[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