[Federal Register Volume 66, Number 67 (Friday, April 6, 2001)]
[Notices]
[Page 18334]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8471]



[[Page 18334]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44135; File No. SR-NYSE-00-60]


Self-Regulatory Organizations; Order Approving a Proposed Rule 
Change by the New York Stock Exchange, Inc. Amending NYSE Rule 416, 
Questionnaires and Reports

March 30, 2001.
    On December 21, 2000, the New York Stock Exchange, Inc. (``NYSE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend NYSE Rule 416, 
Questionnaires and Reports. The proposed rule change was noticed in the 
Federal Register on February 2, 2001.\3\ No comments were received on 
the proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 43886 (January 25, 
2001), 65 FR 8829 (February 2, 2001) (SR-NYSE-00-60).
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I. Description of the Proposal

    NYSE Rule 415 authorizes the Exchange to require members and member 
organizations to submit prescribed information that the Exchange 
believes to be essential for the protection of investors and the public 
interest. The Rule has been used to require the periodic submittal of 
specific predefined financial, operational, and other information 
necessary for an effective evaluation of a member's or member 
organization's compliance with applicable rules and regulations. NYSE 
Rule 416 has also been used to prepare the membership for specific 
initiatives such as participation in Year 2000 testing and the 
conversion to decimalization.
    To facilitate the participation of members and member organizations 
in an industry-wide regulatory initiative with respect to clearing 
firms, the Exchange has proposed an amendment to Rule 416 (Rule 416.20) 
that will give the Exchange broader authority to require members and 
member organizations to submit to the Exchange raw trading data, on 
their own behalf and on behalf of firms that introduce customer 
accounts to them pursuant to NYSE Rule 382 (Carrying Agreements). 
Pursuant to Rule 416.20 members may be required by the Exchange to 
submit such information on an ongoing basis (e.g., daily, monthly, 
quarterly) and in such format as the Exchange may require.\4\ The 
Exchange, in conjunction with the Commission, the National Association 
of Securities Dealers Regulation, Inc., Securities Industry Association 
(``SIA''), several member organizations, and other securities industry 
representatives, has developed a broker-dealer reporting system 
intended to help identify potential sales practice violations, 
particularly those associated with low-priced microcap issues. The data 
that the Exchange collects for this reporting system, pursuant to 
proposed Rule 416.20, will be submitted to a processing center that 
will organize it according to exception parameters established by the 
Exchange and other self-regulatory organizations. The required data 
will initially include, among other data, various raw statistical data 
pertaining to cancelled trades. It is intended that additional data 
will be required at future dates. Once the reporting system is fully 
operational, it is expected that the trade information collected 
pursuant to this initiative will serve as an early warning system to 
``red flag'' unusual trading patterns.
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    \4\ The Exchange has represented that it anticipates requesting 
members and member organizations to submit raw data electronically.
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II. Discussion

    The Commission finds that the proposed rule change is consistent 
with the provisions of section 6(b)(5) of the Act,\5\ which require, 
among other things, that the rules of the Exchange be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with respect to facilitating transactions in securities, 
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.\6\ In particular, the Commission 
believes that Rule 416.20 will help to prevent fraudulent and 
manipulative acts and practices and promote just and equitable 
principles of trade because it authorizes the Exchange to require 
clearing members to submit trading data to be analyzed for indications 
of sales practice violations in connection with low-priced microcap 
issues. Furthermore, because Rule 416 authorizes the Exchange to 
require its clearing members to submit this information on their own 
behalf and on behalf of their introducing firms, the Commission 
believes that the rule will broadly enable the Exchange to detect 
unusual trading patterns at an early stage and thereby better protect 
investors and the public interest from abusive sales practices.
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    \5\ 15 U.S.C. 78f(b)(5).
    \6\ In approving the proposal, the Commission has considered the 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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III. Conclusion.

    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
act,\7\ that the proposed rule change (SR-NYSE-00-60) is approved.

    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8471 Filed 4-5-01; 8:45 am]
BILLING CODE 8010-01-M