[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]


-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-12356 Filed 5-14-99; 8:45 am]
BILLING CODE 8010-01-M