[Federal Register Volume 64, Number 169 (Wednesday, September 1, 1999)]
[Notices]
[Pages 47883-47885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22693]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41787; File No. SR-NYSE-99-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Amending Exchange Rules 
902, 903 and 906

August 25, 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 June 30, 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 Exchange. 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 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 Exchange proposed to amend NYSE Rules 902, 903 and 906 to 
permit coupled orders to be submitted after the official closing of the 
9:30 a.m. to 4:00 p.m. trading session until 5:00 p.m. (the period 
after the 4:00 p.m. close until 5:00 p.m. hereafter referred to as 
``Crossing Session 1'') where both sides represent member or member 
organization interest, in circumstances in which a specialist has 
included another member's or member organization's interest in 
offsetting the imbalance when setting a closing price. 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 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
    In 1991, the Exchange established its ``Off-Hours Trading 
Facility.'' In connection with its implementation, the Exchange adopted 
the ``900'' series of rules to govern trading, order eligibility, order 
entry and record keeping requirements.
    At 4:00 p.m. each day, the Exchange completes its normal procedure 
for the close of trading of the 9:30 a.m.-4:00 p.m. trading session. 
After 4:00 p.m., a common message switch broadcast message is published 
announcing the commencement of Crossing Session 1, which runs until 
5:00 p.m.

[[Page 47884]]

    During Crossing Session 1, the Off-Hours Trading Facility permits 
members and member organizations to enter orders to be executed at the 
NYSE closing price, that is, the price established by the last regular 
way sale in a security at the official closing of the 9:30 a.m. to 4:00 
p.m. trading session. Orders may be entered for any Exchange listed 
issue, other than a security that is subject to a trading halt at the 
close of the regular trading session (including a Rule 80B trading 
halt) or is halted after 4:00 p.m.
    The Exchange proposed to modify certain rules pertaining to 
Crossing Section 1 in an effort to reduce volatility and price 
dislocations at the 4:00 p.m. close by enabling the specialist to 
reflect legitimate market interest that was willing to participate in 
the close, but could not enter a timely order.
    In circumstances in which a stock has an imbalance of market-on-
close or limit-on-close orders, or when the closing price will elect a 
significant volume of stop orders, there may be little time to attract 
offsetting orders. A member, member organization or a customer may be 
willing to offset the imbalance, but be unable to enter an order before 
4:00 p.m. The specialist may then have to acquire a substantial 
position or halt trading.
    Under NYSE Rule 902, coupled orders to buy and sell the same amount 
of the same security may be entered into Crossing Session 1. However, 
such coupled orders may not be entered if they are both for an account 
of a member or member organization, or for an account in which an 
``associated person'' of a member or member organization has an 
interest.
    Therefore, while a specialist member organization may enter an 
order coupled with a contra-side order from a non-member in Crossing 
Section 1, it may not enter an order coupled with an order for a 
member's or member organization's account.
    The Exchange proposes to amend NYSE Rule 902 to permit coupled 
orders to be submitted to Crossing Session 1 where both sides represent 
member or member organization interest, in circumstances in which a 
specialist has included another member's or member organization's 
interest in offsetting the imbalance when setting a closing price. 
Thus, the specialist will increase his or her participation at the 
close in anticipation of trading with a member or member organization 
in Crossing Session 1 and the closing price will reflect less of an 
imbalance.
    Under NYSE Rule 903, orders entered in Crossing Session 1, 
including coupled orders, are executed at the 5:00 p.m. close of the 
session. Under NYSE Rule 906, if the Exchange determines that material 
news is disclosed between 4:00 p.m. and 5:00 p.m., such as about a 
corporate development, it will cancel orders received in Crossing 
Session 1 and will preclude the entry of any subsequent orders. 
However, in the circumstances, outlined above, it is the Exchange's 
view that a good faith negotiation tied to establishing the closing 
price should not be affected by a subsequent event which ``halts'' 
trading.
    Therefore, the Exchange proposes to amend NYSE Rules 903 and 906 to 
permit trades for the account of a specialist and a member, member 
organization or a non-member to be executed immediately when entered 
into Crossing Session 1 and not at 5:00 p.m. regardless of whether the 
Exchange has determined that all other Crossing Session 1 orders be 
canceled and precluded from entry. In addition, the specialist will be 
required to obtain Floor Official approval for the entry of his or her 
order into Crossing Session 1 if such order is not to be at the risk of 
the market, i.e., it will be executed immediately and will not be 
precluded from entry because of a trading ``halt.'' This requirement 
will help to insure that these orders, which are intended to offset the 
specialist's participation at the close, have been reflected when the 
closing price was established. Other coupled orders would continue to 
be executed at 5:00 p.m., subject to the stock not being withdrawn from 
Crossing Session 1. The Exchange believes that retaining this provision 
for other orders is appropriate for the protection of investors who may 
not be aware of the corporate development.
    Total executed volume for coupled orders which are executed either 
immediately upon entry or at 5:00 p.m. would be reported to the tape as 
a single print, and will continue to be reported as ``sold.''
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) \3\ 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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    \3\ 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 Exchange consents, the Commission will:
    (A) by order approve such 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, 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 number SR-NYSE-99-31 and 
should be submitted by September 22, 1999.


[[Page 47885]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-22693 Filed 8-31-99; 8:45 am]
BILLING CODE 8010-01-M