information Memo No. 97-25, 
                                                                             May 13, 1997.                      
 Integration of marketable     Imbalance publication         Expiration day MOC         
 LOC orders in the imbalance           indicates MOC interest only.          procedures permanent approval (File
 publication, (i.e., include both                                            No. SR-NYSE-96-31, Release No. 34- 
 MOC and marketable LOC orders in                                            37894, October 30, 1996);          
 imbalance publication).                                                     Information Memo No. 96-34,        
                                                                             November 8, 1996.                  

[[Page 14750]]

                                                                                                                
 Mandatory publication of      Mandatory publication of      Expiration day of MOC      
 all MOC/LOC imbalances of 50,000      MOC imbalances of 50,000 shares or    procedures permanent approval (File
 shares or more in all stocks on any   more in stocks on special stocks      No. SR-NYSE-96-31, Release No. 34- 
 trading day (i.e., expiration and     lists (formerly known as pilot        37894, October 30, 1996);          
 non-expiration days) as soon as       stocks) and stocks being added to     Information Memo No. 96-34,        
 practicable after 3:40 p.m.           or dropped from an index, on          November 8, 1996.                  
                                       expiration days as soon as                                               
                                       practicable after 3:40 p.m.                                              
 Same as above..............   Mandatory publication of      Non-expiration day MOC     
                                       MOC imbalances of 50,000 shares or    procedures permanent approval (File
                                       more in stocks on special stock       No. SR-NYSE-94-44, Release No. 34- 
                                       lists (formerly--known as pilot       35589, April 10, 1995); Information
                                       stocks) and stocks being added to     Memo No. 95-21, May 12, 1995.      
                                       or dropped from an index, on non-                                        
                                       expiration days as soon as                                               
                                       practicable after 3:50 p.m.                                              
 Non-mandatory publication     New.                         ....................................
 of MOC/LOC imbalances of less than                                                                             
 50,000 shares at 3:40 p.m. with                                                                                
 Floor Official approval.                                                                                       
 Non-mandatory publication     New.                         ....................................
 of MOC/LOC imbalances of any size                                                                              
 between 3:00 and 3:40 p.m., with                                                                               
 Floor Official approval. These                                                                                 
 would be informational only with no                                                                            
 effect on MOC/LOC order entry.                                                                                 
 Imbalance information would be                                                                                 
 required to be updated at 3:40                                                                                 
 p.m., regardless of size.                                                                                      
 Additional imbalance          Single imbalance             Expiration day MOC procedures       
 publication on both expiration and    publication at 3:40 p.m., on          permanent approval (File No. SR-   
 non-expiration days, at 3:50 p.m.     expiration days and at 3.50 p.m. on   NYSE-96-31, Release No. 34-37894,  
 for any stock which had an            non-expiration days.                  October 30, 1996); Information Memo
 imbalance publication at 3:40 p.m.                                          No. 96-34, November 8, 1996.       
                                                                             Non-expiration day MOC     
                                                                             procedures permanent approval (File
                                                                             No. SR-NYSE-94-44, Release No. 34- 
                                                                             35589, April 10, 1995); Information
                                                                             Memo No. 95-21, May 12, 1995.      
 After 3:40 and 3:50 p.m.      After imbalance              Expiration day MOC procedures       
 imbalance publications on any         publications at 3:40 p.m. on          permanent approval (File No. SR-   
 trading day, MOC/LOC orders may be    expiration days and 3:50 p.m. on      NYSE-96-31, Release No. 34-37894,  
 entered only to offset a published    non-expiration days, MOC/LOC orders   October 30, 1996); Information Memo
 imbalance.                            may be entered only to offset a       No. 96-34, November 8, 1996.       
                                       published imbalance.                                                     
                                                                             Non-expiration day MOC     
                                                                             procedures permanent approval (File
                                                                             No. SR-NYSE-94-44, Release No. 34- 
                                                                             35589, April 10, 1995); Information
                                                                             Memo No. 95-21, May 12, 1995.      
                                                                             LOC order entry procedures 
                                                                             pilot approval (File No. SR-NYSE-96-
                                                                             21, Release No. 34-37969, November 
                                                                             20, 1996 and File No. SR-NYSE-97-  
                                                                             19, Release No. 34-38865, July 23, 
                                                                             1997); Information Memo No. 97-25, 
                                                                             May 13, 1997.                      
 If the imbalance at 3:50     New.                          ....................................
 p.m. is less than 50,000 shares,                                                                               
 either (1) a ``no imbalance''                                                                                  
 status must be published; or (2)                                                                               
 Floor Official approval must be                                                                                
 sought to publish an imbalance of                                                                              
 less than 50,000 shares.                                                                                       
 If there were no imbalance                                                                             
 publication at 3:40 p.m., there                                                                                
 would not be a publication at 3:50                                                                             
 p.m..                                                                                                          
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[FR Doc. 98-7920 Filed 3-25-98; 8:45 am]
BILLING CODE 8010-01-M