[Federal Register Volume 64, Number 230 (Wednesday, December 1, 1999)]
[Notices]
[Pages 67365-67366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31209]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42174; File No. SR-NYSE-99-45]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the New York Stock Exchange,
Inc. Amending List of Exchange Rule Violations and Fines Applicable
Thereto
November 23, 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 November 10, 1999, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 NYSE proposes to revise the List of Exchange Rule Violations
and Fines Applicable Thereto Pursuant to Rule 476A (``List'') for
imposition of fines for minor violations of rules and/or policies by
adding to the List; (1) Failure to comply with the provisions of Rule
97(a) relating to purchases by a member of additional shares of stock
on a ``plus'' or ``zero-plus'' tick when it holds a long position in
the stock as a result of an earlier block trade with a customer; and
(2) failure to comply with Expiration Day Auxiliary Opening Procedures.
The Exchange believes it is appropriate to make the failure to comply
with the provisions of the above-named rule and procedure subject to
the possible imposition of a fine under Rule 476A procedures. The text
of the proposed rule change is available at the Office of the
Secretary, NYSE 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 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
Rule 476A provides that the Exchange may impose a fine, not to
exceed $5,000, on any member, member organization, allied member,
approved person, or registered or non-registered employee of a member
or member organization for a minor violation of certain specified
Exchange rules. The purpose of the Rule 476A procedure is to provide
for a meaningful sanction for a rule violation when the initiation of a
disciplinary proceeding under Rule 476 would be more costly and time-
consuming than would be warranted given the minor nature of the
violation, or when the violation calls for a stronger regulatory
response than a cautionary letter would convey. Rule 476A preserves due
process rights, identifies those rule violations which may be the
subject of summary fines, and includes a schedule of fines. In SR-NYSE-
84-27,\3\ which initially set forth the provisions and procedures of
Rule 476A, the Exchange indicated it would amend the list of rules from
time to time, as it considered appropriate, in order to phase-in the
implementation of Rule 476A as experience with it was gained.
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\3\ Securities Exchange Act Release No. 21688 (January 25,
1985), 50 FR 5025 (February 5, 1985) (approving SR-NYSE-84-27).
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The Exchange is seeking approval to add to the List of Rules
subject to imposition of fines under Rule 476A procedures the failure
by members or member organizations to comply with the provisions of:
(1) Rule 97(a) which prohibits a member organization that holds a long
position in a stock in its trading account resulting from a block
transaction it effected with a customer from purchasing, for an account
in which the member organization has a direct or indirect interest,
additional shares of such stock on a ``plus'' or ``zero plus'' tick
under certain conditions for the remainder of the trading day \4\ and
(2) Expiration Day Auxiliary Opening Procedures which provide that the
Exchange, as soon as practicable, after 9:00 a.m. on expiration days,
will publish market order imbalances of 50,000 shares or more in all
stocks, may publish imbalances of less than 50,000 shares at that time
with Floor Official approval, and will not publish a ``no imbalance''
status for any stock.\5\
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\4\ See Securities Exchange Act Release No. 41500 (June 9,
1999), 64 FR 32596 (June 17, 1999).
\5\ See NYSE Information Memoranda No. 96-34 (November 8, 1996)
and No. 99-37 (July 19, 1999) for a discussion of Expiration Day
Auxiliary Opening Procedures.
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The purpose of the proposed change to Rule 476A is to facilitate
the Exchange's ability to induce compliance with all aspects of the
above-cited rules. The Exchange believes failure to comply with the
requirements of the rule and procedures should be addressed with an
appropriate sanction and is adding violations of these requirements to
the List so as to have a broad range of regulatory responses available.
The Exchange believes that this would more effectively encourage
compliance by enabling a prompt, meaningful and heightened regulatory
response (i.e., the issuance of a fine rather than a cautionary letter)
to a minor violation of a rule.
The Exchange wishes to emphasize the importance it places upon
[[Page 67366]]
compliance with the above-named rules. While the Exchange, upon
investigation, may determine that a violation of any of these rules is
a minor violation of the type which is properly addressed by the
procedures adopted under Rule 476A, in those instances where
investigation reveals a more serious violation of the above-described
rules, the Exchange will provide an appropriate regulatory response,
such as suspension, expulsion, limitation of activities, etc. This
includes the full disciplinary procedures available under Rule 476.
2. Statutory Basis
The NYSE believes that this proposal will advance the objectives of
Section 6(b) of the Act \6\ in general and further the objectives of
Section 6(b)(6) \7\ in particular in that it will provide a procedure
whereby member organizations can be ``appropriately disciplined'' when
a rule violations is minor in nature, but a sanction more serious than
a warning or cautionary letter is appropriate. The proposed rule change
provides a fair procedure for imposing such sanctions, in accordance
with the requirements of Sections 6(b)(7) \8\ and 6(d)(1) \9\ of the
Act.
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\6\ 15 USC 78f(b).
\7\ 15 USC 78f(b)(6).
\8\ 15 USC 78f(b)(7).
\9\ 15 USC 78(d)(1).
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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 change.
This proposed rule change is filed pursuant to Section
19(b)(3)(A)(i) of the Act \10\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\11\ The proposed rule change: (1) Does not significantly
affect the protection of investors or the public interest; (2) does not
impose any significant burden on competition; and (3) does not become
operative for 30 days after the date of the filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest provided that the Exchange has
given the Commission notice of its in tent to file the proposed rule
change, along with a brief description and the text of the proposed
rule change, at least five business days prior to the date of filing of
the proposed rule change, which the NYSE did in this instance.
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\10\ 15 USC 78s(b)(3)(A)(i).
\11\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors or otherwise in
furtherance of the purposes of the Act.\12\
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\12\ In reviewing this proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. 15 USC
78c(f).
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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 in accordance with the provisions
of 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 SR-NYSE-99-45 and should be
submitted by December 22, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-31209 Filed 11-30-99; 8:45 am]
BILLING CODE 8010-01-M