[Federal Register Volume 66, Number 67 (Friday, April 6, 2001)]
[Notices]
[Pages 18339-18346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8508]



[[Page 18339]]

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SECURITIES AND EXCHANGE COMMISSION

[Docket No. 34-44139; File No. SR-NYSE-94-34]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change and Notice of Filing and Order Granting Accelerated Approval of 
Amendment No. 6 to the Proposed Rule Change by the New York Stock 
Exchange, Inc. Amending Rule 92 To Permit Limited Trading Along With 
Customers

March 30, 2001.

I. Introduction

    On September 27, 1994, the New York Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to 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 92 to permit 
limited trading along with customers. On December 20, 1994, the 
Exchange submitted Amendment No. 1 to the proposed rule change.\3\ The 
proposed rule change, as amended by Amendment No. 1, was published in 
the Federal Register on January 3, 1995 (``Original Proposal'').\4\ On 
February 1, 1995, in response to requests from several self-regulatory 
organizations (``SROs''),\5\ the Commission published a notice of 
filing to extend the comment period for the Original Proposal.\6\ The 
Commission received ten comment letters on the Original Proposal.\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See: letter to Glen Barrentine, Team Leader, Division Vice 
President and Secretary, NYSE dated December 16, 1994 (``Amendment 
No. 1'').
    \4\ Securities Exchange Act Release No. 35139 (December 22, 
1994), 60 FR 156.
    \5\ See letters to Katherine A. Simmons, Division, SEC, from 
Robert P. Ackerman, The Cincinnati Stock Exchange (``CSE''), dated 
January 23, 1995; and David P. Semak, Vice President Regulation, 
Pacific Stock Exchange, Inc. (``PCX''), dated January 23, 1995.
    \6\ Securities Exchange Act Release No. 35274 (January 25, 
1995), 60 FR 6330. Pursuant to Section 19(b)(2) of the Act, the NYSE 
consented to the additional twenty-one day public comment period. 
See letter to Katherine Simmons, Division, SEC, from Donald Siemer, 
Director, Market Surveillance, NYSE, dated January 24, 1995.
    \7\ See letters to Jonathan G. Katz, Secretary, SEC, from Roger 
D. Blanc, Wilkie, Farr & Gallagher, dated February 21, 1995 (``Blanc 
Letter No. 1'') and March 30, 1995; Joan Conley, Corporate 
Secretary, National Association of Securities Dealers, Inc. 
(``NASD''), dated March 6, 1995; Peter A. Ianello, et al, SBC 
Capital Markets Inc., dated March 13, 1995; J. Craig Long, Foley & 
Lardner, dated May 3, 1995; and letters to Margaret H. McFarland, 
Deputy Secretary, SEC from William W. Uchimoto, General Counsel, 
Philadelphia Stock Exchange (``Phlx''), dated February 15, 1995 
(``Phlx Letter No. 1'') and April 4, 1995; Frederick Moss, Chairman 
of the Board of Trustees, CSE, dated February 16, 1995; David P. 
Semak, Vice President Regulation, PCX, dated February 17, 1995 
(``PCX Letter No. 1''); and George W. Mann, Senior Vice President 
and General Counsel, Boston Stock Exchange, Inc. (``BSE''), dated 
February 27, 1995.
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    On July 13, 1995, the NYSE submitted Amendment No. 2 to the 
proposed rule change, which was published in the Federal Register on 
July 28, 1995.\8\ The Commission received five comment letters on 
Amendment No. 2 to the proposed rule change.\9\
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    \8\ Securities Exchange Act Release No. 36015 (July 21, 1995), 
60 FR 38875.
    \9\ See letter to Jonathan G. Katz, Secretary, SEC, from David 
P. Semak, Vice President Regulation, PCX, dated September 8, 1995; 
letters to Margaret H. McFarland, Deputy Secretary, SEC, from 
William W. Uchimoto, First Vice President and General Counsel, Phlx, 
dated August 11, 1995 and October 27, 1995; and David Colker, 
Executive Vice President and Chief Operating Officer, CSE, dated 
February 15, 1996; and letter to Brandon Becker, Director, Division, 
SEC, from Roger D. Blanc, Wilkie, Farr & Gallagher, dated November 
22, 1995.
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    On June 28, 1996, the NYSE submitted Amendment No. 3 to the 
proposed rule change, which was published in the Federal Register on 
July 18, 1996.\10\ The Commission received three comment letters on 
Amendment No. 3 to the proposed rule change.\11\
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    \10\ Securities Exchange Act Release No. 37428 (July 11, 1996), 
61 FR 37523.
    \11\ See letter to Jonathan G. Katz, Secretary, SEC, from Roger 
D. Blanc, Wilkie, Farr & Gallagher, dated August 2, 1996; and 
letters to Margaret H. McFarland, Deputy Secretary, SEC, from 
Michele R. Weisbaum, Vice President and Associate General Counsel, 
Phlx, dated August 8, 1996; and Adam W. Gurwitz, Director of Legal 
Affairs, CSE, dated August 13, 1996.
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    On December 15, 1997, the NYSE submitted Amendment No. 4 to the 
proposed rule change, which was published in the Federal Register on 
February 18, 1998.\12\ The Commission received six comment letters on 
Amendment No. 4 to the proposed rule change.\13\
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    \12\ Securities Exchange Act Release No. 39634 (February 9, 
1998), 63 FR 8244.
    \13\ See letters to Jonathan G. Katz, Secretary, SEC, from Roger 
D. Blanc, Wilkie, Farr & Gallagher, dated March 10, 1998; Robert C. 
Errico, President, Securities Industry Association, dated March 24, 
1998; Karen A. Aluise, Vice President, BSE, dated March 12, 1998; 
Paul A. Merolla, Vice President-Associate General Counsel, Goldman 
Sachs, dated March 18, 1998; letter to Margaret H. McFarland, Deputy 
Secretary, SEC, from Adam W. Gurwitz, Vice President Legal and 
Corporate Secretary, CSE, dated March 11, 1998; and letter to Howard 
L. Kramer, Assistant Director, Division, SEC, from Julius R. Leiman-
Carbia, Goldman Sachs, dated May 21, 1998.
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    On October 28, 1999, the NYSE submitted Amendment No. 5 to the 
proposed rule change, which was published in the Federal Register on 
December 20, 1999.\14\ The Commission received three comment letters on 
Amendment No. 5 to the proposed rule change.\15\ Given the public's 
interest in the proposed rule change and the Commission's desire to 
give the public sufficient time to consider Amendment No. 5 to the 
proposal, the Commission extended the comment period to Amendment No. 5 
for an additional 14 days.\16\
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    \14\ Securities Exchange Act Release No. 42224 (December 13, 
1999), 64 FR 3515.
    \15\ See letters to Jonathan G. Katz, Secretary, SEC, from 
Gerald D. Putnam, Chief Executive Officer, Archipelago, L.L.C., 
dated January 10, 2000 (``Archipelago Letter''); Sam Scott Miller, 
Orrick, Herrington & Sutcliffe, LLP, dated January 25, 2000 
(``Orrick Herrington Letter''); Richard T. Sharp, Solomon, Zauderer, 
Ellenhorn, Frischer & Sharp, dated March 10, 2000 (``Solomon 
Zauderer Letter'').
    \16\ Securities Exchange Act Release No. 42330 (January 11, 
2000), 65 FR 3515 (January 21, 2000).
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    On March 13, 2001, the NYSE submitted Amendment No. 6 to the 
proposed rule change.\17\ This order approves the proposed rule change, 
as amended. The Commission also seeks comment from interested persons 
on Amendment No. 6.
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    \17\ See letter to Belinda Blaine, Associate Director, Division, 
SEC, from James E. Buck, Senior Vice President and Secretary, NYSE, 
dated March 9, 2001 (``Amendment No. 6'').
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II. Background

    Currently, NYSE Rule 92 prohibits members from personally buying or 
selling (or initiating the purchase or sale) of any security on the 
Exchange at the same or better price at which they hold executable 
customer orders. The rule does not contain any exceptions for any type 
of proprietary transactions. In addition, the current rule does not 
apply to member organizations or transactions by members or member 
organizations in market centers other than the Exchange.
    According to the Exchange, Rule 92 reflects fundamental concepts of 
agency law--that an agent must place its customer's interest ahead of 
its own proprietary interest. While this concept remains true today, 
the Exchange believes that trading practices have evolved in a manner 
that requires that the rule be amended. Specifically, the rule was 
drafted and promulgated before the advent of block positioning \18\ and 
the proliferation of upstairs proprietary trading by member 
organizations. Thus, the Exchange decided to evaluate the rule's 
application, which currently only applies to trading practices engaged 
in by floor members, in light of member organizations' new off-floor 
trading practices. According to the Exchange, in amending Rule 92 to 
address these off-floor trading practices, it sought to strike

[[Page 18340]]

an appropriate balance between permitting block facilitations and 
preserving customer protections.
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    \18\ Block positioning is an activity engaged in by certain 
broker-dealers whereby a broker-dealer acts as principal in taking 
all or part of a block order placed with the broker-dealer by a 
customer to facilitate a transaction that might otherwise be 
difficult to effect in the ordinary course of floor trading.
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    Accordingly, the Original Proposal \19\ sought to extend the 
restrictions of the rule by treating proprietary transactions entered 
by member organizations in the same manner as proprietary trades of 
individual members on the floor of the Exchange. However, to 
accommodate the block facilitation business, the Exchange proposed to 
permit members and member organizations to trade along with customers 
when liquidating block facilitation positions, subject to certain 
conditions.
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    \19\ See note 4 supra.
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    In the Original Proposal, the Exchange also sought to extend the 
trading restrictions imposed by Rule 92 to trades effected by NYSE 
members that occurred on ``any other market center.'' The Exchange 
believed that the broad concepts of agency law and fiduciary duties 
owned by agents to their customers applied to all agency relationships 
irrespective of the market center. Thus, it believed that its members 
should be subject to the rule's restrictions regardless of whether 
their transactions occurred on the NYSE.
    Finally, the Exchange clarified the rule by proposing that members 
or employees of members or member organizations engaged in proprietary 
trading for the member or member organization would be imputed with 
knowledge of customer orders unless the member organization had created 
a functional separation between its proprietary trading desks and its 
other trading desks.
    In Amendment No. 2,\20\ the Exchange revised the Original Proposal 
to reflect some of the issues raised in the comment letters.\21\ 
Several commenters raised concerns about extending the rule to cover 
member organizations and to transactions occurring on other market 
centers. The Exchange reiterated its belief that the rule should be 
extended to apply to member organizations. According to the Exchange, 
while most trading along situations occur when the same floor broker 
represents both agency and proprietary orders, it would be unacceptable 
for a member to enter a proprietary order with a different broker, who 
could then compete directly with the member firms's broker representing 
the member firm's customer.
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    \20\ See note 8 supra.
    \21\ See note 7 supra. In addition to submitting Amendment No. 2 
to the Commission, the Exchange submitted a letter responding to the 
issues raises in Blanc Letter No. 1, Phlx Letter No. 1 and PCX 
Letter No. 1. See letter to Brandon Becker, Director, Division, SEC, 
from James E. Buck, Senior Vice President and Secretary, NYSE dated 
March 15, 1995.
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    The Exchange, however, proposed to amend the ``other market 
center'' provision of the Original Proposal by excluding transactions 
in securities not listed on the NYSE, transactions by a member 
organization acting in the capacity of a market maker in a security 
covered by Rule 19c-3 \22\ under the Act, and transactions by a member 
organization acting in the capacity of a specialist or market maker on 
a regional exchange, to the extent that the principal trade effected 
was immediately liquidated at the same price as the customer received 
on that exchange. The NYSE, however, reasserted its belief that the 
rule should apply to all agency transactions by its members 
irrespective of the market center on which a transaction may be 
executed.
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    \22\ 17 CFR 240.19c-3.
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    Finally, to accommodate off-floor proprietary trading, the Exchange 
proposed an additional exception to the rule to permit members or 
member organizations to trade along with customers when engaging in 
bona fide arbitrage or risk arbitrage, provided that certain conditions 
were met.
    In Amendment No. 3,\23\ the Exchange further clarified the scope of 
the proposed rule change. Specifically, the Exchange amended the 
provision that excluded regional exchange specialists and market makers 
from the provisions of the rule when they were acting in the capacity 
of a specialist or market maker on a regional exchange by deleting the 
requirement proposed in Amendment No. 2 that a regional specialist or 
market maker immediately liquidate its principal trade at the same 
price to its customer.
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    \23\ See note 10 supra.
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    The Exchange also sought to clarify its reason for expanding its 
enforcement of Rule 92 to other market centers. Specifically, NYSE 
stated that because Rule 92 was an inventor protection and market 
integrity rule, its amendments sought to expand the narrow focus on 
floor activities to encompass member organizations' transaction in 
NYSE-listed securities irrespective of the market center in which these 
transactions occurred. The NYSE, nevertheless, amended the proposal to 
provide that, if another SRO had prohibitions similar to Rule 92, the 
prohibited activity resulted in transactions effected solely on that 
other SRO's market, and that SRO was a member of the Intermarket 
Surveillance Group (``ISG''), the ISG's investigative procedures would 
apply.
    In Amendment No. 4,\24\ the Exchange proposed to permit members and 
member organizations to hedge facilitation positions, provided that the 
hedging activity met certain conditions.
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    \24\ See note 12 supra.
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    In addition, the Exchange proposed to included a provision as 
Supplemental Material .20 concerning the application of the proposed 
``any other market center'' language. Specifically, the Exchange 
proposed to defer the review of transactions, both proprietary and 
agency, that were executed on another market center, to that other 
market center's regulatory staff, if the other market center had a 
trading along prohibition that was ``substantially similar'' \25\ to 
the NYSE's Rule 92. If the other market center did not have a 
``substantially similar'' rule, the NYSE rules would govern the review 
and analysis and the NYSE would pursue the matter. Further, the NYSE 
proposed that all investigations be coordinated through the ISG 
procedures.
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    \25\ NYSE proposed that it would consider a rule to be 
``substantially similar'' if the difference in the application of 
the rule was minor and technical and not materially different.
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    In Amendment No. 5,\26\ the Exchange revised the ``other market 
center'' provisions by limiting the application of Rule 92 to only 
those situations in which one or both trades (proprietary or agency) of 
a customer facilitation transaction were effected on the NYSE. Thus, if 
neither transaction occurred on the NYSE, Rule 92 would not apply.
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    \26\ See note 14 supra.
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    In addition, the Exchange proposed a definition for bona fide 
hedge. Specifically, the Exchange proposed to define the creation of a 
bona fide hedge as those transactions that occur so close in time to 
the completion of the transaction precipitating such hedge that the 
hedge transactions are ``clearly related.'' Further, the Exchange 
defined what it considered to be ``clearly related'' for purposes of 
the hedge exception in proposed Supplemental Material .50.
    Finally, the Exchange proposed to permit members and member 
organizations to trade along with customers when effecting transactions 
to correct bona fide errors.

III. Description of the Proposal \27\

    As described above, NYSE Rule 92 currently restricts the ability of 
a NYSE

[[Page 18341]]

member \28\ to trade for its own account when the member has knowledge 
of any unexecuted customer order for the same security that could be 
executed at the same price. The NYSE has proposed to amend Rule 92 to 
broaden its applicability to include member organization,\29\ and to 
permit members and member organizations to trade along with some of 
their customers in limited circumstances, as discussed further below.
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    \27\ The Commission notes that the description of the proposal, 
and thus the proposal approved in this order, reflects the proposed 
rule language submitted by the NYSE in Amendment No. 6 See note 17 
supra.
    \28\ The NYSE defines the term ``member'' as a natural person 
who is a member of the Exchange. See NYSE Constitution, Article I, 
Section 3(h).
    \29\ The NYSE defines the term ``member organization'' as a 
corporation or partnership, registered as a broker or dealer in 
securities under, unless exempt by, the Act, approved by the Board 
as a member corporation or member firm, at least one of whose 
officers or general partners or employees is a member of the 
Exchange, or which has the status of a member corporation or member 
firm by virtue of permission given to it pursuant to the rules of 
the NYSE. See NYSE Constitution, Article I, Sections 3(i), (j), and 
(k).
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    As proposed NYSE Rule 92(a) would maintain the restriction 
regarding NYSE members' ability to enter orders to buy or sell any 
Exchange-listed security for any account in which such member or member 
organization or any approved person thereof is directly or indirectly 
interested, if the person responsible for the entry of the order has 
knowledge \30\ of any particular unexecuted customer order to buy or 
sell the same security that could be executed at the same price. 
However, Rule 92, as proposed, will now also place the same trading 
restrictions on member organizations.
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    \30\ In Supplemental Material .10 to proposed NYSE Rule 92, the 
Exchange proposed to define what constitutes knowledge for the 
purposes of the rule to provide that a member or employee of a 
member or a member organization that is responsible for entering 
proprietary orders shall be presumed to have knowledge of a 
particular customer order unless the member organization has 
implemented a reasonable system of internal policies and procedures 
to prevent the misuse of information about customer orders by those 
responsible for entering proprietary orders.
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    As proposed in NYSE Rule 92(b), members and member organizations 
will be permitted to enter proprietary orders while representing a 
customer's order that could be executed at the same price, under 
limited circumstances, so long as the order is not for the account of 
an individual investor \31\ and the customer has given express 
permission, which must include an understanding of the relative price 
and size of allocated execution reports. Consent from the customer will 
be required for each transaction with which the member or member 
organization wishes to trade along.\32\ Subject to this consent, 
members and member organizations will be permitted to enter only four 
types of proprietary orders when representing non-individual investor 
orders: First, pursuant to proposed NYSE Rule 92(b)(1), members and 
member organizations will be permitted to liquidate a position in a 
proprietary facilitation account \33\ if their customer's order is for 
at least 10,000 shares.\34\ Second, pursuant to proposed NYSE Rule 
92(b)(2), members and member organizations will be permitted to create 
a bona fide hedge \35\ so long as (i) the creation of the hedge, 
whether through one or more transactions, occurs so close in time to 
the completion of the transaction precipitating such hedge that the 
hedge is clearly related; \36\ (ii) the size of the hedge is 
commensurate with the risk of offsets; \37\ (iii) the risk to be offset 
is the result of a position acquired in the course of facilitating a 
customer's order; and (iv) the customer's order is for 10,000 shares or 
more. Third, pursuant to proposed NYSE Rule 92(b)(3), members and 
member organizations will be permitted to modify an existing hedge if 
(i) the size of the hedge, as modified, remains commensurate with the 
risk it offsets; (ii) the hedge was created to offset a position 
acquired in the course of facilitating a customer's order; and (iii) 
the customer's order is for 10,000 shares or more. Finally, pursuant to 
proposed NYSE Rule 92(b)(4), members and member organizations will be 
permitted to engage in bona fide arbitrage \38\ or risk arbitrage \39\ 
transactions so long as such transactions are recorded in an account 
used solely to record arbitrage transactions.
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    \31\ In Supplemental Material .40 to proposed NYSE Rule 92, the 
Exchange proposed to define ``an account of an individual investor'' 
as having the same meaning ascribed to the term in NYSE Rule 80A. 
NYSE Rule 80A, Supplemental Material .40(c) defines such terms as an 
account covered by Section 11(a)(1)(E) of the Act, which includes an 
account of a natural person, the estate of a natural person, or a 
trust created by a natural person for himself or another natural 
person. See 15 U.S.C. 78k(a)(1)(E).
    \32\ According to the Exchange, it intends to inform its members 
and member organizations that, although the rule does not include 
express recordkeeping provisions with regard to evidencing 
customers' consent, members and member organizations will have the 
burden of proof to demonstrate that consent has in fact been 
obtained. See Original Proposal, note 4 supra. See also Amendment 
No. 2, note 8 supra.
    \33\ In Supplemental Material .40 to proposed NYSE Rule 92, the 
Exchange proposed to define a ``proprietary facilitation account'' 
an account in which a member organizations has a direct interest and 
which is used to record transactions whereby a member organization 
acquires positions in the course of facilitating customer orders.
    \34\ The Exchange also clarified that it believed that the 
exception should be extended to situations where a member 
organization enters into a binding contract with a customer to buy 
or sell a specified number of shares of a particular security at the 
closing price on the same day, with the contract to be completed 
after the close of trading on that day. According to the Exchange, 
it would consider such a binding contract, for the purposes of Rule 
92 only, as the equivalent of the establishment of a block 
facilitation position so long as the contract is binding on both the 
customer and the member organization. In these circumstances, the 
member organization would be required to memorialize the block 
facilitation position by an entry or otherwise in a block 
facilitation account. Thereafter, the member organization could 
trade along with its customer's order to liquidate that position in 
accordance with the provisions of proposed paragraph (b) of Rule 92. 
See Amendment No. 6, note 17 supra.
    \35\ In Supplemental Material .40 to proposed NYSE Rule 92, the 
Exchange proposed to define ``bona fide hedge '' as having the 
meaning ascribed to it in Securities Exchange Act Release No. 15533 
(January 29, 1979) (``Section 11(a) Release'').
    \36\ In Supplemental Material .50 to proposed NYSE Rule 92, the 
Exchange provided that for the purposes of NYSE Rule 92(b)(2), a 
hedge will be deemed to be ``clearly related'' if either the first 
or last transaction comprising the hedge is executed on the same 
trade date as the transaction that precipitates such hedge. Further, 
the provision requires a member to mark all memoranda of orders to 
identify each transaction creating or modifying a hedge as permitted 
under the rule.
    \37\ In Amendment No. 4, the Exchange stated that the 
determination of what constitutes an offset or reduction of risk may 
be made by the use of any responsible method of calculating the size 
of the risk and the type of securities, which would appropriately 
hedge that risk.
    \38\ In Supplemental Material .40 to proposed NYSE Rule 92, the 
Exchange proposed to define ``bona fide arbitrage'' as having the 
meaning ascribed to it in the Section 11(a) Release. See note 35 
supra.
    \39\ In proposed Supplemental Material .40 to proposed NYSE Rule 
92, the Exchange proposed to define ``risk arbitrage'' as having the 
meaning ascribed to it in the Section 11(a) Release. See note 35 
supra.
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    In addition to the current exceptions to the rule for odd-lot 
dealers to offset odd-lot orders for customers, and orders with 
delivery terms other than those specified in an unexecuted market or 
limit order, the Exchange has proposed two other exceptions. First, 
pursuant to proposed Rule 92(c)(3), transactions by a member or member 
organization that is acting in the capacity of a market maker or 
specialist in an NYSE-listed security otherwise than on the Exchange 
will not be subject to the restrictions of proposed Rule 92.\40\ 
Second, pursuant to proposed Rule 92(c)(4), transactions by members 
made to correct bona fide errors will also be permitted.
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    \40\ See Amendment No. 6, note 17 supra.
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    In the Original Proposal, the NYSE proposed to extend the 
application of NYSE Rule 92 to other market centers. In Amendment No. 
5, the NYSE withdrew this language but proposed to apply Rule 92 to 
those situations in which one or both trades (proprietary or agency) of 
a customer facilitation is effected on the NYSE. If neither segment of 
a customer facilitation transaction occurs on the exchange, proposed 
NYSE Rule 92 would not apply.

[[Page 18342]]

IV. Summary of Comments \41\

    The Commission received three comments in response to Amendment No. 
5.\42\ The Exchange responded to the issues raised in these comment 
letters in Amendment No. 6 to the proposed rule change.\43\
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    \41\ The Commission notes that it received a total of 30 comment 
letters on the proposal. The Exchange has generally addressed the 
issues raised in the earlier comments letters by subsequently 
amending the proposal. Therefore, this discussion only reflects the 
issues raised in the comment letters received in response to 
Amendment No. 5.
    \42\ See note 15 supra.
    \43\ See Amendment No. 6, note 17 supra.
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    One commenter supported the proposal and believed that it clearly 
promoted investor protection.\44\ Another commenter questioned the 
reference to transactions by members and member organizations acting in 
the capacity of market makers pursuant to SEC Rule 19c-3,\45\ as 
proposed in Rule 92(c)(3) in Amendment No. 5.\46\ The commenter noted 
that, as a result of the rescission of NYSE Rule 390, such a 
distinction would be irrelevant. The Exchange agreed with the 
commenter's suggestion and subsequently amended the proposal in 
Amendment No. 6 to delete the reference to SEC Rule 19c-3.\47\
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    \44\ See Archipelago Letter, note 15 supra.
    \45\ 17 CFR 240.19c-3.
    \46\ See Orrick Herrington Letter, note 15 supra.
    \47\ 17 CFR 240.19c-3.
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    The third commenter raised several issues regarding the language of 
the proposal.\48\ First, the commenter questioned the proposed 
definition of ``block size'' for purposes of the proposed Rule 92. As 
proposed, members and member organizations will be permitted to 
liquidate positions held in facilitation accounts, create bona fide 
hedges or modify existing hedges while representing a customer order 
if, among other things, their customer's order is for 10,000 shares or 
more. The commenter proposed that the NYSE adopt the definition set 
forth by the Commission in its Section 11(a) Release \49\ for block 
orders. The commenter indicated that the Commission defined a ``block 
order'' for purposes of section 11(a)(1) of the Act \50\ as one that 
``represents at least 10,000 shares or a quantity of securities that 
has a current market value of at least $200,000, whichever is 
greater.'' The commenter believed that the Commission's disjunctive 
definition would enable members to provide liquidity to their customers 
by facilitating trades of high-priced securities in amounts less than 
10,000 shares.
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    \48\ See Solomon Zauderer letter, note 15 supra.
    \49\ See note 35 supra.
    \50\ 15 U.S.C. 78k(a0(1).
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    The Exchange responded that it continued to believe that the 10,000 
share threshold for customers' orders is appropriate for the purposes 
of the limited trading along exceptions permitted by proposed Rule 92.
    Second, the commenter proposed that the NYSE permit members and 
member firms to trade along with their high net worth customers as well 
as their institutional customers. The commenter believed that, subject 
to specified conditions, proposed Rule 92 should permit consensual 
trading along with sophisticated high net worth customers, who are 
capable of understanding allocations and to consenting to allocations 
on an informed basis.
    The Exchange responded that it continued to believe that the 
limited trading along exceptions should be available only when the 
customer is not an individual investor.
    Third, the commenter requested that the NYSE clarify the meaning of 
the phrase in proposed Rule 92(b) that requires a customer to 
understand the ``relative price and size of allocated execution 
reports.'' Specifically, the commenter requested that the Exchange 
clarify that a member or member firm may, with its customer's consent 
and subject to the other conditions of the proposed rule, allocate 
shares in any specified size (not to exceed the size of the 
facilitation position) to the member's or member firm's facilitation 
account.
    The Exchange responded by clarifying that a member organization 
would not be precluded form allocating executions to its own account 
before allocating executions to its customer, but that the member 
organization would be required to inform the customer of this fact in 
advance and obtain the customer's express permission that it may do so. 
Further, the member organization must retain appropriate documentation 
that the customer was informed as to exactly how the execution would be 
allocated.\51\
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    \51\ The Exchange also reiterated its interpretation regarding 
consent by stating that consent must be obtained with respect to 
each order that the member organization intends to trade along with, 
and that the member organization must retain appropriate 
documentation evidencing such consent.
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    Fourth, the commenter sought clarification on the proposed rule's 
application to program orders. Specifically, the commenter noted that 
the proposed rule should clarify the difference between an order to buy 
or sell an entire program and an order to buy or sell a single 
component security of such a program. The commenter requested that the 
NYSE specifically note that proposed Rule 92 does not restrict a member 
firm from executing a proprietary program order when holding a customer 
order in a component security, nor does it restrict a member firm's 
ability to execute a proprietary order in an individual security when 
holding a customer's program order includes that individual security.
    The Exchange responded that it considered proprietary program 
orders to be subject to the restrictions against trading along with 
customer orders. However, the Exchange recognized that program trading 
desks at member organizations are typically distinct from trading desks 
that handle non-program customer orders. Therefore, the Exchange stated 
that proprietary program orders entered in accordance with the 
requirements of proposed Supplemental Material .10, which requires 
members or member organizations to establish a reasonable system of 
procedures to prevent the misuse of information about customer orders 
by those responsible for entering proprietary orders, could be entered 
notwithstanding the fact that the member organization may also be 
representing customer orders in the same stock executable at the same 
price.
    Fifth, the commenter requested that the NYSE confirm that proposed 
Rule 92 does not apply to market-on-close (``MOC'') and limit-on-close 
(``LOC'') orders entered in connection with the Exchange's MOC and LOC 
policy. According to the commenter, because each MOC and LOC order is 
executed at the same time at the same closing price by the specialist, 
there is no opportunity for a member firm to ``front-run'' or otherwise 
take advantage of the market impact of a customer MOC or LOC order by 
entering a proprietary MOC or LOC order. Therefore, the commenter 
believed that MOC and LOC orders do not present the potential for abuse 
that the rule was designed to protect against and should not be subject 
to the constraints of the rule.
    With regards to MOC orders, the Exchange stated that there would 
not be any restriction on a member organization entering proprietary 
MOC orders in the same stock as to which it also had entered a customer 
MOC order because all MOC order must be executed at the same price. 
With regards to LOC orders, however, the Exchange stated that, because 
a LOC order may or may not receive an execution, depending on the depth 
of contra side interest, a member organization may enter proprietary 
LOC orders with the same limit price as its customer's LOC order but, 
if the member organization receives an execution and its customer's

[[Page 18343]]

order does not, the member organization must give up its execution to 
its customer.
    Sixth, the commenter believed that the ``clearly related'' 
definition, in proposed Supplemental Material .50 relating to bona fide 
hedges, is unduly restrictive. Pursuant to proposed Rule 92(b)(2), a 
member or member organization may create a bona fide hedge, so long as, 
the hedge, among other things, is clearly related to the transaction 
precipitating the hedge. As proposed, a hedge will be deemed ``clearly 
related'' if either the first or last leg of the hedge is executed on 
the same trade date as the transaction that precipitates such hedge. 
According to the commenter, the ``same trade date'' requirement is 
unduly restrictive. The commenter asserted, as an example, that a 
derivatives desk needs to have flexibility in creating a hedge when 
determining whether to facilitate a customer's order, and, if so, at 
what price. Further, the commenter argued that a block desk that 
facilitates a customer's order based on a closing price, may hedge such 
a position as quickly as feasible when the market opens on the next 
trading day. Therefore, the commenter believed that the ``clearly 
related'' definition should be amended to permit a member to facilitate 
a trade if the first or last leg of the hedge is effected ``within one 
trading day,'' which the commenter proposed to define as the period 
between the time of the facilitation transaction and the same time on 
the next subsequent or immediately preceding trading day.
    The Exchange believed that the ``same trade date'' condition to be 
an appropriate limitation on the ability of member organizations to 
trade along with their customers. The Exchange stated that it intended 
the hedge exemption to be narrowly construed but noted that, while the 
initiation of a hedge should be reasonably proximate to the transaction 
precipitating the hedge, a member organization is not strictly required 
to complete the hedge on the same trade date as the precipitating 
transaction. However, the Exchange cautioned that a hedge started on 
the same trade date as the precipitating transaction but not completed 
until several days later would not be deemed to be ``clearly related'' 
unless there were unusual or extenuating circumstances.
    In addition to amending the ``clearly related'' definition, the 
commenter requested that NYSE classify the definition as a safe harbor, 
and therefore, it a hedge transaction is executed outside of the 
specified time period, such a transaction will not automatically be 
deemed to be outside of the ``clearly related'' definition, and thus, 
in violation of proposed Rule 92.
    According to the Exchange, the ``clearly related'' definition is 
not a safe harbor. Thus, transactions occurring outside of the rule's 
time limitations would be in violation of the rule.\52\
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    \52\ Telephone call between Brian McNamara and Don Siemer, NYSE, 
and Alton Harvey and Kelly Riley, Division, SEC, on June 26, 2000.
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    In relation to the hedge exception, the commenter also noted that 
Amendment No. 5 deleted the requirement that the risk to be hedged be 
the result of a ``previously-established position,'' as proposed in 
Amendment No. 4. According to the commenter, this change signifies the 
the proposal permits a member firm to create a hedge either prior to, 
or subsequent to, effecting the facilitation trade. Therefore the 
commenter suggested revising proposed Rule 91(b)(2)(iii) to reflect 
this change by reading ``* * * the risk to be offset is the result of a 
position acquired or to be acquired in the course of facilitating a 
customer's order * * *''.
    The Exchange responded that it believed that the hedge exemption is 
available only to offset the risk of a facilitation position that has 
been acquired, or that the member knows it will acquire in order to 
facilitate a specific customer order that it has received. Further, the 
Exchange stated that the hedge exemption is not available to offset the 
risk of a position that the member organization believes it will 
acquire, absent having received a specific customer order that the 
member organization will be facilitating.
    Finally, the commenter, while supporting the Exchange's proposal to 
use the definitions for ``bona fide hedge,'' ``bona fide arbitrage,'' 
and ``risk arbitrage'' that are found in the Section 11(a) Release, 
suggested that the Exchange consider a flexible approach to their 
intepretation. Specifically, the commenter requested that the Exchange 
consider the definitions as capable of being adapted to reflect 
changing market conditions and evolving trading practices.
    The Exchange responded that it was not inclined to adopt a flexible 
approach to defining these terms. According to the Exchange, adopting 
flexible definitions could create enforcement and compliance problems. 
Thus, the Exchange believes that its approach would lead to better and 
more even-handed enforcement of the rule.\53\
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    \53\ Id.
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V. Discussion

    After careful review, 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.\54\ In particular, the Commission believes the proposal is 
consistent with the requirements of section 6(b)(5) of the Act, \55\ 
which requires, among other things, that the rules of an exchange be 
designed to prevent fradulent and manipulative acts and practices, to 
promote just and equitable principles of trade, and, in general, to 
protect investors and the public interest.
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    \54\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \55\ 15 U.S.C. 78f(b)(5).
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    The NYSE first proposed to amend its Rule 92 in 1994. Since then, 
the Exchange has repeatedly amended its proposal in order to address 
the significant policy issues raised by commenters. The Commission 
recognizes that this time-consuming process has been necessary in order 
to permit the Exchange to craft its revised Rule 92 in a manner that 
balances fundamental investor protections with the requirements of 
evolving trading practices involving institutional investors and member 
firm proprietary trading operations.

A. Application of NYSE Rule 92 to Activities on Other Market Centers

    As originally submitted, the Exchange's proposal was drafted in a 
very broad manner that cast a wide net over many market participants 
and transactions that were not connected to the NYSE. Several regional 
exchanges voiced their opposition to the Original Proposal and the 
ensuing amendments.\56\ For example, in its letter responding to 
Amendment No. 2, the CSE argued that the proposed rule ``would 
establish an inappropriate precedent for the extension of NYSE's 
regulatory jurisdiction beyond the boundaries established by the 
national market system, section 17(d) of the Act \57\ and the ISG 
Agreement.'' \58\
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    \56\ See comment letters submitted by the BSE, CSE, CHX, Phlx, 
notes 7, 9, 11, and 13 supra.
    \57\ 15 U.S.C. 78q(d).
    \58\ See note 14 supra.
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    This issue remained controversial throughout the filing process 
until the NYSE withdrew the ``other market center'' provision in 
Amendement No. 5.\59\ The Commission believes that the

[[Page 18344]]

NYSE has sufficiently narrowed the focus of Rule 92 to be consistent 
with the requirements of the Act and the rules and regulations 
thereunder. Specifically, section 6(b)(5) of the Act \60\ requires that 
an exchange's rules not be designed to regulate matters not related to 
the purposes of the administration of the exchange.
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    \59\ For example, the Phlx reiterated its objection to the 
NYSE's proposed jurisdiction over orders entered on market other 
than the NYSE, as submitted in Amendment No. 3. See note 11 supra. 
Later, the CSE restated its continued objection to the NYSE's 
proposal by arguing that the NYSE's proposal, submitted in Amendment 
No. 4, to impose its jurisdiction over CSE matters would be 
``overreaching.'' See note 13 supra.
    \60\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Rule 92, as amended, now applies only to those situations in which 
one or both trades (proprietary or agency) of a customer facilitation 
is effected on the NYSE. If neither segment of a customer facilitation 
transaction occurs on the Exchange, proposed NYSE Rule 92 would not 
apply. In Supplementary Material .20, the Exchange proposes to apply 
the rule's restrictions to any agency or proprietary transaction 
effected on the Exchange if the Exchange transaction is part of a group 
related transactions that together have the effects prohibited by the 
rule, regardless of whether one or more transactions occur on other 
market centers or the Exchange transaction itself had such effects. The 
Commission believes that this provision is a reasonable measure to 
ensure that NYSE members and member organizations are not able to 
circumvent the restrictions of the rule. Further, the Commission notes 
that the restriction regarding member trading on other market centers 
is narrowly tailored to be applicable only to orders that have an 
adequate nexus to activities on the NYSE.

B. Expansion of Rule To Cover Member Organizations

    According to the Exchange, Rule 92 was originally adopted to 
express the agency law principle that an agent must put the interests 
of its customer ahead of its own proprietary interests. The Commission 
believes that the Exchange's proposal to expand the applicability of 
Rule 92 to include member organizations is reasonably designed to 
enhance investor protection and is consistent with the requirements of 
the Act. Today, member organizations are accepting customer orders and 
facilitating their execution. The customers of these member 
organizations deserve the same types of protections as customers whose 
orders are represented by members on the floor of the Exchange.

C. Permitted Member and Member Organization Transactions

    Today, many member organizations engage in trading for their own 
accounts in order to facilitate their customers' orders. These trading 
practices potentially subject the member organizations to significant 
market risks. The Exchange believes that the restrictions set forth in 
existing Rule 92 would prevent member organizations from adequately 
minimizing these market risks if the firm is representing customer 
orders for the same securities. The Commission believes that the NYSE 
has struck an appropriate balance in the rule by enabling its member 
organizations to limit their risk exposure in narrow circumstances 
involving informed institutional investors while maintaining the basic 
principles of agency law and investor protections.
    The member or member organization will be required to obtain its 
customer's consent to trade along with the customer and such consent 
must include the customer's understanding of the relative price and 
size of the member's or member organization's allocated execution 
reports. In addition, a member or member organization will be permitted 
to trade along with a customer with consent only if the customer is not 
an individual investor as defined by NYSE Rule 80A.\61\ A member or 
member organization will be required to ensure that each of these 
conditions is satisfied before entering the proprietary transactions 
permitted by the proposed rule.
---------------------------------------------------------------------------

    \61\ See note 31 supra.
---------------------------------------------------------------------------

    The Commission believes that these conditions are reasonable and 
should preserve investor protections when a member or member 
organization proposes to trade along with its customers. By requiring 
affirmative consent, the rule gives the customer the opportunity to 
decide whether or not to permit its agent to trade for the agent's own 
accounts while representing the customer's order. The customer will not 
be required to give consent and a failure to respond to the firm's 
inquiry will not be deemed to be consent. Of course, if a customer does 
not consent, the member or member organization may decide not to accept 
the customer's order. On the other hand, the member or member 
organization may decide to accept its customer's order and refrain from 
trading in the same security for its proprietary accounts while 
representing its customer's order. In either case, revised Rule 92 
should provide customer with the disclosure necessary to assist them in 
making decisions about their broker's order handling practices.\62\
---------------------------------------------------------------------------

    \62\ One commenter requested clarification with regards to the 
consent provision that requires the customer to understand the 
relative price and size of allocated reports. See Solomon Zauderer 
Letter, note 15 supra. The Exchange responded that a member may 
allocate executions to its own account before its customer so long 
as the customer consents in advance to the allocation. The 
Commission believes that the Exchange's determination on this issue 
is reasonable but expects that the Exchange will monitor its members 
to ensure that they are adequately explaining the allocation methods 
to their customers to ensure that customers are readily informed and 
have a clear understanding upon which to base their consent 
decisions.
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    One commenter suggested that members be permitted to trade along 
with thigh net worth customers, which the Exchange declined to do.\63\ 
The Commission believes that the Exchange has made a reasonable 
determination to limit a member's or a member organization's ability to 
enter proprietary orders to those instances where the member or member 
organization has obtained consent from a customer who is not an 
individual investor. The Commission believes that the Exchange has 
reasonably sought to maximize investor protection by limiting consent 
under Rule 92 to the type of customer that is more likely to have the 
sophistication and market knowledge needed to fully appreciate the 
implications of permitting, or not permitting, a broker-dealer to trade 
along with its order.
---------------------------------------------------------------------------

    \63\ See Solomon Zauderer Letter, note 15 supra.
---------------------------------------------------------------------------

    Once consent has been obtained, the Exchange has proposed to permit 
its members and member organizations to enter four types of proprietary 
transactions while representing their customer orders. As described 
above, members and member organizations will be permitted, subject to 
certain restrictions, to (1) liquidate positions held in proprietary 
facilitation accounts when their customer's order is for at least 
10,000 shares; \64\ (2) create bona fide hedges; (3) modify existing 
hedges; and (4) engage in bona fide arbitrage or risk arbitrage 
transactions.
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    \64\ The Commission notes that the Exchange proposed to permit 
limited proprietary trading, except for arbitrage and risk arbitrage 
transactions, to those instances where the member or member 
organization holds a block size order, which the Exchange defined as 
an order for at least 10,000 shares. One commenter suggested that 
the Exchange modify its definition to recognize orders for higher 
priced securities that may not be for at least 10,000 shares, which 
the Exchange declined to accept. See Solomon Zauderer Letter, note 
15 supra. The Commission believes that the Exchange has limited its 
definition for appropriate regulatory reasons.
---------------------------------------------------------------------------

    The Commission believes that the Exchange's decision to allow 
members and member organizations to engage in these limited types of 
transactions,

[[Page 18345]]

subject to their customers' consent, should promote just and equitable 
principles of trade. Many of these proprietary transactions will add 
liquidity to the market and help investors receive efficient execution 
of their orders. Moreover, the Commission believes that members and 
member organizations should be more willing to facilitate large 
transactions for customers when they are able to minimize their 
proprietary risk by entering trades for their proprietary accounts.\65\
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    \65\ One commenter requested clarification regarding members' 
responsibilities and obligations when handling program orders and 
component stocks of program orders. See Solomon Zauderer Letter, 
note 15 supra. As the Exchange noted, the commenter's issue could be 
resolved by the member using the information barriers permitted in 
Supplemental Material .10, to restrict the flow of knowledge between 
a member's program trading desk and those responsible for entering 
customer orders.
    The commenter also requested guidance with respect to MOC and 
LOC orders. Because of the nature of these orders, the Exchange 
responded that it did not believe that the rule would restrict MOC 
orders but would, in some cases, restrict proprietary LOC orders. 
The Commission believes that this interpretation is consistent with 
ensuring investor orders are handled appropriately.
---------------------------------------------------------------------------

    The Commission also notes that the facilitation of block size 
orders is a service needed by many institutional investors. Many orders 
of block size cannot be executed in the markets as a single order 
without significantly affecting the price of the security. Thus, these 
services may contribute to stability in the markets and many contribute 
to customers being afforded a fair and stable price for their order.
    The Commission therefore believes that the proprietary trading 
exceptions balance the interests of investor protection with the 
interests of a free and open market. Each type of permitted proprietary 
transaction has been narrowly drafted to allow only very specific types 
of member transactions. Moreover, because members and member 
organizations will be required to obtain customer consent before they 
enter a facilitation transaction, customers should be protected. In 
sum, the Exchange has recognized the needs of its members to be able to 
facilitate their customers' orders by minimizing their proprietary 
risks, while also reinforcing and maintaining the paramount interests 
of the investor. The Commission notes that these exceptions do not 
minimize the importance of the broker-dealers' duty to their customers, 
which requires broker-dealers to place investors' interests before 
their own. On the contrary, members and member organizations remain 
obligated to consider their customers' interest in every customer 
transaction.
    The Commission notes that one commenter raised concerns that the 
``clearly related'' definition for bona fide hedges was unduly 
restrictive and requested clarification that the definition was 
intended as a safe harbor.\66\ The Exchange has declined to broaden its 
definition along these lines or suggest that this provision was 
designed to act as a safe harbor. Instead, the Exchange has indicated 
that its proposed interpretation should enable it to enforce compliance 
in a fair and reasonable manner. The Commission believes that the 
Exchange's determination in this matter appears to be reasonable and 
consistent with the requirements of the Act. The Commission notes that, 
while the definition requires that the initiation of the hedge must be 
reasonably proximate to the trade precipitating the hedge, the hedge 
does necessarily need to be completed on the same trade date.
---------------------------------------------------------------------------

    \66\ See Solomon Zauderer Letter, note 15 supra.
---------------------------------------------------------------------------

D. Other Transactions

    The Exchange proposed two new exceptions to the trading 
restrictions in proposed Rule 92(c). Specifically, in addition to the 
current exceptions regarding odd lot transactions and orders with 
delivery terms other than those specified in an unexecuted market or 
limit order, the Exchange also proposed to permit (1) transactions by 
members or member organizations that are acting in the capacity of a 
specialist or market maker in a security listed on the Exchange that 
are executed off the Exchange, and (2) transactions made to correct 
bona fide errors. The Commission believes that these new exceptions are 
appropriate and consistent with the requirements of the Act. The 
Commission notes that exception transactions by members acting as 
specialists or market makers executed on markets other than the 
Exchange from coverage of the rule should ensure that the liquidity 
created and maintained by these market participants on the regional 
exchanges and the Nasdaq Intermarket is not compromised. Further, the 
Commission notes that Exchange would not have the authority to enforce 
compliance with NYSE trading rules on members trading exclusively on 
other national securities exchanges, the Nasdaq Intermarket, or the 
over-the-counter market. Finally, the Commission believes that it is 
necessary to permit transactions to correct bona fide errors, but the 
Commission expects the Exchange to monitor the activities of its 
members to ensure that this provision is not abused.

E. Supplementary Material

    In Supplemental Material .30, the Exchange clarified that floor 
members of a member organization will be restricted in the same manner 
as their member organization when entering proprietary orders. Thus, a 
floor member of a member organization may not enter a proprietary order 
at the same or better price as an unexecuted customer order, except to 
the extent that the member organization could do so under the rule. The 
Commission believes that this clarification should assist in the 
enforcement of the rule by providing clear notice of a floor member's 
prohibited activities.
    In Supplemental Material .40, the Exchange has proposed definitions 
for the terms ``account of individual investor,'' ``Proprietary 
facilitation account,'' ``bona fide hedge,'' ``bona fide arbitrage,'' 
and ``risk arbitrage.'' The Commission believes that these definitions 
should provide clarity to the rule and should help in member compliance 
and Exchange enforcement of the Rule.

F. Amendment No. 6

    The Commission finds good cause to approve Amendment No. 6 to the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice thereof in the Federal Register. In addition to 
responding to the issues raised in the Solomon Zauderer Letter, the 
Exchange amended the test of the rule to delete the reference to SEC 
Rule 19c-3 \67\ securities. The Commission notes that, since the 
rescission of NYSE Rule 390, this provision is no longer relevant. 
Therefore, because Amendment No. 6 merely made the rule accurate in 
light of recent events and did not change the intent or substance of 
the proposed rule change, the Commission believes that good cause 
exists, pursuant to sections 6(b)(5) \68\ and 19(b) \69\ of the Act, to 
accelerate approval of Amendment No. 6 to the proposed rule change.
---------------------------------------------------------------------------

    \67\ 17 CFR 240.19c-3.
    \68\ 15 U.S.C. 78f(b)(5).
    \69\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 6, including whether it is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth

[[Page 18346]]

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 other 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. Copies of such filings also will be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to File No. SR-NYSE-94-34 and should be 
submitted by April 27, 2001.

VII. Conclusion

    It Is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\70\ that the amended proposed rule change (SR-NYSE-94-34) is 
approved.
---------------------------------------------------------------------------

    \70\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\71\
---------------------------------------------------------------------------

    \71\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8508 Filed 4-5-01; 8:45 am]
BILLING CODE 8010-01-M