[Federal Register Volume 65, Number 50 (Tuesday, March 14, 2000)]
[Notices]
[Pages 13801-13802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6203]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42501; File No. SR-NYSE-99-44]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Rule 103A

March 7, 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 November 3, 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 proposed rule change consists of amendments to Exchange Rule 
103A (Specialist Stock Reallocation). 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 Section 
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
    The Exchange proposes to amend Rule 103A (Specialist Stock 
Reallocation) to codify the Market Performance Committee's (``MPC'') 
authority with respect to allocation freezes, stock assignments and 
reassignments, specialist unit organizational changes and Floor member 
qualification and continuing education requirements.
    a. Allocation Freezes. Currently, Rule 103A provides the MPC the 
authority to establish and administer measures of specialist 
performance, conduct performance improvement actions when a specialist 
unit does not meet the performance standards in Rule 103A, and 
reallocate stocks if a unit does not achieve its specified goals when 
subject to a performance improvement action. These standards help to 
establish and maintain acceptable levels of specialist performance, 
thereby enhancing the competitiveness of the Exchange's specialist 
performance, thereby enhancing the competitiveness of the Exchange's 
specialist system. The purpose of a performance improvement action is 
to provide assistance and guidance to specialist units to enable them 
to enhance their performance. When a performance improvement action is 
initiated, a specialist unit is required to submit a performance 
improvement plan addressing how it intends to improve performance to 
the MPC. Based on the MPC's review of the performance improvement plan, 
the MPC has the authority to preclude a specialist unit subject to a 
performance improvement action, from applying to be allocated any 
newly-listing company (an ``allocation freeze'') if the MPC believes 
such action is appropriate.
    The Exchange proposes to amend Rule 103 to allow the MPC to 
exercise its discretion in imposing allocation freezes. In certain 
instances, the Committee will determine that a unit's performance is 
not as strong as other units' performance, although the unit's 
performance fully meets the Rule 103A performance standards. For 
example, this may occur when a specialist unit's scores on the 
quarterly Specialist Performance Evaluation Questionnaire are above 
Rule 103A performance standards; however, the unit may have lower 
scores than other units over a period of several quarters, resulting in 
persistent lower rankings in the bottom quartile. In these instances, 
the Exchange believes the MPC should have the ability to provide an 
incentive to the specialist unit to ensure performance by using its 
professional judgment. Therefore, the Exchange proposes to add to Rule 
103A authority for the Committee to initiate an allocation freeze for a 
unit, without initiating a formal performance improvement action.
    b. Receipt of New Listings During an Allocation Freeze. Under the 
Exchange's Allocation Policy and Procedures (the ``Allocation Policy'') 
there are circumstances when a newly-listing

[[Page 13802]]

company may choose its specialist unit. For example, a newly-listing 
company that is related to an already listed company may choose to stay 
with the current specialist for the listed company or choose to go 
through the Allocation Committee.\3\ The newly-listing company may 
choose to stay with the current specialist for the related listed 
company even if such unit is under an allocation freeze imposed by the 
MPC as long as the unit is not subject to a performance improvement 
action.
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    \3\ See Securities Exchange Act Release No. 42487 (March 2, 
2000).
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    Similarly, under the Allocation Policy, the newly-listing company 
may choose its specialist from among a group of specialist units chosen 
by the Allocation Committee. The Allocation Committee has the ability 
to exclude or include the current specialist for the related company in 
such a group. If the specialist unit was under an allocation freeze 
imposed by the MPC, it would not be precluded from being placed in the 
group or chosen by the newly-listing company as long as the allocation 
freeze was not the result of a performance improvement action.
    c. Floor Member Qualifications and Continuing Education. The 
Exchange also proposes to amend Rule 103A to make mandatory: (i) 
Participation by proposed Floor members in an Exchange-sponsored 
educational program before such individuals would be permitted to act 
as members on the Floor; and (ii) participation by all Floor members in 
an Exchange-sponsored educational program, conducted semi-annually, and 
at such other times as may be appropriate in connection with any 
particular matter or matters. Rule 103A would also make it mandatory 
for Floor members to participate in any testing programs the Exchange 
may introduce from time to time in connection with the mandatory 
education program.
    d. Stock Assignments and Reassignments and Organizational Changes 
of Specialist Units. The Exchange proposes to amend Rule 103A to codify 
the Committee's authority with respect to approving stock assignments 
and reassignments, assignments in special stock situations, and 
organizational changes to specialist units. Such situations typically 
involve: (i) Changes in a specialist unit's organizational structure 
effecting control of the specialist unit, such as split-ups and 
mergers; (ii) withdrawal of individual specialists from one specialist 
unit, where the specialists propose to register with another unit and 
transfer certain securities to such other unit; and (iii) assignments 
of newly-listed securities to a specialist unit already registered in a 
security with a trading relationship to the newly-listed securities 
(e.g., a corporate restructuring of a listed company; stocks involved 
in mergers of listed companies; and immediate relisting of a listed 
company that delisted for technical reasons). In all of these 
situations, the MPC will review the proposal, and approve the matter if 
the Committee believes that market quality in the securities subject to 
the proposal will not be eroded.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\4\ in general, and furthers the 
objectives of section 6(b)(5),\5\ in particular, in that is it designed 
to 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 protect investors and the public interest. The 
amendments to Rule 103A are consistent with these objectives in that 
they facilitate high quality member performance through the 
reallocation of stocks by the MPC and the Floor member qualification 
and mandatory education program.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not 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 self-regulatory organization consents, the Commission will:
    (A) By order approve the 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 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 in the 
Commission's Public Reference Room, 450 Fifth Street, NW, Washington, 
DC 20549. 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-99-44 and should be submitted by April 4, 
2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.3-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-6203 Filed 3-13-00; 8:45 am]
BILLING CODE 8010-01-M