[Federal Register Volume 67, Number 51 (Friday, March 15, 2002)]
[Notices]
[Pages 11735-11737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6262]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45521; File No. SR-NYSE-99-51]


Self-Regulatory Organizations; Notice of Filing of Amendment No. 
4 to a Proposed Rule Change by the New York Stock Exchange, Inc. 
Relating to Requirements for Order Tracking by Exchange Members and 
Member Organizations

March 8, 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 February 27, 2002, 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 NYSE. On May 24, 
2000, the Exchange filed Amendment No. 1 to the proposal.\3\ On August 
14, 2001, the Exchange filed Amendment No. 2 to the proposal.\4\ On 
January 17, 2002, the Exchange filed Amendment No. 3 to the 
proposal.\5\ The

[[Page 11736]]

proposed rule change was published, as amended, on January 30, 2002.\6\ 
The Commission is publishing this notice to solicit comments on 
Amendment No. 4 to File No. SR-NYSE-99-51 from interested persons.
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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.
    \6\ See Securities Exchange Act Release No. 45326 (January 23, 
2002), 67 FR 4479.
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I.Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    As originally filed in SR-NYSE-99-51, the proposed rule change 
consisted of amendments to NYSE Rule 132, and the proposed adoption of 
NYSE Rules 132A, B and C on order tracking. In Amendment No. 4 to the 
proposed rule change, the Exchange proposes that the requirement that 
copies of execution reports be entered into an Exchange database be 
implemented within 6 months, instead of 15 months (as originally 
proposed), after Commission approval of the filing.

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 Exchange has adopted requirements for the electronic capture of 
orders at the point of sale (front end systemic capture, or 
``FESC'')\7\ and proposed requirements for the electronic capture of 
orders at the point of receipt (order tracking system, or ``OTS'').\8\ 
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. As 
originally filed in SR-NYSE-99-51, the proposed rule change consisted 
of amendment of Exchange Rule 132, and adoption of new Rules 132A, B 
and C on order tracking. These new rules require the recording of 
details of orders in Exchange listed securities by members and member 
organizations.
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    \7\ See Securities Exchange Act Release No. 43689 (December 7, 
2000), 65 FR 79145 (December 18, 2000).
    \8\ See note 6, supra.
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    Amendment No. 1 effected a minor change to proposed NYSE Rule 
132(B).\9\ Amendment No. 2 proposed amendments to NYSE Rules 123 and 
132 to require that members and member organizations provide a drop 
copy of the report of execution to FESC, with the unique order 
identifier linking the execution report to the original order, rather 
than requiring that the order identifier be submitted as part of audit 
trail post-trade processing.\10\ Amendment No. 3 discussed the 
Exchange's position that data be submitted to the Exchange on an ``as 
requested'' basis rather than daily as a matter of routine under NYSE 
Rule 132C.\11\
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    \9\ See note 3, supra.
    \10\ See note 4, supra.
    \11\ See note 5, supra.
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    As originally proposed in File No. SR-NYSE-99-51, the 
implementation date for the entire rule change and amendments would 
occur fifteen (15) months after Commission approval, if such approval 
is granted. The Exchange now proposes to amend this time frame with 
respect to the drop copy of execution reports requirement only (as 
described in Amendment No. 2 to the proposed rule change) to a shorter 
time frame, namely six (6) months after Commission approval of the 
filing. The Exchange believes that this is feasible since the system 
architecture for the Exchange database (FESC) is already in place. This 
six-month time frame should allow sufficient time for members and 
member organizations to do programming and training so that execution 
reports can be captured and drop-copied into the Exchange database. In 
addition, the Exchange believes that the phasing-in of the requirements 
will give members and member organizations time to better plan for full 
implementation of the rule changes proposed in File No. SR-NYSE-99-51.
2. Statutory Basis
    The Exchange believes that the basis under the Act for Amendment 
No. 4 to this proposed rule change is the requirement under section 
6(b)(5)\12\ 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 NYSE believes that this amendment to the proposed rule change will 
enhance the Exchange's tools to effectively surveil its market. The 
Exchange notes that the proposed rule change fulfills an undertaking 
contained in an order issued by the Commission relating to the 
Exchange's regulatory responsibilities.\13\ 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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    \12\ 15 U.S.C. 78f(b)(5).
    \13\ 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 (``the 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 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 self-regulatory organization 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.

[[Page 11737]]

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 20549. 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 Amendment No. 4 of File No. SR-
NYSE-99-51 and should be submitted by April 5, 2002.

    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. 02-6262 Filed 3-14-02; 8:45 am]
BILLING CODE 8010-01-P