[Federal Register Volume 64, Number 82 (Thursday, April 29, 1999)]
[Notices]
[Pages 23142-23143]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10761]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41315; File No. SR-NYSE-98-42]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to the Proposed Rule Change by the New York 
Stock Exchange, Inc. To Amend MOC/LOC Order Entry and Cancellation 
Procedures During a Regulatory Halt

April 20, 1999.
    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 November 25, 1998, 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 
Exchange. On March 19, 1999, the Exchange submitted Amendment No. 1 to 
the proposed rule change.\3\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Letter from Donald Siemer, Director, Market Surveillance, 
NYSE to Richard Strasser, Assistant Director, Division of Market 
Regulation (``Division''), SEC, dated March 15, 1999 (``Amendment 
No. 1''). In Amendment No. 1, the Exchange provided information 
regarding the Exchange's regulatory trading halt policy and 
clarified that the Exchange does not seek to amend its regulatory 
trading halt policy in this proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change consists of amendments to the market-on-
close (``MOC'') and limit-on-close (``LOC'') procedures permitting 
entry and cancellation of MOC/LOC orders after 3:40 p.m. when a 
regulatory trading halt is in effect.

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 Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    Cancellation of MOC/LOC Orders During a Regulatory Halt. Under 
Exchange policy, a trading halt in an Exchange-listed stock may be put 
into effect when the Exchange determines that a regulatory condition 
exists in that stock.\4\ The purpose of a regulatory halt is to allow 
the market the time to absorb and react to the news or market 
conditions. Trading halts may also be instituted when non-regulatory 
conditions exist.\5\
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    \4\ A regulatory condition may exist if news is pending about 
the stock or if time is needed for new dissemination about the 
stock. When instituting a regulatory halt, the Exchange follows 
procedures contained in the section on Trading Halt and Suspension 
Procedures of the Consolidated Tape Association Plan, which was 
filed with the Commission. See Securities Exchange Act Release No. 
10787 (May 10, 1994), 39 FR 17799; and Securities Exchange Act 
Release No. 16983 (July 16, 1980), 45 FR 49414 (July 24, 1980).
    \5\ A non-regulatory condition may exist if a stock has an order 
imbalance of significant size or when there are equipment problems 
affecting the trading in a stock. See Securities Exchange Act 
Release No. 38225 (January 31, 1997), 62 FR 5875 (February 7, 1997) 
and Exchange Information Memo No. 97-23 (May 8, 1997).
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    Current Exchange procedures \6\ utilized for MOC and LOC orders 
prohibit Exchange members from

[[Page 23143]]

canceling MOCs and LOCs after 3:40 p.m., except in the case where the 
member entering the order made a legitimate error or the member must 
cancel the order to comply with the provisions of Exchange Rule 
80A(c).\7\ Therefore, if a regulatory halt for a particular stock is in 
effect at 3:40 p.m. or occurs after that time, market participants are 
not permitted to cancel their MOC and LOC orders in that stock, even if 
the stock reopens at a price substantially different from the last 
sale.
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    \6\ For a description of the Exchange's current procedures see 
Securities Exchange Act Release No. 40094 (June 15, 1998), 63 FR 
38230 (July 15, 1998) and Exchange Information Memo No. 98-20 (June 
22, 1998).
    \7\ For example, Exchange Rule 80A(c) requires index arbitrage 
orders in any stock in the Standard & Poor's 500 Stock Price Index 
entered on the Exchange to be stabilizing (i.e., the order must be 
marked either buy minus or sell plus) when the Dow Jones Industrial 
Average advances or declines by the 2% point level determined by the 
Exchange each quarter. See Securities Exchange Act Release No. 41041 
(February 11, 1999), 64 FR 8424 (February 19, 1999). When Rule 
80A(c) goes into effect, a MOC index arbitrage order without the 
appropriate tick restriction must be canceled unless it is related 
to an expiring derivative index product.
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    The Exchange is proposing that when a regulatory halt is in effect 
at 3:40 p.m. or occurs after that time, members may cancel MOC and LOC 
orders until 3:50 p.m. or until the stock reopens, whichever occurs 
first. The Exchange is not proposing any changes in the case of a non-
regulatory halt with respect to this position.
    The Exchange believes that this exception to the no-cancellation 
policy for MOC/LOC orders is appropriate because of the need of market 
participants to be able to respond to information that was not 
available before 3:40 p.m. Furthermore, by limiting the period of time 
for canceling MOC and LOC orders to 3:50 p.m. at the latest, 
specialists will have sufficient time to arrange an orderly close.
    Entry of MOC/LOC Orders During a Regulatory Halt. Current Exchange 
procedures prohibit members from entering MOC and LOC orders after 3:40 
p.m. except to offset a published imbalance. If any type of halt is in 
effect at 3:40 p.m., no imbalance of MOC or LOC orders would be 
published,\8\ and, therefore, no MOC or LOC orders could be entered 
after 3:40 p.m. If a regulatory halt occurs after an imbalance has been 
published at 3:40 p.m., market conditions may differ substantially from 
those that existed at the time of the imbalance publication.
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    \8\ A specialist is required to publish tape indications to 
reopen a stock after a trading halt. The Exchange's policy on tape 
indications requires a minimum of ten minutes to elapse between the 
first indication and the reopening of a stock and a minimum of five 
minutes to elapse between the last indication and the reopening of a 
stock, provided that a minimum of ten minutes has elapsed since the 
first indication. See Securities Exchange Act Release No. 38225 
(January 31, 1997), 62 FR 5875 (February 7, 1997) and Exchange 
Information Memo No. 97-23 (May 8, 1997).
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    Therefore, the Exchange is proposing that if a regulatory halt is 
in effect at 3:40 p.m. or occurs after that time, members may enter MOC 
and LOC orders on either side of the market until 3:50 p.m. or until 
the stock reopens, whichever occurs first. If an order imbalance is 
published following a regulatory halt, MOC and LOC order entry would be 
permitted only to offset the published imbalance.
    Order Imbalance Publication After Any Trading Halt. Finally, under 
current Exchange policy, if a stock reopens at or before 3:50 p.m. 
following any type of halt, the specialist in that stock will publish 
an imbalance of 50,000 shares or more (or less than 50,000 shares with 
the approval of a Floor Official) as soon as practicable after 3:50 
p.m. The Exchange is proposing that if the stock opens after 3:50 p.m., 
the specialist must publish an imbalance of 50,000 shares or more (or 
less than 50,000 shares with the approval of a Floor Official), if 
practicable.\9\ If a halt occurs after 3:50 p.m., the stock will not 
reopen on that day and MOC and LOC orders will not be executed.
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    \9\ The decision of whether an imbalance shall be published for 
a stock opening after 3:50 p.m. will be made by an Exchange Floor 
Director or other Exchange Floor Official. Telephone call between 
Betsy Lampert Minkin, Senior Project Specialist, NYSE and Kelly 
McCormick, Attorney, Division, SEC, on January 13, 1999.
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    The Exchange intends to issue an Information Memo to inform its 
members of the revised MOC/LOC proceures.
2. Statutory Basis
    The Exchange believes the basis under the Act for the proposed rule 
change is the requirement under Section 6(b)(5) \10\ that the rules of 
an Exchange be 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.
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    \10\ 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 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, including whether the proposed rule 
change is 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-
0609. 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. 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-98-42 and should 
be submitted by May 20, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-10761 Filed 4-28-99; 8:45 am]
BILLING CODE 8010-0-M