[Federal Register Volume 66, Number 182 (Wednesday, September 19, 2001)]
[Notices]
[Pages 48304-48306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-23307]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44783; File No. SR-NYSE-2001-36]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the New York Stock Exchange, 
Inc. To Amend NYSE Rule 123

September 10, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on 
September 10, 2001, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the NYSE. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 123. 
The proposed rule text follows:
    Additions are italicized, deletions are [bracketed].

[[Page 48305]]

Rule 123--Records of Order

    (e) System Entry Required
    Except as provided in paragraphs .21 and .22 below, [N] no Floor 
member may represent or execute an order on the Floor of the Exchange 
unless the details of the order have been first recorded in an 
electronic system on the Floor. Any member organization proprietary 
system used to record the details of the order must be capable of 
transmitting these details to a designated Exchange data base within 
such time frame as the Exchange may prescribe. The details of each 
order required to be recorded shall include the following data 
elements, any changes in the terms of the order and cancellations, in 
such form as the Exchange may from time to time prescribe:
    1. Symbol;
    2. Clearing member organization;
    3. Order identifier that uniquely identifies the order;
    4. Identification of member or member organization recording order 
details;
    5. Number of shares or quantity of security;
    6. Side of market;
    7. Designation as market, limit, stop, stop limit;
    8. Any limit price and/or stop price;
    9. Time in force;
    10. Designation as held or not held;
    11. Any special conditions;
    12. System-generated time of recording order details, modification 
of terms of order or cancellation of order;
    13. Such other information as the Exchange may from time to time 
require.
* * * * *
    .20 Orders--For purposes of paragraph (e), an order shall be any 
written, oral or electronic instruction to effect a transaction.
    .21 Orders not subject to paragraph (e) recording requirements--Any 
order executed by a specialist, Competitive Trader or Registered 
Competitive Market Maker for his or her own account and any orders 
which by their terms are incompatible for entry in an Exchange system 
relied on by a Floor member to record the details of the order in 
compliance with this Rule shall be exempt from the order entry 
requirements of paragraph (e) above.
    .22 With respect to bona fide arbitrage order, a member may execute 
such order before entering the order into an electronic system as 
required by paragraph (e) above, but such member must enter such order 
into such electronic system no later than 60 seconds after the 
executive of such order. With respect to an order to offset a 
transaction made in error, a member may, upon discovering such error 
within the same trading session, effect an offsetting transaction 
without first entering such order into an electronic system, but such 
member must enter such order into such electronic system no later than 
60 seconds after the execution of such order.
    .23[2] Time standards--Any member organization proprietary system 
used to record the details of an order for purposes of this rule must 
be synchronized to a commonly used time standard and format acceptable 
to the Exchange.

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 NYSE 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 and is set forth in Sections A, B, and C below.

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

1. Purpose
    The proposed rule change is being filed as a one-month pilot.
    In December, 2000, the Exchange adopted requirements for the 
electronic capture of orders at the point of sale (front end systemic 
capture, or ``FESC'') \3\ and at the point of receipt (order tracking 
system, or ``OTS''). The purpose of the requirements is to create a 
complete systemic record of orders handled by members and member 
organizations. These requirements are scheduled to become effective on 
September 10, 2001.
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    \3\ See Securities Exchange Act Release No. 43689 (December 7, 
2000), 65 FR 79145 (December 18, 2000) (Order approving amendments 
to NYSE Rule 123 providing for the systemic capture of order 
information on the Exchange floor).
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    Due to the time sensitivity of bona fide arbitrage orders and 
orders to offset transactions made in error, the Exchange is proposing 
to carve out two exceptions to NYSE Rule 123(e). These orders may be 
initiated by a member on the Floor pursuant to SEC Rule 11a-1 and NYSE 
Rule 111, and a requirement that such orders be first entered into FESC 
may result in a lost arbitrage opportunity, or an additional loss to 
the member when covering an error. With respect to bona fide arbitrage 
orders, a member may execute such orders before entering the order into 
FESC. However, such member must enter such orders into FESC no later 
than 60 seconds after the execution of such orders.
    Similarly, with respect to an order to offset transactions made in 
error, a member, may, upon discovering such error within the same 
trading session, effect an offsetting transaction without first 
entering such order into FESC. However, such member must enter such 
order into FESC no later than 60 seconds after the execution of such 
order.
2. Statutory Basis
    The Exchange believes that the basis under the Securities Exchange 
Act of 1934 (the ``Act'') for this proposed rule change is the 
requirement under Section 6(b)(5) \4\ that an Exchange have rules that 
are 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 Exchange believes that the 
proposed rule change is designed to accomplish these ends by 
strengthening the Exchange's ability to surveil the Floor activities of 
members.
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    \4\ 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 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 neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Because the foregoing proposed rule: (1) Does not significantly 
affect the protection of investors or the public interest; (2) does not 
impose any significant burden on competition; and (3) does not become 
operative for 30 days or such shorter time as the Commission may 
designate, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \5\ and subparagraph (f)(6) of

[[Page 48306]]

Rule 19b-4 thereunder.\6\ At any time within 60 days of the filing of 
the proposed rule change, as amended, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.\7\
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    \5\ 15 U.S.C. 78s(b)(3)(A).
    \6\ 17 CFR 240.19b-4(f)(6)(iii).
    \7\ The Commission notes, however, this proposed rule change has 
been filed as a one-month pilot.
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    The Commission notes that under Rule 19b-4(f)(6)(iii),\8\ the 
proposal does not become operative for 30 days after date of its 
filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
The Exchange has requested that the Commission waive the five-day pre-
filing requirement and designate that the proposed rule change become 
operative immediately to permit implementation of NYSE Rule 123(e) as 
scheduled on September 10, 2001, which the NYSE believes is consistent 
with investor protection and the public interest. In particular, the 
Exchange believes the proposed rule change will enable members to 
execute bona fide arbitrage orders and orders to offset transactions 
made in error quickly without having to enter the order into the FESC. 
The proposed rule will still require that these be entered into the 
FESC within 60 seconds after the execution of the respective order.
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    \8\ 17 CFR 240.19b-4(f)(6).
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    The Commission believes that it is consistent with the protection 
of investors and the public interest to waive the five-day pre-filing 
requirement and designate the proposal immediately operative.\9\ 
Accelerating the operative date and waiving the pre-filing requirement 
will permit the Exchange to implement NSYE Rule 123 without undue 
delay. For this reason, the Commission finds good cause to designate 
that the proposal become operative immediately.
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    \9\ For purposes of accelerating the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission 450 Fifth Street NW., Washington, DC 10549-0609.
    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 File No. SR-NYSE-2001-36 and should be submitted by October 
10, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.20-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-23307 Filed 9-18-01; 8:45 am]
BILLING CODE 8010-01-M