[Federal Register Volume 66, Number 178 (Thursday, September 13, 2001)]
[Notices]
[Pages 47710-47711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22953]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44769; File No. SR-NYSE-99-25]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change and Notice of Filing 
and Order Granting Accelerated Approval to Amendment No. 3 to Proposed 
Rule Change Relating to Error Accounts, Floor Member Account 
Disclosure, and Erroneous Transaction Reports

September 6, 2001.

I. Introduction

    On June 15, 1999, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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 require that each member maintain an error 
account, and to require each member to report to the Exchange any 
securities account in which the member has a financial interest or over 
which the member has discretionary authority. The proposed rule change 
also includes provisions concerning error transaction procedures, 
recordkeeping, and other related matters. On December 13, 1999, the 
NYSE filed Amendment No. 1 to the proposed rule change with the 
Commission.\3\ The proposed rule change, as amended, was published for 
comment in the Federal Register on February 10, 2000.\4\ The Commission 
received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 added further procedures and recordkeeping 
requirements to the proposed rule change, as well as a provision 
concerning the reporting of profitable errors.
    \4\ See Securities Exchange Act Release No. 42381 (February 3, 
2000), 65 FR 6673.
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    On January 8, 2001, the NYSE filed Amendment No. 2 to the proposed 
rule change with the Commission. Amendment No. 2 added provisions to 
the proposed rule change to: (a) specify that no non-error trading may 
take place in a member's error account; (b) require a member to inform 
the NYSE anytime the member closes a securities account in which the 
member has an interest; and (c) provide a means for an error to be 
accepted, under certain conditions, where an order has been correctly 
executed, but the wrong price and/or the wrong size has been reported 
to the customer. Amendment No. 2 was published for comment in the 
Federal Register on July 14, 2001.\5\ The Commission received no 
comments on Amendment No. 2.
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    \5\ See Securities Exchange Act Release No. 44427 (June 21, 
2001), 66 FR 33282.
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    On August 13, 2001, the NYSE filed Amendment No. 3 to the proposed 
rule change with the Commission. Amendment No. 3 would amend NYSE Rule 
134 to require each member who initiates a transaction on the Floor of 
the Exchange to offset an error to create a time-stamped order ticket 
to evidence the transaction and to indicate that the transaction is to 
cover an error.
    This order approves the proposed rule change as amended, 
accelerates approval of Amendment No. 3, and solicits comments from 
interested persons on that amendment.

II. Discussion

    The Commission finds that the proposed rule change as amended is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \6\ 
and, in particular, the requirements of section 6 of the Act \7\ and 
the rules and regulations thereunder. The Commission finds specifically 
that the provisions of the proposed rule change contained in the 
original filing and the amendments are consistent with section 6(b)(5) 
of the Act \8\ because they will enable the NYSE to more effectively 
monitor the activities of its members and investigate circumstances of 
suspected abuse.\9\
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    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ The Commission notes that the recordkeeping provision of the 
proposed rule change requires a member or member organization to 
maintain, besides the information specifically identified in the 
rule, ``such other information [with respect to errors] as the 
Exchange may from time to time require.'' To adopt any such 
additional requirement, the Exchange would need to file a rule 
change proposal with the Commission pursuant to the provisions of 
Rule 19b-4 under the Act.
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    The Commission also notes that these provisions are likely to aid 
the NYSE in fulfilling some of the requirements of the undertakings 
included in the order issued by the Commission relating to the 
settlement of an enforcement action against the NYSE for failure to 
enforce compliance with section 11(a) \10\ and Rule 11a-1 \11\ under 
the Act and NYSE Rules 90, 95, and 111.\12\
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    \10\ 15 U.S.C. 78k(a).
    \11\ 17 CFR 240.11a--1.
    \12\ See In the Matter of New York Stock Exchange, Inc., 
Securities Exchange Act Release No. 41574 (June 29, 1999); 
Administrative Proceeding File No. 3-9925.
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    The Commission finds that Amendment No. 3 is consistent with the 
Act because it will help provide a more complete and accurate record of 
errors that occur on the Floor and enhance the ability of the Exchange 
to examine a member's error account activities. The Commission finds 
good cause to approve Amendment No. 3 to the proposed rule change prior 
to the thirtieth day after the date of publication of notice of filing 
of Amendment No. 3 in the Federal Register. The Commission believes 
that Amendment No. 3 will improve the overall effectiveness of the 
proposed rule change, while imposing no significant additional 
regulatory burden. Accelerated approval of the amendment will enable 
the Exchange to implement its several changes related to error 
transactions and erroneous reports at once.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 3, including whether the amendment 
is consistent with the Act. Persons making written submissions should 
file six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of 
the submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the

[[Page 47711]]

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 File No. SR-NYSE-99-25 and should be 
submitted by October 4, 2001.

IV. Conclusion

    For the reasons discussed above, the Commission finds that the 
proposal, as amended, is consistent with the Act and the rules and 
regulations thereunder.
    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-NYSE-99-25), as 
amended, be, and it hereby is, approved.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-22953 Filed 9-12-01; 8:45 am]
BILLING CODE 8010-01-M