[Federal Register Volume 65, Number 80 (Tuesday, April 25, 2000)]
[Notices]
[Pages 24245-24246]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10263]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42694; File No. SR-NYSE-00-13]


Self-Regulatory Organizations: Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the New York 
Stock Exchange, Inc. Extending the Pilot Program for Amendments to 
Exchange Rule 123B Until April 26, 2000

April 17, 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 March 22, 2000, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') 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 and to grant 
accelerated approval to the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange requests that the pilot program for commission-free 
execution of orders received by specialists through the SuperDOT 
System, and language clarifying the status of an order that is 
cancelled and replaced, be extended for 60 days.

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, 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. 
One amendment provided for the commission-free execution of all orders 
received by the Exchange specialists through the SuperDOT system if 
such orders were executed within five minutes. A second amendment added 
language to Rule 123B to clarify that if an order placed with the 
specialist is cancelled and replaced, the replacement order is 
considered a new order for purposes of the Rule.\3\ The Commission 
approved these changes as a pilot program through February 26, 2000.
---------------------------------------------------------------------------

    \3\ The third proposed change to Rule 123B related to reports of 
executions within two minutes for orders stopped by specialists. The 
Exchange is not requesting extension of this provision at this time. 
See letter from James E. Buck, Senior Vice President and Secretary, 
NYSE, to Richard Strasser, Assistant Director, Division of Market 
Regulation, SEC, dated February 25, 2000. The Commission published 
notice of these two amendments to Rule 123B. See Exchange Act 
Release No. 42572 (March 23, 2000), 65 FR 17325 (March 31, 2000) 
(SR-NYSE-00-09).
---------------------------------------------------------------------------

    The Exchange requests that the pilot be extended for 60 days as it 
relates to the commission-free policy and the provision in Rule 123B 
relating to cancelled and replaced orders. 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. As to that 
portion of Rule 123B on cancelled and replaced orders, the Exchange is 
not aware of any problems associated with the clarifying language.
2. Statutory Basis
    The Exchange believes that the basis under the Act for the proposed 
rule change is the requirement under Section 6(b)(5) \4\ that the 
Exchange have rules that are designed to promote just and equitable 
principles of trade, that facilitate transactions in securities, that 
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. The Exchange also believes that the 
basis under the Act for

[[Page 24246]]

the proposed rule change is the requirement under Section 11A(a)(1)(C) 
\5\ which states that it is in the public interest and appropriate for 
the protection of investors and the maintenance of fair and orderly 
markets to assure 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b)(5).
    \5\ 15 U.S.C. 78k-1(a)(1)(C).
---------------------------------------------------------------------------

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

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b) of the Act.\6\ 
Eliminating specialist commissions on orders executed within five 
minutes will improve the cost competitiveness of Exchange executions, 
which the Exchange believes will inure to the benefit of investors. 
Additionally, this may assist broker-dealers in fulfilling their best 
execution duties for their customers. The Commission notes that the 
proposed rule change also extends provisions of a previously approved 
pilot program.\7\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ In approving this rule change, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
---------------------------------------------------------------------------

    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register. Approval of the proposal will 
allow the Exchange to continue the pilot program. Therefore, the 
Commission believes it is consistent with Section 6(b)(5) and Section 
11A(a)(1)(C) of the Act \8\ to grant accelerated approval to the 
proposed rule change.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78k-1(a)(1)(C).
    \9\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
---------------------------------------------------------------------------

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 at the 
Commission's Public Reference Room, located at the above address. 
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-00-13 and should be submitted by May 16, 2000.

V. Conclusion

    It is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSE-00-13) extending the 
pilot program for amendments to Exchange Rule 123B until April 26, 2000 
is approved.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-10263 Filed 4-24-00; 8:45 am]
BILLING CODE 8010-01-M