[Federal Register Volume 64, Number 94 (Monday, May 17, 1999)]
[Notices]
[Pages 26809-26810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12356]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41386; File No. SR-NYSE-99-09]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the New York
Stock Exchange, Inc. Relating to Rule 79A.15
May 10, 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 March 10, 1999, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice and order to solicit comments on
the proposed rule change from interested persons and to grant
accelerated approval to the proposed rule change.
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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 proposed rule change consists of amendments to Exchange Rule
79A.15, to provide that deactivation of Quote Assist will require that
the specialist review that decision with a Floor Official as soon as
practicable, and no later than three minutes from the time of
deactivation. The text of the proposed rule change is available at the
Exchange 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 III below and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In January 1997, Commission Rule 11Ac1-4 under the Act (``Display
Rule'')\3\ became effective. The Display Rule requires specialists to
display immediately, i.e., as soon as practicable, which under normal
market conditions means no later than 30 seconds from the time of
receipt, the price and full size of customer limit orders that would
improve the bid or offer in a security. On January 7, 1997, the
Exchange implemented a Display Book \4\ enhancement known as ``Quote
Assist'' to compute and disseminate a quote within the 30-second
timeframe. Quote Assist is designed to help specialists comply with the
Display Rule.
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\3\ 17 CFR 240.11Ac1-4.
\4\ The specialist's Display Book is an electronic workstation
at the trading post that keeps track of limit orders and incoming
market orders. Various window-like screen applications allow the
specialist to view one or more issues at a time at various levels of
detail. Incoming SuperDOT limit orders automatically enter the
Display Book. When a floor broker gives the specialist a limit
order, the specialist's clerk can enter the order into the Display
Book using the keyboard. The Display Book sorts the limit orders and
displays them in price/time priority.
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Quote Assist monitors the limit order book for new orders and
compares those orders with the published quotation. When a new order
would improve the quote or increase the size at a quoted price, Quote
Assist publishes a new quote at the improved price or increased size 30
seconds after the order arrives if the specialist has not already done
so. Quote Assist is always active at the beginning of the trading day.
A specialist has the ability to deactivate Quote Assist as to a
particular stock or stocks.
The Exchange proposes to amend Exchange Rule 79A.15 to provide that
deactivation of Quote Assist will require that the specialist obtain
approval of that decision from a Floor Official. Floor Official
approval would only be granted in instances when there is an influx of
orders resulting in gap pricing, an ITS outgoing commitment, or other
unusual circumstances. Approval of a Floor Official to deactivate Quote
Assist should be obtained as soon as practicable, and must be obtained
no later than three minutes from the time of deactivation. If approval
is not obtained within three minutes from the time of deactivation, the
matter will be reviewed as a market surveillance issue by the Exchange.
As an interim measure, Floor Official approvals will be documented
on the Exchange's electronic Floor Official approval forms. After mid-
year, the Exchange expects to modify the Display Book so that Floor
Official approval will be documented within that system.
The requirement to keep Quote Assist active is not meant to serve
as a substitute for the actual posting of quotes by specialists.
Specialists will be reminded that they are not to rely solely on Quote
Assist to generate quotes, because this would not comply with the
Commission's requirements for limit order display. Rather, specialists
should always attempt to reflect a limit order by manually quoting the
stock as soon as practicable, even though the Quote Assist feature is
active.
The Exchange believes that Quote Assist provides valuable help to
enable specialists to comply with their responsibilities under the
Commission's Display rule. The requirement that Quote Assist generally
remain active throughout the day will ensure that specialists avail
themselves of the tools provided for managing order flow and updating
quotes.
2. Statutory Basis
Section 6(b)(5) of the Act \5\ requires an Exchange to 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.
The proposed rule change will help perfect the mechanism of a free and
open market by facilitating compliance with the Commission's Display
Rule.
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\5\ 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. 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
[[Page 26810]]
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W., 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-99-09 and should
submitted by June 7, 1999.
IV. Commissions Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission has reviewed carefully the Exchange's proposed rule
change \6\ and believes, for the reasons set forth below, the proposal
is consistent with the Act and the rules and regulations thereunder
applicable to a national securities exchange. Specifically, the
Commission believes the proposal is consistent with Sections 6(b)(5)
and 11A(a)(1)(C)(iii) and (iv) of the Act.\7\ Section 6(b)(5) requires
that the rules of an exchange be designed 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. With respect to Section 11A, Congress found that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers and investors of information with respect to
quotations for and transactions in securities, and to assure the
practicability of brokers executing investors' orders in the best
market. The proposed rule change will help to ensure the availability
if information with respect quotations by assisting specialists in
providing information regarding orders to the market.\8\
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\6\ In approving this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b)(5), 78k-1(a)(1)(C)(iii) and (iv).
\8\ The Commission, in approving the proposed rule change, notes
that the requirement to keep Quote Assist active does not relieve
specialists of their responsibility to reflect limit orders by
manually quoting the stock as soon as practicable.
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In addition, the Commission believes the proposal is consistent
with Section 6(b)(5) of the act because it requires specialists to
obtain approval of a decision to deactivate Quote Assist from a Floor
Official as soon as practicable, and no later than three minutes from
the time of deactivation. This requirement should improve member
handling of customer limit orders.
The Commission finds good cause for approving the proposed rule
change prior to the 30th day after the date of publication of notice
thereof in the Federal Register, because the proposal facilitates
compliance with the Display Rule. The Commission believes, therefore,
that granting accelerated approval of the proposed rule change is
appropriate and consistent with Section 6 of the Act.\9\
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\9\ 15 U.S.C. 78f.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-NYSE-99-09) is hereby
approved on an accelerated basis.
\10\ 15 U.S.C. 78s(b)(2).
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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. 99-12356 Filed 5-14-99; 8:45 am]
BILLING CODE 8010-01-M