[Federal Register Volume 64, Number 140 (Thursday, July 22, 1999)]
[Notices]
[Pages 39547-39548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18656]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41623; File No. SR-NYSE-99-10]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. to Amend Rule 123A.40

July 16, 1999.
    Pursuant to Section 19(b)(1) of the Security Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 19, 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, 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. 78s(b)(1).
    \2\ 17 C.F.R. 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 would amend NYSE Rule 123A.40 to allow 
specialists to elect stop orders at a bid or offer that betters the 
market and would eliminate the requirement for specialists to obtain 
Floor Official approval, unless the price of the specialist's electing 
transaction is more than \4/16\ point away from the previous sale.

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

[[Page 39548]]

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 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
    NYSE Rule 123A.40 generally prohibits a specialist from making a 
transaction for his or her own account that would result in electing 
stop orders.\3\ However, the Rule permits a specialist to be party to 
the election of a stop order under two sets of circumstances: (i) when 
the specialist's bid or offer is made with the prior approval of a 
Floor Official, has the effect of bettering the market, and the 
specialist guarantees that the stop order will be executed at the same 
price as the electing sale; and (ii) when the specialist purchases or 
sells stock at the current bid or offer in order to facilitate 
completion of a member's order at a single price, where the depth of 
the current bid or offer is not sufficient.
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    \3\ A stop order is an order that becomes an executable market 
order, or limit order, once the specified price (``stop price'') is 
reached. A stop order is elected when the stock trades at or beyond 
the stop price and, thus, may not necessarily be executed at that 
price. See NYSE Rule 13.
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    The Exchange proposes to amend part (i) of the Rule to allow the 
specialist to make a bid or offer that betters the market at a price 
that would elect stop orders and eliminate the requirement to obtain 
Floor Official approval, unless the price of the specialist's electing 
transactions is more than \4/16\ point away from the previous sale. The 
Rule would retain the requirement that the specialist guarantee that 
stop orders be executed at the same price as the electing sale.
    A review of specialists' stop order electing transactions shows 
that a significant percent of trades occur at little or no change in 
price. For example, a study of the difference between the electing stop 
price and last sale price for September through November 1998 shows 
that 86% of the electing sales took place at \4/16\ point change or 
less from the last sale price. The proposed change follows the 
philosophy that smaller variation trades do not require immediate 
scrutiny by a Floor Official. The Exchange's program for surveying stop 
order elections would not be affected by the proposed change to NYSE 
Rule 123A.40.
    Based on these statistics, therefore, the proposal would eliminate 
approximately 86% of required Floor Official approvals in this area. A 
comparison of Stop Election Forms (Floor Official approval slips) 
submitted during July and August 1997 versus the same weeks in 1998 
shows that the number of such forms (and therefore requests for Floor 
Official approval) doubled in 1998. In 1998, on average, more than 800 
Stop Election Forms a day were submitted during this period. The 
proposed change would significantly reduce the administrative burden on 
Floor Official and specialists without compromising the Exchange's 
ability to survey stop order elections.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) \4\ 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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    \4\ 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 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 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-99-10 and should be submitted by August 12, 
1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-18656 Filed 7-21-99; 8:45 am]
BILLING CODE 8010-01-M