[Federal Register Volume 67, Number 20 (Wednesday, January 30, 2002)]
[Notices]
[Pages 4479-4485]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-2213]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45326; File No. SR-NYSE-99-51]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Order Tracking 
and Amendment Nos. 1, 2 and 3 Thereto

January 23, 2002.
    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 December 27, 1999, 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 
Exchange. On May 24, 2000, the Exchange filedAmendment No. 1 to the 
proposal.\3\ On August 14, 2001, the Exchange filed Amendment No. 2 to 
the proposal.\4\ On

[[Page 4480]]

January 17, 2002, the Exchange filed Amendment No. 3 to the 
proposal.\5\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from James E. Buck, Senior Vice President and 
Secretary, NYSE, to Jennifer Colihan, Attorney, Division of Market 
Regulation (``Division''), Commission, dated May 22, 2000 
(``Amendment No. 1''). In Amendment No. 1, the Exchange deleted the 
phrase ``or execution'' from proposed Rule 132B(a)(1)(C) as 
unnecessary for application of the Rule.
    \4\ See Letter from Darla C. Stuckey, Assistant Secretary, NYSE, 
to Nancy J. Sanow, Assistant Director, Division, Commission, dated 
August 14, 2001 (``Amendment No. 2''). In Amendment No. 2, the 
Exchange proposed to: (1) Amend Rule 123 by adding proposed 
paragraph (f) which would set forth the details required to be 
recorded of each execution report, including a unique order 
identifier, and (2) amend Rule 132.30 by deleting 132.30(10), which 
would have required a unique order identifier be added to the data 
elements in post trade processing. The Exchange represents that this 
change will ensure that a unique order identifier will be attached 
throughout the life of an order, thus simplifying the tracking 
process.
    \5\ See Letter from Darla Stuckey, Corporate Secretary, NYSE, to 
Belinda Blaine, Associate Director, Division, Commission, dated 
January 17, 2002 (``Amendment No. 3''). In Amendment No. 3, the 
Exchange explained that it did not believe that it was cost-
effective to store all order tracking data collected from members on 
a daily basis, and clarified that therefore members would be 
required to submit data to the NYSE on an ``as requested'' basis 
rather than daily as a matter of routine. The Exchange also 
represented that the data collected would be used solely for 
regulatory purposes, and that it would not use data received from 
its members pursuant to the proposed rules to gain a competitive 
advantage over another self-regulatory organization or broker-
dealer. Lastly, the Exchange explained what it considered order 
origination and time of receipt of an order.
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    The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change consists of amendments NYSE Rule 123, 
Interpretation .30 to NYSE Rule 132, and the proposed adoption of new 
NYSE Rules 132A, B and C, which will govern order tracking. The text of 
the proposed rule change is as follows (additions are italicized; 
deletions are bracketed):

Rule 123--Records of Orders

(f) Reports of Order Executions

    Order execution reports must be entered into the same database as 
required by this rule for the entry of orders. Any member organization 
proprietary system used to record the details of an order pursuant to 
paragraph (e) must also be capable of transmitting a report of the 
order's execution to such database. Order execution reports must be 
entered into such system within such time frame as the Exchange may 
prescribe. The details of each execution report required to be recorded 
shall include the following data elements, and any modifications to the 
report, in such form as the Exchange may from time to time prescribe:
    1. Order identifier that uniquely identifies the order as required 
by paragraph (e);
    2. Symbol;
    3. Number of shares or quantity of security;
    4. Transaction price;
    5. Time the trade was executed;
    6. Executing broker badge number, or alpha symbol as may be used 
from time to time, in regard to its side of the contract;
    7. Executing broker badge number, or alpha symbol as may be used 
from time to time, of the contra side to the contract;
    8. Clearing firm number, or alpha symbol as may be used from time 
to time, in regard to its side of the contract;
    9. Clearing firm number, or alpha symbol as may be used from time 
to time, in regard to the contra side of the contract;
    10. Whether the account for which the order was executed was that 
of a member or member organization or of a non-member or non-member 
organization;
    11. Identification of member or member organization which recorded 
order details as required by paragraph (e);
    12. Date the order was entered into an Exchange system;
    13. Indication as to whether this is a modification to a previously 
submitted report; 
    14. Settlement Instructions (e.g., cash, next day, or seller's 
option); 
    15. Special Trade Indication, if applicable; 
    16. Online Comparison System (OCS) Control Number; 
    17. Such other information as the Exchange may from time to time 
require 

Comparison and Settlement of Transactions Through A Fully-
Interfaced or Qualified Clearing Agency

Rule 132

* * * * *
    .30  Regardless of whether or not a Fully-Interfaced or Qualified 
Clearing Agency is being used for the comparison and/or settlement of a 
round-lot regular way contract for the purchase or sale of a security 
entered into on the Exchange, each clearing member organization that is 
a party to such contract shall submit to a Fully-Interfaced or 
Qualified Clearing Agency, as defined above, in such form and within 
such time periods as may be prescribed by the Clearing Agency, or the 
Exchange, as appropriate, each of the following trade data elements:
    (1) Name or identifying symbol of the security, as may be required 
by the clearing agency;
    (2) Number of shares or quantity of security;
    (3) Transaction price;
    (4) Time the trade was executed;
    (5) Executing broker badge number, or alpha symbol as may be used 
from time to time, in regard to its side of the contract;
    (6) Executing broker badge number, or alpha symbol as may be used 
from time to time, of the contra side to the contract;
    (7) Clearing firm number, or alpha symbol as may be used from time 
to time, in regard to its side of the contract;
    (8) Clearing firm number, or alpha symbol as may be used from time 
to time, in regard to the contra side of the contract;
    (9) Whether the account for which the order was executed was that 
of a member or member organization or of a non-member or non-member 
organization;
    [(10) The order identifier for the order as prescribed in Rule 
132B(e);]
    (10) [(11)] Such other information as the Exchange may from time to 
time require.
    Each clearing member organization that is a party of a round lot 
non-regular way contract for the purchase or sale of a security entered 
into on the Exchange shall submit each of the trade data elements 
referred to above to the Exchange, in such form and within such time 
periods as the Exchange may prescribe.
* * * * *

Rule 132A. Synchronization of Member Business Clocks

    Each member and member organization shall synchronize its business 
clocks that are used for purposes of recording the date and time of any 
event that must be recorded pursuant to the Rules of the Exchange, with 
reference to a time source as designated by the Exchange, and shall 
maintain the synchronization of such business clocks in conformity with 
such procedures as are prescribed by the Exchange.

Rule 132B. Order Tracking Requirements

    (a) Procedures.
    1. With respect to any security listed on the New York Stock 
Exchange, each member and member organization shall:
    A. immediately following receipt or origination of an order, record 
each item of information described in paragraph (b) of this Rule that 
applies to such order, and record any additional information described 
in paragraph (b) of this Rule that applies to such order immediately 
after such information is received or becomes available; and
    B. immediately following the transmission of an order to another 
member, or from one department to another within the same member 
organization, record each item of information described in paragraph 
(c) of this Rule that applies with respect to such transmission; and

[[Page 4481]]

    C. immediately following the modification or cancellation of an 
order, record each item of information described in paragraph (d) of 
this Rule that applies with respect to such modification or 
cancellation.
    2. Each required record of the time of an event shall be expressed 
in terms of hours, minutes, and seconds.
    3. Each member or member organization shall, by the end of each 
business day, record each item of information required to be recorded 
under this Rule in such electronic form as is prescribed by the 
Exchange from time to time.
    4. Maintaining and Preserving Records
    A. Each member and member organization shall maintain and preserve 
records of the information required to be recorded under this Rule for 
the period of time and accessibility specified in SEC Rule 17a-4(b).
    B. The records required to be maintained and preserved under this 
Rule may be immediately produced or reproduced on ``micrographic 
media'' as defined in SEC Rule 17a-4(f)(1)(i) or by means of 
``electronic storage media'' as defined in SEC Rule 17a-4(f)(1)(ii) 
that meet the conditions set forth in SEC Rule 17a-4(f) and be 
maintained and preserved for the required time in that form.
    (b) Order Origination and Receipt
    Unless otherwise indicated, the following order information must be 
recorded under this Rule when an order is received or originated:
    1. an order identifier meeting such parameters as may be prescribed 
by the Exchange assigned to the order by the member or member 
organization that uniquely identifies the order for the date it was 
received;
    2. the identification symbol assigned by the Exchange to the 
security to which the order applies;
    3. the market participant symbol assigned by the Exchange to the 
member or member organization;
    4. the identification of any department or the identification 
number of any terminal where an order is received directly from a 
customer;
    5. where the order is originated by a member or member 
organization, the identification of the department (if appropriate) of 
the member that originates the order;
    6. the number of shares to which the order applies;
    7. the designation of the order as a buy or sell order;
    8. the designation of the order as a short sale order;
    9. the designation of the order as a market order, limit order, 
stop order or stop limit order;
    10. any limit and/or stop price prescribed in the order;
    11. the date on which the order expires, and, if the time in force 
is less than one day, the time when the order expires;
    12. the time limit during which the order is in force;
    13. any request by a customer that an order not be displayed 
pursuant to Rule 11Acl-4(c) under the Securities Exchange Act of 1934;
    14. special handling requests, specified by the Exchange for 
purposes of this Rule;
    15. the date and time the order is originated or received by a 
Member or member organization; and
    16. the type of account, i.e., retail, wholesale, employee, 
proprietary, or any other type of account designated by the Exchange, 
for which the order is submitted.
    (a) Order Transmittal.
    Order information required to be recorded under this Rule when an 
order is transmitted includes the following:
    1. When a member or member organization transmits an order to 
another department within the member, other than to the trading 
department, the member or member organization shall record:
    A. the order identifier assigned to the order by the member or 
member organization,
    B. the market participant symbol assigned by the Exchange to the 
member or member organization,
    C. the date the order was first originated or received by the 
member or member organization, D. an identification of the department 
to which the order was transmitted, and
    E. the date and time the order was received by that department;
    1. When a member or member organization transmits an order to 
another member or member organization:
    A. the transmitting member or member organization shall record:
    (i) whether the order was transmitted manually or electronically,
    (ii) the order identifier assigned to the order by that member or 
member organization,
    (iii) the market participant symbol assigned by the Exchange to 
that member or member organization,
    (iv) the market participant symbol assigned by the Exchange to the 
member or member organization to which the order is transmitted,
    (v) the date the order was first originated or received by the 
transmitting member or member organization,
    (vi) the date and time the order is transmitted, (vii) the number 
of shares to which the transmission applies, and
    (viii) for each order to be included in a bunched order, the 
bunched order route indicator assigned to the bunched order by the 
member or member organization; and
    B. the receiving member or member organization shall record, in 
addition to all other information items in Rule 132B that apply with 
respect to such order: 
    (i) the fact that the order was received manually or 
electronically;
    (ii) the order identifier assigned to the order by the member or 
member organization that transmits the order, and
    (iii) the market participant symbol assigned by the Exchange to the 
member or member organization that transmits the order.
    C. The requirement in paragraph 2A above to record information 
regarding the transmission of an order to another member or member 
organization shall not apply to:
    (i) the transmitting member or member organization where the order 
was transmitted to the Floor by means of the SuperDOT system; or
    (ii) the transmitting member on the Floor, where the order is 
transmitted on the Floor to another member, and the order had been 
entered into an Exchange data base pursuant to Exchange Rule 123(e) or 
had been received on the Floor by means of the SuperDOT system, except 
that the transmitting member shall record the order identifier as 
specified in paragraph (e) of this Rule, and the market participant 
symbol assigned by the Exchange to the member or member organization to 
which the order was transmitted. 
    D. The requirement in paragraph 2B above to record information 
regarding the receiving of an order shall not apply where:
    (i) the receiving member or member organization received the order 
by means of the SuperDOT system; or
    (ii) the receiving member received the order on the Floor from 
another member on the Floor, and the order had been entered into an 
Exchange data base pursuant to Exchange Rule 123(e) or had been 
received on the Floor by means of the SuperDOT system, except that the 
receiving member shall record the order identifier as specified in 
paragraph (e) of this Rule, and the market participant symbol assigned 
by the Exchange to the member or member organization from which the 
order was received.
    3. When a member or member organization transmits an order to a

[[Page 4482]]

non-member, the member or member organization shall record:
    A. the fact that the order was transmitted to a non-member,
    B. the order identifier assigned to the order by the member or 
member organization,
    C. the market participant symbol assigned by the Exchange to the 
member or member organization,
    D. the date the order was first originated or received by the 
member or member organization,
    E. the date and time the order is transmitted,
    F. the number of shares to which the transmission applies, and 
    G. for each manual order to be included in a bunched order, the 
bunched order route indicator assigned to the bunched order by the 
member or member organization.
    (d) Order Modifications and Cancellations.
    Order information required to be recorded under this Rule when an 
order is modified or canceled includes the following:
    1. When a member or member organization modifies or receives a 
modification to the terms of the order, the member or member 
organization shall record, in addition to all other applicable 
information items (including a new order identifier) that would apply 
as if the modified order were originated or received at the time of the 
modification:
    A. the order identifier assigned to the order by the member or 
member organization prior to the modification,
    B. the date and time the modification was originated or received 
and 
    C. the date the order was first originated or received by the 
member or member organization.
    2. When the member or member organization cancels or receives a 
cancellation of an order, in whole or part, the member or member 
organization shall record: 
    A. the order identifier assigned to the order by the member or 
member organization,
    B. the market participant symbol assigned by the Exchange to the 
member or member organization,
    C. the date the order was first originated or received by the 
member or member organization,
    D. the date and time the cancellation was originated or received,
    E. if the open balance of an order is canceled after a partial 
execution, the number of shares canceled, and 
    F. whether the order was canceled on the instruction of a customer 
or the member or member organization.
    3. The requirements in paragraphs 1 and 2 above regarding the 
recording of information with respect to receiving a modification or 
cancellation of an order shall not apply where: 
    (i) the receiving member or member organization received the 
modification or cancellation by means of the SuperDOT system; or 
    (ii) the receiving member received the modification or cancellation 
on the Floor from another member on the Floor, and such modification or 
cancellation had been entered into an Exchange database pursuant to 
Exchange Rule 123(e), or had been received on the Floor by means of the 
SuperDOT system.
    (e) The order identifier referred to in paragraph (b)(1) above 
shall be the order identifier required by Exchange Rule 123(e) with 
respect to any order transmitted by a member or member organization to 
the Floor for execution, and to any order received on the Floor by a 
member or member organization from off the Floor, except that the order 
identifier with respect to an order transmitted to the Floor by means 
of the SuperDOT system shall be the order identifier assigned to such 
order.
    (f) The provisions of this Rule shall not apply to members 
effecting on the Floor proprietary transactions when they are acting in 
the capacity of a specialist, a Registered Competitive Market Maker, or 
a Competitive Trader.

Rule 132C: Transmission of Order Tracking Information to the Exchange

    Members and member organizations shall be required to transmit to 
the Exchange, in such format as the Exchange may from time to time 
prescribe, such order tracking information as the Exchange may request.
* * * * *

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.

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

1. Purpose
    The Exchange proposes to add new provisions and procedures in its 
rules to require the recording of details of orders in Exchange listed 
securities by its members and member organizations. The requirements of 
amended Rule 123, Rule 132 and new Rules 132A, B and C will be 
integrated into existing Exchange procedures and systems to create a 
complete order audit trail from origination through execution and 
cancellation.
    a. Summary of Proposed Rules.
    The Exchange proposes the adoption of four new rules which will 
require members and member organizations (herein referred to 
collectively as ``members'') to record and retain order information, to 
synchronize their time keeping equipment with a time source designated 
by the Exchange and to provide the Exchange with information on orders 
when so requested. Specifically, the Exchange has adopted requirements 
for the electronic capture of orders at the point of sale (front end 
systemic capture, or ``FESC'') \6\ and is proposing requirements for 
the electronic capture of orders 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 will provide benefits both to 
the Exchange and members in terms of recordkeeping, surveillance and 
order processing. The design of FESC and OTS includes linking them to 
other Exchange systems in order to maximize their use. A key to linking 
is the provision for a unique order identifier in Rule 123(e). This 
order identifier is required to be included in each phase of processing 
as the order moves from entry through execution (or modification or 
cancellation) into reporting of an execution. With this unique 
identifier attached throughout the life of the order, tracking the 
order will be simplified. The order identification requirement would 
actually become effective when Rule 123(f) is implemented, which would 
be concurrent with the Exchange's implementation of proposed Rules 
132A, B, and C. The proposed

[[Page 4483]]

rules and amendments are detailed below.
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    \6\ See Securities Exchange Act Release No. 43689 (December 7, 
2000), 65 FR 79145 (December 18, 2000).
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    i. Rule 123(f)
    Proposed Rule 123(f) requires that order execution reports be 
entered into FESC, and that any member organization proprietary system 
used to record the details of an order must also be capable of 
transmitting a report of the order's execution to FESC. The proposed 
rule further requires that the details of each execution report 
required to be recorded must include the following data elements: (1) 
Order identifier that uniquely identifies the order as required by 
paragraph 123(e); (2) symbol; (3) number of shares or quantity of 
security; (4) transaction price; (5) time the trade was executed; (6) 
executing broker badge number, or alpha symbol as may be used from time 
to time, in regard to its side of the contract; (7) executing broker 
badge number, or alpha symbol as may be used from time to time, of the 
contra side to the contract; (8) clearing firm number, or alpha symbol 
as may be used from time to time, in regard to its side of the 
contract; (9) clearing firm number, or alpha symbol as may be used from 
time to time, in regard to the contra side of the contract; (10) 
whether the account for which the order was executed was that of a 
member or member organization or of a non-member or non-member 
organization; (11) identification of member or member organization 
which recorded order details as required by paragraph (e); (12) date 
the order was entered into an Exchange system; (13) indication as to 
whether this is a modification to a previously submitted report; (14) 
settlement instructions (e.g., cash, next day, or seller's option); 
(15) Special Trade Indication, if applicable; (16) online Comparison 
System (OCS) Control Number; and (17) such other information as the 
Exchange may from time to time require.
    ii. Rule 132A
    Proposed Rule 132A requires members to synchronize the business 
clocks used to record the date and time of any event that the Exchange 
requires to be recorded. The Exchange will require that the date and 
time of orders in securities listed on the Exchange be so recorded. The 
proposed Rule also requires that members maintain the synchronization 
of this equipment in conformity with procedures prescribed by the 
Exchange. The Exchange intends to coordinate time synchronization with 
the National Association of Securities Dealers Inc.'s (``NASD'') 
identical requirements.\7\
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    \7\ See NASD Rule 6953.
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    iii. Rule 132B
    Proposed Rule 132B prescribes requirements and procedures with 
respect to orders in any security listed on the Exchange received or 
originated by a member. Paragraph (a) of the proposed rule requires 
immediate recordation of the data elements described in paragraph (b). 
If an order is transmitted to another member or is transmitted to 
another department of the same member, information detailed in 
paragraph (c) must be recorded. If an order is modified or cancelled, 
information required by paragraph (d) must be recorded. The various 
data elements and information required by the proposed rule must be 
recorded in an electronic format prescribed by the Exchange. Time 
records must be expressed in hours, minutes and seconds. The Rule makes 
clear that the records required therein must be preserved pursuant to 
Rule 17a-4(b) under the Act and that these records may be produced or 
reproduced on ``micrographic media'' as contemplated under Rule 17a-
4(f) under the Act.
    Paragraph (b) of the proposed rule contains the sixteen data 
elements to be recorded for an order. These include: (1) An order 
identifier; (2) stock symbol; (3) identification of the member; (4) 
department identification of the member or terminal identification 
number for orders received via a SuperDOT terminal; (5) department of 
the member which originated the order; (6) number of shares; (7) buy or 
sell order designation; (8) whether the order is a short sale order; 
(9) whether the order is a market, limit, stop or stop limit order 
(which terms are defined in Rule 13 of the Exchange); (10) any limit 
price, stop price or stop limit price prescribed in the order; (11) the 
date, if any, that an order expires or, if the order is in force for 
less than a day, the time when it expires; (12) the time limit the 
order is in force; (13) any request by the customer that the order not 
be displayed pursuant to Rule 11Ac1-4 under the Act; (14) any special 
handling requests (such as fill or kill, market-on-close, limit-on-
close, not held, etc); (15) date and time of origination or receipt of 
the order; \8\ and (16) the type of account for which the order is 
entered. Each of these data elements are commonly understood and used 
by members.
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    \8\ For purposes of Rule 132B(b)(15), for electronic orders, the 
Exchange will consider order origination and time of receipt of an 
order to be the time the order is captured by a member 
organization's electronic order-routing or execution system. For 
manual orders, the Exchange will consider order origination and time 
of receipt of an order to be the time the order is first received by 
the member organization from the customer. See Amendment No. 3, 
supra note 5.
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    Paragraph (e) of the proposed rule explains that the order 
identifier is the order identifier required by NYSE Rule 123(e). As 
explained above, this is the identifier assigned to an order in 
connection with the Exchange's FESC initiative. Under Rule 123(e), 
before an order is represented or executed on the Floor of the 
Exchange, a member must assign a unique identifier to it. This 
identifier will stay with the order throughout its processing life, 
through cancellation or execution.
    Paragraph (c) of proposed rule 132B requires that certain 
information be recorded when an order is transmitted to another 
department within the member, to another member, or to a non-member. 
When transmitted to another department, the following must be recorded: 
the order identifier, identification of the member, the date of receipt 
or origination of the order, the identification of the department to 
which the order was transmitted and the date and time the order was 
received by the department.
    Paragraph (c)(2) contains requirements for both receiving and 
transmitting members when an order is transmitted from one member to 
another. The transmitting member must record whether the order was 
transmitted manually or electronically, the order identifier, market 
participant symbol for both receiver and transmitter, date of 
origination or receipt by the transmitting member, the date and time 
the order was transmitted, the number of shares so transmitted and, if 
the order is included in a bunched order, the bunched order route 
indicator assigned by the member. A bunched order is any aggregation of 
two or more orders. The receiving member must record whether the 
transmitted order was received manually or electronically, the order 
identifier and the identifier of the member transmitting the order.
    Exceptions to the requirement for recording information for both 
the transmitting and receiving member are contained in proposed Rule 
132B(c)(2)(C) and 132(c)(2)(D). These exceptions are for orders 
transmitted to the Floor via SuperDOT, the Exchange's automated order 
routing system, and orders transmitted to another member on the Floor 
of the Exchange, where the order was entered into an Exchange data base 
pursuant to Rule 123(e), the Exchange's front-end systemic order 
capture requirements. In light of the objective of being able to 
identify an order from start to finish, both the receiving and 
transmitting members

[[Page 4484]]

must record the order identifier and the identity of the member 
transmitting and receiving the order.
    For orders transmitted to a non-member, the member must record that 
fact as well as the order identifier, member's identity, date of 
receipt or origination of the order, date and time of the order, number 
of shares, and, if applicable, any bunched order route indicator.
    If an order is modified, proposed Rule 132B(d) requires that the 
order identifier (and any new order identifier, if applicable), date 
and time of modification and date the original order was received or 
originated be recorded. If an order is cancelled, (d)(2) requires the 
date and time of cancellation, whether the customer or the member 
cancelled the order, and the number of shares cancelled if there is a 
partial execution. This is in addition to the basic requirements to 
record the order identifier, identity of the member and the date and 
time when the order was first received or originated.
    The same exceptions with respect to SuperDOT orders and orders on 
the Floor entered into a database under Rule 123(e) will apply to 
modifications and cancellations. Modification and cancellation will be 
elements captured in these systems, and will not need to be captured by 
the member on the Floor.
    Paragraph (f) of proposed rule 132B provides an exception to the 
Rule for proprietary transactions of specialists, Registered 
Competitive Market Makers and Competitive Traders. The transactions 
these members effect for their own accounts are not, in effect, orders 
as contemplated by the Rule. Information with respect to these 
transactions is recorded and maintained by these members pursuant to 
the recordkeeping requirements of Exchange and Commission Rules.
    iv. Rule 132C
    New Rule 132C requires members, upon request, to transmit order 
tracking data to the Exchange. This parallels the approach used under 
Rule 410A (Automated Submission of Trading Data) for submission of 
transaction information. The Exchange will make requests for order 
tracking information on an as-needed basis in order for the Exchange to 
carry out its surveillance and regulatory functions. The Commission 
recognizes that the NYSE, in its regulatory capacity, can obtain 
sensitive market data that could benefit the NYSE's market operation if 
used for competitive purposes. The NYSE has assured the Commission that 
this information is being collected solely for regulatory purposes and 
that it will not use OTS data to gain an unfair competitive advantage 
over other market participants.\9\
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    \9\ See Amendment No. 3, supra note 5.
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    Members will be required to submit the data in an automated format. 
It is the Exchange's experience that submission of data by request has 
proven to be effective and efficient from both the Exchange's and its 
members' viewpoint.
    b. Integration with Existing Exchange Requirements
    With the implementation of Rule 132B, Exchange rules will provide a 
complete audit trail of orders from receipt through execution. As 
mentioned above, NYSE Rule 123(e) provides for the systemic capture of 
orders before they are represented or executed on the Floor. This 
includes the assignment of the unique identifier to each order. In 
addition, the Exchange intends to require that, in the future, all 
orders be systemically delivered to its Floor, thus providing an 
electronic capture of order data from receipt or origination of an 
order. The audit trail requirements of proposed Rule 132B require 
information on the execution and clearance of transactions, the so-
called ``back end'' of orders. With the addition of Rule 123(f), which 
requires recordation of the unique order identifier as part of the 
execution report, the Exchange represents that an order could be 
tracked throughout the life of the order. The unique order identifier 
would link the execution report to the original order.
    c. Violation of Order Tracking Requirements
    If, upon investigation, the Exchange determines that a violation of 
the Rule proposed to be amended or adopted herein has occurred, the 
Exchange will take appropriate action under the procedures of its 
disciplinary rules, including Rule 476. If a particular violation is 
deemed minor in nature, this could include issuance of a cautionary 
letter. In the future, the Exchange will consider seeking approval to 
add these rules to the list of rules contained in Rule 476A which 
provides for the imposition of fines for minor violations of rules.
    d. Effective Date
    The Exchange will require that the provisions of the rules and 
amendments proposed herein become effective fifteen months after the 
Commission's approval.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \10\ that an exchange have rules that 
are designed to promote just and equitable principles of trade, to 
remove impediments to and to 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 will enable 
the Exchange to fulfill its regulatory responsibilities to effectively 
surveil its market. The proposed rule change fulfills an undertaking 
contained in an order issued by the Commission \11\ relating to the 
Exchange's regulatory responsibilities. Specifically, the Order 
directed the Exchange to ``design and implement * * * an audit trail 
sufficient to enable the NYSE to reconstruct its market promptly. * * 
*'' The Order called for ``an accurate, time-sequenced record of 
orders''' throughout an order's life, from receipt through execution or 
cancellation and for synchronization of clocks used in connection with 
the audit trail of orders.
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    \10\ 15 U.S.C. 78f(b)(5).
    \11\ See In the Matter of New York Stock Exchange, Inc. SEC 
Release No. 41574 (June 29, 1999); Administrative Proceeding File 
No. 3-9925 (``Order'').
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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

    Within 35 days of the 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 proposal is 
consistent with the Act. In particular,

[[Page 4485]]

the Commission solicits comments on when the Exchange should consider a 
manual order ``received'' for purposes of proposed NYSE Rule 
132B(b)(15). As proposed, the Exchange will consider the time of 
receipt of such as order as the time the firm first receives the order 
from a customer. However, the Commission and the Exchange are aware 
that there are occasions when members receive orders after business 
hours, and at remote locations. For these reasons, the Commission 
requests comment on whether is it reasonable to interpret time of 
receipt of a manual order to be when the order is first received by the 
member without further consideration given to when and/or where the 
order was received by the member. To the extent commenters believe that 
modification to the interpretation is needed, the Commission requests 
that commenters provide specific suggestions on what the time of 
receipt for manual orders should be.
    The Commission also requests comment on whether NYSE members that 
are also members of the NASD required to comply with NASD's Order Audit 
Trail System (``OATS'') rules will be able to use the internal systems 
they currently have in place for collecting and storing order tracking 
data in order to comply with the proposed NYSE rules, or whether they 
will need to make system changes.
    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 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 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-99-51 and should be 
submitted by February 20, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-2213 Filed 1-29-02; 8:45 am]
BILLING CODE 8010-01-P