[Federal Register Volume 66, Number 109 (Wednesday, June 6, 2001)]
[Notices]
[Pages 30494-30496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-14155]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44368; File No. SR-NYSE-00-31]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. To Amend Rule 36.30 and 
Rule 104A.50

May 30, 2001.
    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 July 3, 2000, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Exchange submitted an amendment to the proposed rule change on May 21, 
2001.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange submitted a new Form 19b-4, which replaces and 
supersedes the original filing in its entirely (``Amendment No. 
1''). Amendment No. 1 withdraws the proposed amendments to NYSE Rule 
36.20 in the original filing that would have permitted certain off-
floor communications by members on the floor. The NYSE has stated 
that these amendments will be subject to a separate filing. 
Amendment No. 1 also amends proposed NYSE Rule 36.30A to clarify the 
manner in which Exchange specialists may communicate proprietary 
orders in foreign specialty stock from their post to off-floor 
broker-dealers. Finally, Amendment No. 1 amends proposed NYSE Rule 
36.30C to include in the definition of foreign security depositary 
shares that represent a foreign company's publicly traded security.
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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 NYSE Rule 36.30, 
concerning communications from specialists' posts on the floor of the 
Exchange, and NYSE Rule 104A.50, concerning specialists reporting 
requirements. The text of the proposed rule change is set forth below. 
Deletions are in brackets. Additions are in italics.

Rule 36  Communications Between Exchange and Members' Offices

* * * * *
    .30  Specialist Post Wires--[With the approval of the Exchange, 
a specialist unit may maintain a telephone line at its stock trading 
post location to the off-Floor offices of the specialist unit or the 
unit's clearing firm. Such telephone connection shall not be used 
for the purpose of transmitting to the Floor orders for the purchase 
or sale of securities, but may be used to enter options or futures 
hedging orders through the unit's off-Floor office or the unit's 
clearing firm, or through a member (on the floor) of an options or 
futures exchange.]
    A. With the approval of the Exchange, a specialist unit may 
maintain a communication link at its stock trading post location:
    1. To the off-Floor office of the specialist unit or the unit's 
clearing firm which may be used for the purpose of entering options 
and futures hedging orders, and orders in a foreign security;
    2. To a member (on the Floor) of an options or futures exchange 
for the purpose of entering options and futures hedging orders;
    3. To an automated trading system registered as a broker-dealer 
under the Securities Exchange Act of 1934 (a ``registered broker-
dealer'') or under the auspices of a registered broker-dealer or 
under the auspices of a foreign broker-dealer subject to and in 
accordance with Rule 15a-6 under the Securities Exchange Act of 1934 
(``Rule 15a-6'') for the purpose of entering orders in a foreign 
security; and 
    4. To a registered broker-dealer or a foreign broker-dealer 
subject to and in accordance with Rule 15a-6 for the purpose of 
entering orders in a foreign security.
    B. No such communication link shall be used for the purpose of 
transmitting to the Floor orders for the purchase or sale of 
securities.
    C. For purposes of the Rule, a foreign security is a security 
traded on the Exchange which is a foreign ordinary security, a 
depositary receipt or a depositary share that represents a foreign 
company's publicly traded security. A specialist registered in the 
depositary receipt or share may enter an order either in such 
security or the related ordinary security. A specialist registered 
in the ordinary security may enter an order in such security, or 
where applicable, a related depositary receipt or share.
* * * * *

Rule 104A  Specialists--General

* * * * *
    .50  Equity Trading Reports--Every specialist (including relief 
specialists) must keep a record of purchases and sales initiated on 
the Floor (including purchases and sales resulting from commitments 
or obligations to trade issued from the Exchange through ITS or any 
other Application of the system), in stocks in which he is 
registered, for an account in which he has an interest. Specialists 
must also maintain records of purchases and sales in the Exchange's 
off-hours trading sessions. Such record must show the sequence in 
which each transaction actually took place, the time thereof, and 
whether such transaction was at the same price or in what respect it 
was at a different price in relation to the immediately preceding 
transaction in the same stock. The price designations for 
transactions made in another market center through ITS or any other 
applications of the System are to be determined from the immediately 
preceding transaction price on the Exchange at the time the 
commitment or obligation to trade is issued. Specialists and relief 
specialists are required to report such transactions in such 
automated format and with such frequency as may be prescribed by the 
Exchange. Paragraph 2104.12 sets forth circumstances under which 
specialists who maintain investment accounts in specialty stocks are 
required to submit an equity trading data report.
    Options trading data reports--Every specialist (including relief 
specialists) must keep a record of all options purchases and sales 
to hedge his speciality stock positions as permitted by Rule 105 and 
must report such transactions in such automated format and with such 
frequency as may be prescribed by the Exchange.
    Foreign securities reports--Every specialist (including relief 
specialists) must keep a record of all purchases and sales of 
foreign securities (as defined in Rule 36.30) for an account in 
which he has an interest. Specialists and relief specialists are 
required to report such transactions in such automated format and 
with such frequency as may be prescribed by the Exchange.
    Inquiries.--Inquiries in connection with these reports should be 
addressed to Market Surveillance, 11 Wall Street, 10th Floor, 
telephone 656-6755.
* * * * *

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.

[[Page 30495]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Rule 36 (communications Between Exchange and Members' Offices) 
governs the establishment of telephone or electronic communications 
between the Exchange trading floor and any other location. The Exchange 
proposes to amend Rule 36 with respect to communication links between 
specialist posts and off floor locations.
    Specialists Post Wires. NYSE Rule 36.30 governs the use of 
telephone lines at a specialist unit's post. The rule currently permits 
telephone lines from the post to the unit's off-floor offices and to 
the unit's clearing firm. The rule also permits specialists to have 
telephone lines to the floor of an options or futures exchange for the 
purpose of entering hedging orders on the floors of those exchanges.
    The Exchange proposes to amend NYSE Rule 36.30 to more clearly 
identify the types of communications that may emanate from the post. 
The words ``communication link'' would replace ``telephone'' to 
encompass a wider range of communication methods. The types of 
communications would be expanded to give the specialist the ability to 
enter orders in foreign stocks directly from the post. In that regard, 
the rule would permit a specialist to enter orders to purchase or sell 
foreign securities through a broker-dealer registered with the 
Commission or directly with a foreign broker-dealer pursuant to Rule 
15a-6 under the Act.\4\ The prohibition on receiving orders for the 
purchase or sale of securities at the post would be retained. The term 
``foreign security'' would be defined to include a foreign ordinary 
security, a depositary receipt or a depositary share representing a 
foreign security.
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    \4\ 17 CFR 240.15a-6.
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    At the end of 1999, there were a total of 394 foreign issues listed 
on the Exchange. A total of 16.5 billion shares of foreign stock traded 
on the Exchange, representing an increase of 11% above 1998 totals. As 
foreign listing and trading expands, issues related to foreign 
securities have arisen in discussions between the Exchange and 
specialists. For example, in 2000, amendments to NYSE Rule 104 were 
submitted to the Commission to permit, without first obtaining floor 
official approval, specialists to effect certain stabilizing 
transactions in a foreign stock to achieve price parity with that stock 
on its home country market.\5\
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    \5\ See File No. SR-NYSE-00-30. This proposal has not yet been 
approved by the Commission. In this filing the Exchange noted that 
the proposed change in SR-NYSE-2000-30 to NYSE Rule 104 would give 
specialists the ability to react quickly to changes in the price of 
foreign securities on the Exchange based on price changes in the 
primary market for the foreign security. The Exchange believes that 
this would enhance the specialist's ability to maintain markets that 
are fair and orderly for these stocks.
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    Similarly, the Exchange believes that specialists may need to act 
quickly to buy or sell or obtain information about a foreign security 
specialty stock in situations where the home country or another market 
represents the best opportunity to do so. The Exchange proposes to 
amend NYSE Rule 36.30 to permit specialists to have any commercially 
available communication link at the post over which it can communicate 
directly to place an order in a foreign security for the specialists's 
own account or seek information on the current market for a foreign 
security.\6\ The communication links could be used to receive 
information on stocks, data for the U.S. or foreign markets, vendor 
services or news. The receipt of information would not be restricted, 
and could include data from competing markets. The communication link 
would not be used to transmit orders to specialists for execution on 
the Exchange or to give nonmembers market look information. Specialist 
units would continue to have the ability to transmit hedging orders in 
options or futures from the post to its off-floor offices, its clearing 
firm, or a member on the floor of an options or futures exchange.
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    \6\ Proposed Rule 36.30A states that any such purchase or sale 
must be through a broker-dealer registered with the Commission or 
directly with a foreign broker-dealer pursuant to Rule 15a-6 under 
the Act.
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    The Exchange believes that the availability of all communication 
links to specialists should be permitted. The proposed rule change, 
however, would not permit orders to be transmitted over these links 
either into the floor or to another market, except by specialists in 
the circumstances outlined in NYSE Rule 36.30.
    Foreign Stock Transaction Reports. The Exchange also proposes to 
amend NYSE Rule 104A.50 to require specialists to record and report to 
the Exchange the details of all proprietary transactions executed by 
the specialist unit away from the Exchange in foreign securities. 
Specialists would be informed that the reports would be required to be 
submitted on Form 81, the electronic reporting mechanism already used 
by specialists to report proprietary transactions in speciality stocks.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b)(5) of the Act \7\ in that it is designed to promote 
just and equitable principles of trade, 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. 
The proposed rule change supports the mechanism of free and open 
markets by providing for increased means by which communications to and 
from the floor of the Exchange may take place, while continuing to 
prohibit entry of orders from off the floor directly to the post, or to 
the point of sale.
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    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change, as 
amended, 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 has not solicited or 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 Exchange 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, as amended, is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth

[[Page 30496]]

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 NYSE. All 
submissions should refer to the File No. SR-NYSE-00-31 and should be 
submitted by June 27, 2001.
    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).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-14155 Filed 6-5-01; 8:45 am]
BILLING CODE 8010-01-M