[Federal Register Volume 65, Number 36 (Wednesday, February 23, 2000)]
[Notices]
[Pages 9025-9026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4191]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42425; File No. SR-NYSE-00-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. Relating to the Interpretation of Exchange Rules 15 and 390

February 14, 2000.
    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 February 14, 2000, 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.\3\ 
Pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder, the Exchange has designated this proposal as one that does 
not significantly affect the protection of investors or the public 
interest, and does not impose any significant burden on competition. 
Thus, the proposal is effective upon filing with the Commission. 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.
    \3\ On February 14, 2000, the day of filing, the Exchange also 
submitted an amendment to the proposed rule change. See Letter from 
Daniel Odell, Assistant Secretary, Exchange, to Nancy Sanow, Senior 
Special Counsel, Division of Market Regulation, Commission, dated 
February 14, 2000 (``Amendment No. 1''). Amendment No. 1 stated that 
the Exchange characterized the rule filing as non-controversial, and 
requested that it become effective pursuant to Section19(b)(3)(A) of 
the Act, 15 U.S.C. 78s(b)(3)(A), and Rule 19b-4(f)(6) thereunder, 17 
CFR 240.19b-4(f)(6). Amendment No. 1 also requested that the 
Commission waive the five day pre-filing requirement and the 30 day 
implementation delay for non-controversial filings.
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1. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change
    The proposed rule change consists of an interpretation of Exchange 
Rules 15 and 390 to permit members, member organizations, and 
affiliated persons (as defined in Rule 390) to effect transactions in 
NYSE-listed stocks in the over-the-counter market by means of the 
Intermarket Trading System (``ITS'').\4\
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    \4\ NYSE Rule 390 limits the ability of members of the Exchange 
to effect transactions in NYSE-listed stocks in the over-the-counter 
market. NYSE Rule 15 governs the use of the ITS.
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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
    The purpose of the proposed rule change is to interpret Rules 15 
and 390 to apply those rules in a manner that is consistent with the 
objectives of the Commission in expanding the ITS/CAES linkage,\5\ and 
that is consistent with the Exchange's filing to rescind Rule 390 and 
thereby eliminate restrictions on trading NYSE-listed stocks in the 
over-the-counter market.\6\ The interpretation provides that members, 
member organizations, and affiliated persons (as defined in Rule 390) 
may effect, either as principal or agent, transactions in any ITS-
eligible security listed on the Exchange in the over-the-counter market 
by means of ITS.
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    \5\ On December 13, 1999, the Commission adopted amendments to 
the ITS plan to expand the ITS/Computer Assisted Execution System 
(``CAES'') linkage to all listed securities. This amendment is 
effective February 14, 2000. Prior to the amendment, the ITS/CAES 
linkage applied only to ``Rule 19c-3'' securities i.e., securities 
listed after April 26, 1979. See Securities Exchange Act Release No. 
42212 (December 13, 1999), 64 FR 70297 (December 16, 1999).
    \6\ On December 10, 1999, the Exchange filed a proposed rule 
change to rescind Rule 390. See File No. SR-NYSE-99-48.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \7\ 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 a national market system and, in general, to protect 
investors and the public interest.
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    \7\ 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

[[Page 9026]]

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

    This proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder because the 
proposal: (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 prior to 30 days after 
the date of filing or such shorter time as the Commission may designate 
if consistent with the protection of investors and the public interest. 
The Exchange, however, is required to give the Commission written 
notice of its intent to file the proposed rule change at least five 
business days prior to the filing date of the proposed rule change, or 
such shorter time as designated by the Commission.
    The Exchange has requested that the Commission accelerate the 
operative date of the proposed rule change and waive the five-day pre-
filing notice requirement contained in rule 19b-4(f)(6)(iii), so that 
trading in Exchange-listed securities may proceed in a manner 
consistent with the Commission's recent amendment to the ITS Plan to 
expand the ITS/CAES linkage.
    The Commission finds that it is appropriate to waive the five-day 
pre-filing notice requirement, and to designate the proposal to become 
operative upon filing, because the immediate implementation of the 
proposed rule change is consistent with the dictates of Section 6(b)(5) 
of the Act, in that the immediate implementation of the proposal would 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system and, in general, protect investors and the public 
interest. The Commission recently amended the ITS plan to expand the 
ITS/CAES linkage to encompass all listed securities because the 
Commission believed that step was necessary to fully implement the 1975 
congressional mandate to create a national market system linking the 
exchanges and the over-the-counter market. The Commission determined 
that this expansion would increase broker-dealers' ability to obtain 
the best price available for their customers, promote competition in 
listed securities, help ensure equivalent access to the markets, and 
provide for additional liquidity and more efficient executions. The 
expanded ITS/CAES linkage became effective on February 14, 2000. The 
NYSE's proposed interpretation of Rules 15 and 390--to permit members 
to use ITS to effect transactions in any ITS-eligible securities listed 
on the NYSE--is consistent with the Commission's action and will help 
NYSE members benefit from the widened ITS/CAES linkage.\8\
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    \8\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition and capital formation. 15 
U.S.C. 78c(f).
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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.

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, D.C. 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 at 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-NYSE-00-07 and should be 
submitted by March 15, 2000.


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-4191 Filed 2-22-00; 8:45 am]
BILLING CODE 8010-01-M