[Federal Register Volume 64, Number 229 (Tuesday, November 30, 1999)]
[Notices]
[Pages 66956-66957]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30979]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42163; File No. SR-NYSE-98-33]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendment No. 1 to the Proposed Rule Change to Amend NYSE Rule 64

November 19, 1999.

I. Introduction

    On October 16, 1998, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Rule 64. The proposed rule change 
was published for comment in the Federal Register on November 12, 
1998.\3\ On November 1, 1999, the Exchange filed Amendment No. 1.\4\ 
The Commission received no comments on the proposal. This notice and 
order approves the proposed rule change, as amended, and solicits 
comments from interested persons on Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 40631 (November 3, 
1998), 63 FR 63347 (November 12, 1998).
    \4\ See Letter from James E. Buck, Senior Vice President and 
Secretary, NYSE, to Richard Strasser, Assistant Director, Division 
of Market Regulation, Commission, dated October 29, 1999 
(``Amendment No. 1''). Amendment No. 1 changes the proposal to 
require Floor Official approval for non-regular way trades 
throughout the year, but not during the last calendar week of the 
year, to \2/16\ point away from the regular way bid or offer from 
\4/16\ point away. Initially, the proposed rule change would have 
extended the existing requirement of NYSE Rule 64 for Floor Official 
approval for end-of-the-year non-regular way trades to the entire 
year. In other words, Floor Official approval would have been 
required for non-regular way trades that were more than \4/16\ point 
away from the regular way bid or offer throughout the year.
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II. Description of Proposal

    Currently, NYSE Rule 64 requires Floor Official approval for all 
``non-regular way'' \5\ trades during all but the final calendar week 
of the year. During the last calendar week of the year such approval is 
required only for sales more than \4/16\ point away from the regular 
way bid or offer. The Exchange proposes to amend the rule to eliminate 
the requirement of Floor Official approval for certain non-regular way 
trades that do not occur during the final calendar week of the year. 
Under the proposed rule change, Floor Official approval would be 
required only for those non-regular way trades that are more than \2/
16\ point away from the regular way bid or offer throughout the year, 
but not during the final calendar week of the year.\6\ The proposal 
does not change the existing requirement for Floor Official approval 
for non-regular way trades that are more than \4/16\ point away from 
the regular way bid or offer during the last calendar week of the 
year.\7\ Under the proposed rule change, Floor Officials will still be 
required to ``take into consideration whether the price of the 
transaction is reasonable in relation to the `regular way' market'' 
when deciding whether to grant approval for a non-regular way trade.
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    \5\ A ``non-regular way'' trade is a trade that is settled in a 
different time frame from ``regular-way'' trades, which settle on 
the third business day following the transaction. See NYSE Rule 
64(a)(3).
    \6\ See note 4, above.
    \7\ Id.
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    Exchange staff and analyzed price changes from the current bid or 
offer for non-regular way trades during June 1998.\8\ The Exchange's 
analysis showed that approximately 80% of non-regular way trades 
occurred at \2/16\ point or less away from the regular way bid or 
offer. The Exchange believes that the proposed rule change would 
relieve members of the burden of obtaining Floor Official approval for 
routine non-regular way trades at small price variations, while 
preserving Floor Official supervision for those instances were it is 
most needed.
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    \8\ See NYSE Analysis of Non-Regular Way Trades for June 1998.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b)(5) of the Act.\9\ 
Section 6(b)(5) \10\ requires, among other things, that an exchange 
have rules which are designed to promote just and equitable principles 
of trade, to facilitate transactions in securities, 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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    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
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    The Commission believes that the proposed rule change should help 
to alleviate the administrative burden for Floor Officials and members 
with regard to non-regular way trades, which should in turn permit the 
reallocation of valuable resources, and thereby increase operational 
efficiency for Floor Officials and members. As mentioned above, the 
Exchange's analysis of non-regular way trades indicates that this 
proposal should substantially reduce the number of Floor Official 
approvals required for such trades.\11\ The Commission believes that by 
requiring Floor Official approval for non-regular way trades that are 
more than \2/16\ point away from the regular way bid or offer 
throughout the year, but not during the final calendar week of the 
year, the proposal should facilitate transactions in securities and 
help to remove impediments to and perfect the mechanism of a free and 
open market. The Commission notes, however, that the approval of the 
elimination of the requirement for Floor Official approval for non-
regular way trades with a \2/16\ point, or less, deviation from the 
regular way bid or offer does not relieve brokers of their best 
execution duty. The Commission further notes that Floor Officials, as 
per NYSE guidelines, will still be required to consider whether the 
price of the transaction is reasonable in relation to the regular way 
market when deciding whether to grant approval for

[[Page 66957]]

a non-regular way trade when such approval is required.
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    \11\ See note 8, above.
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    The Commission finds good cause to approve Amendment No. 1 to the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing of the amendment in the Federal 
Register. Specifically, Amendment No. 1 changes the proposal to require 
Floor Official approval for non-regular way trades throughout the year, 
but not during the last calendar week of the year, from \4/16\ point 
away from the regular way bid or offer to \2/16\ point away. Initially, 
the proposed rule change would have extended the existing requirement 
of NYSE Rules 64 for Floor Official approval for end-of-the-year non-
regular way trades to the entire year. In other words, Floor Official 
approval would have been required for non-regular way trades that were 
more than \4/16\ point away from the regular way bid or offer 
throughout the year. The Commission finds that reducing the deviation 
from the regular way bid or offer that would require Floor official 
approval for a non-regular way trade is consistent with Section 6(b)(5) 
of the Act.\12\ The Exchange's analysis of non-regular way trades 
indicated that approximately 97% of such trades occur at a \4/16\ point 
or less deviation from the regular way market, while approximately 80% 
of such trades occur at a \2/16\ point or less deviation from the 
regular way market. Therefore, the Commission believes that Amendment 
No. 1 helps to achieve the Exchange's goal of alleviating a substantial 
administrative burden for Floor Officials and members while preserving 
the investor protection provided by Floor Official review of non-
regular way trades that occur at \2/16\ point or more away from the 
regular way market throughout the year, but not during the final 
calendar week of the year. Accordingly, the Commission believes that 
there is good cause, consistent with Sections 6(b)(5) and 19(b) of the 
Act,\13\ to approve Amendment No. 1 to the proposal on an accelerated 
basis.
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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 15 U.S.C. 78f(b)(5) and 78s(b).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning Amendments No. 1, including whether Amendment No. 
1 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 at 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-98-33 and should be 
submitted by December 21, 1999.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NYSE-98-33), as amended, is 
approved.

    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deptuy Secretary.
[FR Doc. 99-30979 Filed 11-29-99; 8:45 am]
BILLING CODE 8010-01-M