[Federal Register Volume 65, Number 63 (Friday, March 31, 2000)]
[Notices]
[Pages 17325-17326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-7974]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42572; File No. SR-NYSE-00-09]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Amendments to 
Exchange Rule 123B

March 23, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 28, 2000, the New York Stock Exchange, Inc. (``NYSE'' 
or ``Exchange'') file with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change. The proposed rule 
change is 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 involves two amendments to Exchange Rule 
123B. The first amendment relates to commission-free execution or 
orders received by specialists through the SuperDOT System, and the 
second amendment clarifies the status of an order that is canceled and 
replaced.\3\
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    \3\ The Commission approved these two amendments to Exchange 
Rule 123B on a pilot basis on November 30, 1999. See Exchange Act 
Release No. 42184 (November 30, 1999), 64 FR 68710 (December 8, 
1999), File No. SR-NYSE-99-40. In SR-NYSE-99-40, a third amendment 
to Exchange Rule 123B relating to execution reports of stopped 
orders was also proposed and approved by the Commission. However, 
the Exchange did implement this third amendment upon the 
Commission's approval, and is not seeking to implement this third 
amendment at this time. See letter from James E. Buck, Senior Vice 
President and Secretary, Exchange, to Richard Strasser, Assistant 
Director, Division of Market Regulation, Commission, dated February 
25, 2000. Additionally, in File No. SR-NYSE-00-13, filed with the 
Commission on March 21, 2000, the Exchange has requested an 
extension of this pilot program for an additional 60 days or until 
April 26, 2000, and has requested permanent approval of this pilot 
program on an accelerated basis.
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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. The Exchange has prepared summaries, set forth in 
Sections 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
    On October 4, 1999, the Exchange filed a proposed rule change with 
the Commission consisting of three amendments to Exchange Rule 123B. On 
November 30, 1999, the Commission approved the proposed rule change as 
a pilot through February 26, 2000.\4\
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    \4\ See Exchange Act Release No. 42184 (November 30, 1999), 64 
FR 68710 (December 8, 1999). The third proposed change to Rule 123B 
related to reports of executions within two minutes for orders 
stopped by specialists. The Exchange is not implementing this third 
proposed change to Rule 123B at this time. See Footnote 3, infra. 
Therefore, the Commission is not seeking comment on this third 
amendment.
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    One of the amendments to Rule 123B provided for the commission-free 
execution of all orders received by Exchange specialists through the 
SuperDOT system if such orders were executed within five minutes. Under 
former Exchange Rule 123B(b)(1), specialists were not permitted to 
charge floor brokerage (i.e., a commission imposed on exchange floor 
brokers) for executing market and marketable limit orders \5\ received 
by means of the Exchange's automated order routing system known as 
SuperDOT. The Exchange proposed to amend Rule 123B and add .10 in the 
Supplementary Material to the Rule to extend the no commission policy 
to all orders received by specialists via SuperDOT that are executed 
within five minutes of receipt. This proposal extended the commission-
free execution to include limit orders that are not marketable at the 
time of receipt by the specialist but that are executed within the 
five-minute timeframe. The proposed rule change

[[Page 17326]]

eliminated reference to ``market'' and ``marketable limit orders'' 
since all orders received through SuperDOT would be eligible for 
commission-free execution. The provision allowing the specialist to 
charge a commission on orders to sell short was also eliminated. The 
Exchange instituted the pricing initiative of commission-free 
executions, in conjunction with the Exchange's specialist community, 
effective with trades executed on December 29, 1999. To date, the 
procedure has worked well. The Exchange has not received any complaints 
concerning this policy.
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    \5\ A marketable limit order is defined as an order with a limit 
price which is at or better than the prevailing quotation at the 
time the order is received by the specialist. See Exchange Rule 
123B(b)(1).
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    A second amendment added language to Rule 123B to clarify that if 
an order that had been placed with the specialist is canceled and 
replaced, the replacement order is considered a new order for purposes 
of the Rule. Since the implementation of the pilot program, the 
Exchange is not aware of any problems associated with the clarifying 
language.
2. Statutory Basis
    The Exchange believes that the basis for the proposed rule change 
is the requirement under Section 6(b)(5) of the Act \6\ that an 
Exchange have rules that are designed to promote just and equitable 
principles of trade, facilitate transactions in securities, 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. In accordance with Section 11A(a)(1)(C) of the Act,\7\ 
the Exchange also believes that the proposed rule change will foster 
the economically efficient execution of securities transactions, fair 
competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets.
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    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78k-1(a)(1)(c).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    These enhancements will provide the Exchange the opportunity to 
compete more effectively for order flow with other marketplaces. Thus, 
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 reviewed the proposed rule change with members and 
organizations representing various constituencies of the Exchange and 
the responses to the proposed rule changes were positive. The Exchange 
has not otherwise solicited, and does not intend to solicit, comments 
on this proposed rule change. The Exchange has not received any written 
comments from members or other interested parties.

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 
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.
    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-00-09 and should be submitted April 21, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-7974 Filed 3-30-00; 8:45 am]
BILLING CODE 8010-01-M