[Federal Register: June 9, 2003 (Volume 68, Number 110)]
[Notices]
[Page 34453-34458]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09jn03-95]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47961; File No. SR-NYSE-2002-32]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment Nos. 1 and 2 Thereto by the New York Stock
Exchange, Inc. Relating to the Addition of Interpretive Material to
Several Exchange Rules
June 2, 2003.
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 August 12, 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 March 11,
2003, the Exchange filed Amendment No. 1 to the proposed rule
change.\3\ On May 21, 2003, the Exchange filed Amendment No. 2 to the
proposed rule change.\4\ 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\ See letter from Mary Yeager, Assistant Secretary, NYSE, to
Nancy J. Sanow, Assistant Director, Division of Market Regulation
(``Division''), Commission, dated March 10, 2003 (``Amendment No.
1''). In Amendment No. 1, the Exchange submitted a new Form 19b-4,
which replaced the original filing in its entirety.
\4\ See letter from Darla C. Stuckey, Corporate Secretary, NYSE
to Nancy J. Sanow, Assistant Director, Division, Commission, dated
May 20, 2003 (``Amendment No. 2''). In Amendment No. 2, the Exchange
corrected a typographical omission to the version of NYSE Rule 72(b)
provided in Amendment No. 1. The Exchange also amended NYSE Rule 75
in order to reflect that Senior Floor Officials and Executive Floor
Officials would be permitted to sit on panels to resolve disputes
among members under certain circumstances. In addition, the Exchange
amended NYSE Rule 91.10 to clarify that a member may reject a trade
as soon as practicable under the prevailing circumstances after
receiving an execution report that the member acted as principal.
The Exchange also amended NYSE Rule 91.10 to clarify that disputes
between members as to whether there was sufficient time to reject a
trade would be resolved under NYSE Rule 75. In addition, NYSE Rule
91.50 was amended to make clear that a Floor Official's review of a
pattern of a member's rejections does not compromise the
unconditional right of the specialist to reject any trade where the
specialist trades as principal.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The proposed rule change, as amended, consists of the addition of
long-standing interpretive material to several NYSE rules.
The text of the proposed rule change, as amended, is below.
Proposed new language is in italics; proposed deletions are in
brackets.\5\
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\5\ The rule text provided herein includes corrections of
typographical errors from the rule text that the NYSE submitted in
Amendment No. 2 of the proposed rule change. Telephone conversation
between Jeffery Rosenstruck, Senior Special Counsel, Market
Surveillance, Rule Development, NYSE, and Tim Fox, Attorney,
Division, Commission on May 22, 2003.
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Rule 72 Priority and Precedence of Bids and Offers
I. Bids.--Where bids are made at the same price, the priority and
precedence shall be determined as follows:
Priority of First Bid
(a) Except as provided in paragraph (b) below, when a bid is
clearly established as the first made at a particular price, the maker
shall be entitled to priority and shall have precedence on the next
sale at that price, up to the number of shares of stock or principal
amount of bonds specified in the bid, irrespective of the number of
shares of stock or principal amount of bonds specified in such bid.
[[Page 34454]]
Priority of Agency Cross Transactions
(b) When a member has an order to buy and an order to sell an
equivalent amount of the same security, and both orders are of 25,000
shares or more and are for the accounts of persons who are not members
or member organizations, the member may ``cross'' those orders at a
price at or within the prevailing quotation. The member's bid or offer
shall be entitled to priority at such cross price, irrespective of pre-
existing bids or offers at that price. The member shall follow the
crossing procedures of Rule 76, and another member may trade with
either the bid or offer side of the cross transaction only to provide a
price which is better than the cross price as to all or part of such
bid or offer. A member who is providing a better price to one side of
the cross transaction must trade with all other market interest having
priority at that price before trading with any part of the cross
transaction. Following a transaction at the improved price, the member
with the agency cross transaction shall follow the crossing procedures
of Rule 76 and complete the balance of the cross. No member may break
up the proposed cross transaction, in whole or in part, at the cross
price. No specialist may effect a proprietary transaction to provide
price improvement to one side or the other of a cross transaction
effected pursuant to this paragraph. A transaction effected at the
cross price in reliance on this paragraph shall be printed as ``stopped
stock''.
When a member effects a transaction under the provisions of this
paragraph, the member shall, as soon as practicable after the trade is
completed, complete such documentation of the trade as the Exchange may
from time to time require.
* * * * *
III. Sale ``Clears the Floor''
Following a sale, all bids and offers previously entered are deemed
to be re-entered and are on parity with each other. For example, assume
that the market in XYZ is 0.20 bid for 5000 shares, with 5000 shares
offered at 0.25. On the bid side of the market, Broker A is bidding for
1000 shares and has priority. Brokers B, C, D, and E are each bidding
for 1000 shares, with B being ahead of C, C being ahead of D, and D
being ahead of E. On the offer side of the market, Broker F is offering
1000 shares and has priority. Brokers G, H, I, and J are each offering
1000 shares, with G being ahead of H, H being ahead of I, and I being
ahead of J. Broker K enters the Crowd and sells 1000 shares to Broker
A's bid of 0.20. The market then becomes 0.20 bid for 4000 shares, with
5000 offered at 0.25. Brokers B, C, D, and E are now on parity on the
bid side of the market, and Brokers F, G, H, I, and J are now on parity
on the offer side of the market.
* * * * *
Rule 75 Disputes as to Bids and Offers
Disputes arising on bids or offers, if not settled by agreement
between the members interested, shall be settled by a Floor Official.
In rendering a decision as to disputes regarding the amount traded, the
Floor Official shall give primary weight to statements by any member
who was not a party to the transaction and shall also take into account
the size of orders held by parties to the disputed transaction, and
such other facts as he deems relevant. If both parties to a dispute
agree, and the dispute involves either a monetary difference of $10,000
or more or a questioned trade, the matter may be referred for
resolution to a panel of three Floor Governors, Senior Floor Officials,
or Executive Floor Officials, or any combination thereof, whose
decision shall be binding on the parties. As an alternative to a panel
of three Floor Governors, Senior Floor Officials, or Executive Floor
Officials, or any combination thereof, members may also proceed to
resolve a dispute through long-standing arbitration procedures
established under the Exchange's Constitution and Rules.
* * * * *
Rule 91 Taking or Supplying Securities Named in Order
* * * * *
[sbull] [sbull] [sbull] Supplementary Material
.10 Confirmation of transactions.--When a member or member
organization is notified to send a [representative] member to a
specialist's post for the purpose of confirming a transaction with
another member who has elected to take or supply for his own account
the securities named in an order entrusted to him, the member or member
organization so notified or a member representing the notified party
must respond [promptly] as soon as practicable under the prevailing
circumstances following notification to the member or member
organization of the report of execution of the transaction. The
transaction must then be either confirmed or rejected with a member and
not with a clerk. [The representative] Transactions which are not then
confirmed in accordance with the procedures above are deemed to have
been accepted. If the specialist took or supplied the securities, the
member so notified must initial the memorandum record of the specialist
which shows the details of the trade and return it to the specialist.
The specialist must keep such memoranda records for a period of three
years.
Any disagreement as to whether a member or member organization has
taken timely action pursuant to this paragraph shall be resolved in
accordance with the principles of Rule 75.
.20 Principal transactions against orders in specialists'
possession.--A specialist occasionally may effect a transaction as
principal against an order which had been entered for an account
carried by the specialist's organization or serviced by someone at his
organization. In such cases, [it is desirable that] all specialists
must follow a uniform procedure. The customer for whom the order had
been entered [should] must be contacted promptly. The fact that the
stock has been taken or supplied as principal against his order
[should] must be explained to him so that he may then accept or reject
the transaction.
* * * * *
.50 Rejection of specialist's principal transactions--If there is a
continued pattern of rejections of a specialist's principal
transactions, a Floor Official may be called upon and require the
broker to review his or her actions. It should be noted, however, that
if a customer gives instructions to his or her broker to reject trades
with the specialist's name on the other side, this would be a
conditional order and should not be entrusted to the specialist for
execution.
The foregoing does not compromise the unconditional right of a
broker to reject any trade where the specialist trades as principal. In
addition, no disciplinary process would be triggered against the broker
for exercising his right to reject the trade.
Rule 95 Discretionary Transactions
(a) No member while on the Floor shall execute or cause to be
executed on the Exchange, or through ITS or any other Application of
the System, any transaction for the purchase or sale of any stock with
respect to which transaction such member is vested with discretion as
to (1) the choice of security to be bought or sold, (2) the total
amount of any security to be bought or sold, or (3) whether any such
transaction shall be one of purchase or sale. The member must receive
all material terms of an order, as referenced in (1), (2), and (3),
from the member's customer off the Floor, and may not
[[Page 34455]]
simply rely on a general understanding of the customer's intentions and
thereby create an order or a material term of an order on the Floor.
For example, a member who has purchased stock pursuant to a customer's
off-Floor order may not simply rely on an understanding of the
customer's strategy to sell the stock if it becomes profitable to do
so, but must first obtain a new order to sell entered by the customer
from off the Floor. See also Rule 90 and the supplementary material
thereto.
* * * * *
Rule 115A Orders at Opening or in Unusual Situations
* * * * *
[sbull] [sbull] [sbull] Supplementary Material
.20 Arranging an opening or price.--
* * * * *
``Pair-offs.''--A specialist who, as provided in (1) above, holds a
market order of another member or gives up his own name instead of
holding the order, may, in arranging the opening, ``pair-off'' such an
order against any order held by the specialist or by another member.
The member who leaves such an order with the specialist should, as
promptly as possible after the opening of the stock, return to the
Post. The specialist must retain the order slip and must advise the
member as to the broker and the name given up on the opposite side of
the transaction. The member should proceed as promptly as possible to
confirm the transaction with the broker on the opposite side.
Failure to comply with the time periods specified in the paragraph
``Responsibility for Losses'' below shall relieve the specialist from
responsibility for any loss that may result.
In the event that the specialist has given up his own name instead
of holding a member's order, and, based upon such order, the specialist
has effected a ``pair-off'' against an order of another member, the
specialist should notify the member to whom he originally gave his own
name of the broker and the name given up on the opposite side of the
transaction. Such member should proceed as promptly as possible to
confirm the transaction with the broker on the opposite side. If the
specialist has effected the ``pair-off'' against an order which he
handled as a broker, he should send a give-up notice to the member to
whom he originally gave his own name.
``Stopping.''--When a specialist has been unable to ``pair-off'' a
market order which has been left with him, as provided in (1) above, he
may, after opening of the Exchange but before the opening of the stock,
``stop'' at the offer price any such market order to buy, or at the bid
price any such market order to sell. In such cases, the specialist
should notify the broker who left the order with him that the order is
``stopped'' and inform him of the price at which it is ``stopped.'' In
the event that the specialist is unable to execute the order at a
better price, he should send for the broker who left such order with
him, and allow the broker to consummate the transaction.
Establishing a fair price.--A specialist or other member who holds
orders in order to assist in establishing a fair price, as provided in
(2) above, should, after the establishment of such price, send for the
members whose orders were held for that purpose. Such members should
proceed as promptly as possible to confirm the transactions with the
brokers on the opposite side.
Responsibility for losses.--A specialist or other member who makes
an error in arranging an opening or establishing a fair price shall not
be responsible for any loss involved if the member whose order has been
held or represented neglects to endeavor to confirm the transaction.
In the event that a member endeavors to confirm a transaction
resulting from an order left with the specialist as provided in (1)
above, but is unable to do so because of an error made by the
specialist in arranging an opening, the specialist shall be responsible
for any loss which may be involved, except when:
(1) The broker who left such order fails to return to the Post
within 30 minutes after the opening sale; or
(2) The broker who left such order returns to the Post within 30
minutes after the opening sale, but neglects to endeavor to confirm the
transaction with the broker on the opposite side within 30 minutes
after returning to the Post.
* * * * *
Rule 116 ``Stop'' Constitutes Guarantee
An agreement by a member to ``stop'' securities at a specified
price shall constitute a guarantee of the purchase or sale by him of
the securities at that price or its equivalent.
If an order is executed at a less favorable price than that agreed
upon, the member who agreed to stop the securities shall be liable for
an adjustment of the difference between the two prices.
[sbull] [sbull] [sbull] Supplementary Material
.10 Reporting ``stops''.--Members and member organizations should
report to their customers that securities have been stopped with
another member only if the stop is unconditional and the other member
had definitely agreed thereto.
.20 ``Stopping'' stock.--The privilege of stopping stock, other
than rights, shall not be granted or accepted by a [member] Floor
broker [in cases where the spread in the quotation is only the minimum
variation of trading in the particular stock], except that, in a
minimum variation market, a [member] Floor broker who holds
simultaneously an order to buy at the market and an order to sell the
same stock at the market may stop such purchase and selling orders
against each other and pair them off at prices and in amounts
corresponding to those of the subsequent sales in the stock as they
occur in the market. This exception will also apply when two [members]
Floor brokers, one holding an order to buy at the market and the other
holding an order to sell the same stock at the market, arrive in the
Crowd at the same time.
For the purpose of the exceptions provided herein, a limited order
to buy which is possible of execution at the prevailing offer price or
a limited order to sell which is possible of execution at the
prevailing bid price may be regarded as a market order.
.30 Restrictions on ``stopping'' stock.--No specialist may stop
stock against the book or for his own account at a price at which he
holds an order capable of execution at this price except that he may
stop stock:
(1) in connection with an opening or reopening;
(2) when there is a broker in the Crowd representing another order
at the stop price; or
(3) when a member acting on behalf of either a public customer's
account or an account in which such member or another member has an
interest makes an unsolicited request that a specialist grant him a
stop if:
(a) (i) the spread in the quotation is not less than twice the
minimum variation of trading in the stock; or, (ii) where the spread in
the quotation is the minimum variation of trading in the stock[,] and
an imbalance in the quotation suggests the likelihood of price
improvement for the stopped order, the size of any order as to which a
stop is granted does not exceed 2,000 shares, and the aggregate number
of shares as to which stops are in effect does not exceed 5,000 shares,
unless a
[[Page 34456]]
Floor Official has approved, as appropriate under prevailing market
conditions, the granting of a stop for an order or orders of a larger
specified size, or the granting of stops as to a larger specified
aggregate number of shares as to which stops may be in effect;
(b) after the granting of the stop the spread between the bid and
offer is reduced, in any case where, prior to the granting of the stop,
the spread in the quotations was not less than twice the minimum
variation of trading in the stock;
(c) the specialist does not reduce the size of the market following
the stop; and
(d) on the election of the stop the order or orders on the
specialist's book entitled to priority will be executed against the
stopped stock.
.40 ``Stopping'' stock on market-at-the-close orders.--
Notwithstanding any provisions of this Rule or of any other Exchange
Rule to the contrary, a member shall execute market-at-the-close orders
in a stock as provided below, where the member is holding
simultaneously both buy and sell market-at-the-close orders.
(A) Where there is an imbalance between the buy and sell market-at-
the-close orders, the member shall, at the close of trading on the
Exchange in that stock on that day, execute the imbalance against the
prevailing bid or offer on the Exchange, as appropriate. (An imbalance
of buy orders would be executed against the offer. An imbalance of sell
orders would be executed against the bid.) The member shall then stop
the remaining buy and sell orders against each other and pair them off
at the price of the immediately preceding sale described above. The
``pair off'' transaction shall be reported to the consolidated last
sale reporting system as ``stopped stock''.
(B) Where the aggregate size of the buy market-at-the-close orders
equals the aggregate size of the sell market-at-the-close orders, the
buy orders and sell orders shall be stopped against each other and
paired-off at the price of the last sale of the Exchange just prior to
the close of trading in that stock on that day. The transaction shall
be reported to the consolidated last sale reporting system as ``stopped
stock''. See Rule 123C for discussion of procedures applicable to
market-at-the-close and limit-at-the close orders.
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, as
amended, 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 purpose of this filing is to add explanatory or clarifying
material to several NYSE rules. The proposed rule change, as amended,
does not constitute a substantive change to any NYSE rule or policy,
and is responsive to recommendations made by an Independent Consultant
retained by the Exchange.\6\
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\6\ See In the Matter of New York Stock Exchange, Inc., 70
S.E.C. Docket 106, Securities Exchange Act Release No. 41574 (June
29, 1999), Administrative Proceeding File No. 3-9925.
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NYSE Rule 72. The Exchange is proposing to add a sentence to NYSE
Rule 72(b) making it clear that a broker must ``recross'' a proposed
clean agency cross pursuant to Exchange auction procedures following a
transaction which provides price improvement to one side of the cross.
The Exchange represents that this is consistent with NYSE auction
procedures that require exposure of bids and offers by brokers
effecting a cross before a transaction may be completed.
The Exchange is also proposing to specify in the Rule its long
standing interpretation of its auction rules that a transaction
``clears the Floor,'' meaning bids and offers not satisfied in the
transaction are deemed to be simultaneously re-entered and on parity
with each other. This is a fundamental concept that has long been
deemed essential to the efficient functioning of the auction market.
NYSE Rule 75. The Exchange is proposing to codify formally in NYSE
Rule 75 its long-standing practice that Floor disputes involving
$10,000 or more, or questioned trades, can be referred for resolution
to a panel of three Floor Governors, Senior Floor Officials, or
Executive Floor Officials, or any combination thereof if the parties to
the dispute so agree.\7\ The decision of the panel is then binding on
the parties. This practice, which is essentially a form of expedited
arbitration, has proven to be a very efficient means of ensuring timely
resolution of Floor disputes.
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\7\ See Amendment No. 2. According to the NYSE, Executive Floor
Officials and Senior Floor Officials perform many of the same
functions performed by Floor Governors. Executive Floor Officials
are former Floor Governors and are empowered to perform any duty,
make any decision or take any action assigned to or required of a
Floor Governor. Floor officials entering their fifth or sixth year
of service as a Floor Official are eligible for appointment as
Senior Floor Officials. They are also empowered with the authority
of a Floor Governor. See Securities Exchange Act Release No. 44673
(August 9, 2001), 66 FR 43279 (August 17, 2001) (SR-NYSE-2001-16).
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As an alternative to a panel of three Floor Governors, Executive
Floor Officials, and/or Senior Floor Officials (as stated above),
members may also proceed to resolve a dispute through long-standing
arbitration procedures established under the NYSE's Constitution and
Rules.
NYSE Rule 91. The Exchange is proposing to clarify NYSE Rule 91.10
to make clear in the Rule that only a member may confirm a transaction
in the situations covered by the Rule. The Exchange is also proposing
to add a sentence to the Rule to clarify that transactions which are
not confirmed are deemed to have been accepted. The NYSE represents
that both of these changes described above reflect consistent Exchange
interpretations of NYSE Rule 91.10.
In addition, the Exchange is proposing to replace the term
``promptly'' with the phrase ``as soon as practicable under the
prevailing circumstances.'' Specifically, the Exchange proposes to
amend NYSE Rule 91.10 to provide that a member receiving a report of
execution of a transaction where another member \8\ acted as principal
triggers the member's unconditional right to reject the trade as soon
as practicable, given the prevailing circumstances. In addition, the
Exchange is amending NYSE Rule 91.10 to clarify that disputes as to
whether there was sufficient time to reject the trade would be resolved
under NYSE Rule 75, either through a panel of three Floor Governors,
Senior Floor Officials, or Executive Floor Officials, or any
combination thereof, or through arbitration procedures established
under the Exchange's Constitution and Rules.\9\
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\8\ The Exchange clarified that NYSE Rule 91.10, except the
provision dealing with the memorandum record of the specialist,
applies to transactions when any member elects to take or supply for
his own account the securities named in an order entrusted to him.
Telephone conservation between Jeffery Rosenstruck, Senior Special
Counsel, Market Surveillance, Rule Development, NYSE, and Tim Fox,
Attorney, Division, Commission on May 28, 2003.
\9\ See Amendment No. 2.
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The Exchange represents that the proposed changes, deeming
transactions
[[Page 34457]]
which are not confirmed or rejected as accepted and replacing
``promptly'' with ``as soon as practicable under the prevailing
circumstances,'' aim to maintain a degree of flexibility in the Rule to
accommodate various situations occurring during the trading day. Given
today's enormous volume of trading on the Floor (over 1 billion shares
daily), the NYSE believes that it is not practical to impose an
affirmative obligation on members to confirm each and every transaction
where another member acted as principal, nor does the Exchange believe
that it is practical for members to have to obtain the confirmations.
Thus, if no action is taken by a member to confirm a transaction, the
transaction would be deemed confirmed under the proposed Rule.\10\
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\10\ Id.
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In NYSE Rule 91.20, the Exchange is proposing to replace the term
``should'' with ``must,'' to reflect the mandatory nature of the
procedures outlined.
NYSE Rule 91.50 is proposed to be added to explain the rejection of
specialist's principal transactions. The proposed language states that
if there is a continued pattern of rejections of a specialist's
principal transactions, a Floor Official may be called upon to require
the broker to review his actions. However, if a customer gives
instructions to his broker to reject trades with the specialist's name
on the other side, this would be a conditional order and should not be
entrusted to the specialist for execution.
The Exchange states that a Floor Official's reviewing a pattern of
rejections of a specialist's principal transactions and requiring a
broker to review his or her actions do not compromise the unconditional
right of a broker to reject any trade where the specialist trades as
principal. If a customer gives a continued pattern of rejection
instructions to a Floor broker to reject any trade where the specialist
acted as principal, a Floor Official would be able to review the
appropriateness of the continued pattern of rejections by the broker,
to make sure he is representing his customer as fiduciary and not
giving the specialist, in effect, a kind of conditional order that is
not recognized under Exchange rules. If a continued pattern of
rejections does occur because the customer will not accept executions
with the specialist as contra party, the Floor broker should represent
the order himself or herself to ensure appropriate representation of
the order in accordance with the broker's fiduciary responsibility to
the customer. Because the right to reject a trade pursuant to NYSE Rule
91 is unconditional, no disciplinary process would be triggered by the
broker exercising his or her right to reject a trade.\11\
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\11\ Id.
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NYSE Rule 95. Under NYSE Rule 95, an Exchange Floor broker cannot
effect a transaction if that broker has discretion regarding the choice
of security to be bought or sold, the total amount of the security to
be bought or sold, or whether the transaction shall be a purchase or a
sale. The Exchange is proposing to add material to NYSE Rule 95(a)
making clear that members may not create an order or a material term of
an order, but must receive an order from off the Floor, regardless of
how familiar they are with a customer's strategy. This is a long-
standing interpretation of NYSE Rule 95 and the Exchange believes is
reasonably and fairly implied by the text of the existing Rule.
NYSE Rule 115A. NYSE Rule 115A, among other matters, provides
procedures for members to confirm transactions on openings. The Rule
provides in one place that members should confirm transactions as
promptly as possible, and in another place states that a specialist
shall not be responsible for losses if the broker does not return to
the specialist's post within 30 minutes after the opening sale. The
Exchange is proposing to add to the Rule a cross reference to make
clear that while a broker should confirm a transaction as promptly as
possible, the specialist is not responsible for losses thirty minutes
after the opening. This is a simple cross-referencing point that the
Exchange believes is reasonably and fairly implied by the text of the
current Rule.
NYSE Rule 116. The Exchange is proposing three changes to NYSE Rule
116. Exchange Rule 116.20 would be revised to directly state a
prohibition against a Floor broker ``stopping'' stock. This is not a
new prohibition, as section 11(a) of the Act \12\ and NYSE rules
regulating on-Floor trading would have the effect of prohibiting a
broker from effecting an on-Floor proprietary trade to execute the
order at the ``stop'' price if other market interest traded with the
bid or offer against which the broker's order was stopped and the
broker was thus obligated to effect a proprietary trade to fulfill the
``stop.'' The Exchange has consistently interpreted NYSE Rule 116.20 in
this manner.
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\12\ 15 U.S.C. 78k(a).
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The Exchange is also proposing to amend NYSE Rule 116.30(3)(a) to
make clear in the Rule that a specialist should ``stop'' an order in a
minimum variation market only when there is an imbalance in the
quotation suggesting the likelihood of price improvement for the
``stopped'' order. This proposed rule change to NYSE Rule 116.30(3)(a)
has been the Exchange's consistent interpretive position. In addition,
the Exchange is proposing to add to NYSE Rule 116.40 a cross reference
to new NYSE Rule 123C,\13\ which codifies in detail the Exchange's
policies regarding execution of market-on-close and limit-on-close
orders.
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\13\ See Securities Exchange Act Release No. 46579 (October 1,
2002), 67 FR 63004 (October 9, 2002) (SR-NYSE-2002-31).
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2. Statutory Basis
The NYSE believes that the proposed rule change, as amended, is
consistent with Section 6(b) of the Act,\14\ in general, and further
the objectives of Section 6(b)(5),\15\ in particular, because it is
designed to promote just and equitable principles of trade, to remove
impediments and to perfect the mechanisms of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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\14\ 15 U.S.C. 78f(b).
\15\ 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
Written comments on the proposed rule change, as amended, were
neither solicited nor received.
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 NYSE consents, the Commission will:
(A) By order approve such proposed rule change, as amended; or
(B) Institute proceedings to determine whether the proposed rule
change, as amended, should be disapproved.
[[Page 34458]]
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 Street, NW., Washington,
DC 20549-0609. Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change, as
amended, 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 filings will also be available for
inspection and copying at the principal office of the NYSE. All
submissions should refer to File No. SR-NYSE-2002-32 and should be
submitted by June 30, 2003.
For the Commission, by the Division of Market Regulation, pursuant
to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-14369 Filed 6-6-03; 8:45 am]
BILLING CODE 8010-01-P