[Federal Register Volume 64, Number 90 (Tuesday, May 11, 1999)]
[Notices]
[Pages 25387-25388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11813]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41359; File No. SR-NYSE-98-41]


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. Amending Opening Imbalance Publication Procedures 
for Expiration Days

May 3, 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 and II below, which Items have been prepared by the Exchange. 
On March 22, 1999, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ 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)(10.
    \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 18, 1999 (``Amendment 
No. 1''). Amendment No. 1 clarified the Exchange's opening 
procedures for stocks underlying derivative index related products 
on expiration days.
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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 expiration day 
opening imbalance publication procedures. The text of the proposed rule 
change is available 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 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. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange currently has auxiliary opening procedures for 
expiration days.\4\ These auxiliary procedures require, among other 
things, that market order imbalances of 50,000 shares or more in stocks 
on the Exchange's ``special stock'' list be published as soon as 
practicable after 9:00 a.m. on expiration days.\5\ The special stock 
list consists of the 50 most highly capitalized stocks in the S&P 500 
Stock Price Index, any stocks in the Major Market Index (XMI) that are 
not among the 50, and the 10 most highly capitalized stocks in the S&P 
400 MidCap Index.\6\
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    \4\ Modified opening procedures were first used on a pilot basis 
for the quarterly expiration on June 19, 1987, See Securities 
Exchange Act Release No. 24596 (June 16, 1987), 52 FR 23618 (June 
23, 1987)(File No. SR-NYSE-87-17). They were approved permanently in 
Securities Exchange Act Release No. 25804 (June 15, 1988), 53 FR 
23474 (June 22, 1988)(File Nos. SR-NYSE-87-11 and SR-NYSE-88-04).
    \5\ Other procedures include: 1. a 9:00 a.m. deadline for the 
entry of orders relating to expiring derivatives for which the 
settlement pricing is based on the opening prices of the underlying 
securities; 2. the use of the identifier ``OPG'' to identify such 
orders (firms unable to use the ``OPG'' identifier through SuperDOT 
must identify such orders by other means and inform Market 
Surveillance in writing by the business day following the expiration 
trade date); and 3. the publication of a ``no imbalance'' status for 
each stock on the special stock list for which there is no market 
order imbalance. See Securities Exchange Act Release No. 37894 
(October 30, 1996), 61 FR 56987 (November 5, 1996)(File No. SR-NYSE-
96-31) and NYSE Information Memo No. 96-34 (November 8, 1996).
    \6\ See Securities Exchange Act Release No. 31732 (January 14, 
1993), 58 FR 6036 (January 25, 1993)(File No. SR-NYSE-92-38).
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    The Exchange also required the use of the special stock list for 
imbalance publications at the close. In June 1998, however, the 
Exchange eliminated the use of special stock lists for publishing 
imbalances at the close and mandated that market-at-the-close (``MOC'') 
imbalances of 50,000 shares or more be published in all stocks on any 
trading day.\7\ As part of these revisions, the exchange also added a 
provision permitting the publication of MOC imbalances of less than 
50,000 shares, with the approval of a Floor Official. These changes 
were implemented as part of a group of revisions to MOC and LOC 
procedures recommended by a subcommittee of the Market Performance 
Committee which reviewed closing procedures.\8\
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    \7\ See Securities Exchange Act Release No. 40094 (June 15, 
1998), 63 FR 38230 (July 15, 1998)(File No. SR-NYSE-97-36) and NYSE 
Information Memo No. 98-20 (June 22, 1998).
    \8\ Id.
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    The Exchange believes it would also be appropriate to revise 
expiration day opening procedures by terminating the use of the special 
stock list and requiring order imbalance publication for all stocks 
with imbalances of 50,000 shares or more and to permit the publication 
of imbalances of less than 50,000 shares with Floor Official approval. 
The Exchange believes the proposed changes will provide more complete 
information to market participants. According to the Exchange, the 
increase of information should attract additional liquidity which could 
minimize volatility and lead to more orderly openings on expiration 
days.\9\ All other aspects of expiration day opening procedures would 
remain the same, e.g., publication of market order imbalances at 9:00 
a.m. and requirements for identification of orders relating to expiring 
derivatives that settle on the opening.
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    \9\ Letter from Donald Siemer, Director, Market Surveillance, 
NYSE to Richard Strasser, Assistant Director, Division, SEC, dated 
March 31, 1999. This letter clarified the Exchange's purpose for the 
proposed rule change.
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    The exchange intends to issue an Information Memo to inform its 
members of the revised expiration day opening procedures.
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 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, 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.

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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 NW., Washington, DC 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-98-41 and should 
be submitted by June 1, 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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-11813 Filed 5-10-99; 8:45 am]
BILLING CODE 8010-01-M