[Federal Register Volume 65, Number 88 (Friday, May 5, 2000)]
[Notices]
[Page 26258]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11228]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42727; File No. SR-NYSE-00-09]


Self-Regulatory Organizations; Order Granting Accelerated 
Approval of Proposed Rule Change by the New York Stock Exchange, Inc. 
Amending Exchange Rule 123B

April 27, 2000.

I. Introduction

    On February 28, 2000, the New York Stock Exchange, Inc. (``NYSE'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'', pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Exchange Rule 123B. The 
proposed rule change was published for comment in the Federal Register 
on March 31, 2000. The Commission has received no comments on the 
proposal. This order grants accelerated approval to the proposed rule 
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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II. Description of the Proposal

    The Exchange seeks permanent approval of a pilot program that two 
amendments to Exchange Rule 123B. The first amendment to Rule 123B 
provides for the commission-free execution of all orders received by 
Exchange specialists through the SuperDOT system if such orders are 
executed within five minutes. The Exchange instituted the pricing 
initiative of commission-free executions beginning with trades executed 
on December 29, 1999.
    A second amendment added language to Rule 123B to clarify that if 
an order that had been placed with the specialist is canceled and 
replaced, the replacement order is considered a new order for purposes 
of the Rule. Since the implementation of the pilot program, the 
Exchange is not aware of any problems associated with the program.
    The Exchange is now proposing to make the pilot program with 
respect to commission-free executions and cancelled/replaced orders 
permanent.\3\ The Exchange believes that the pilot program is operating 
successfully and requests permanent approval of the proposed rule 
change.\4\
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    \3\ The Commission notes that it approved these two amendments 
to Exchange Rule 123B on a pilot basis on November 30, 1999. See 
Exchange Act Release No. 42184 (November 30, 1999), 64 FR 68710 
(December 8, 1999), File No. SR-NYSE-99-40. A third amendment to 
Exchange Rule 123B relating to execution reports of stopped orders 
was also proposed and approved by the Commission. However, the 
Exchange decided not to implement this third amendment due to 
capacity and resource limitations. See letter from James E. Buck, 
Senior Vice President and Secretary. Exchange, to Richard Stasser, 
Assistant Director, Division of Market Regulation, Commission, dated 
February 25, 2000. In this proposed rule change, the Commission 
provided notice of the modified pilot program instituting only two 
out of the three amendments originally proposed in SR-NYSE-99-40.
    \4\ On March 22, 2000, the Commission also approved on an 
accelerated basis the Exchange's request to extend the pilot program 
relating to commission-free executions and cancelled/replaced orders 
until April 26, 2000. See Exchange Act Release No. 42694 (April 17, 
2000), 65 FR 24245 (April 25, 2000), File No. SR-NYSE-00-13.
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III. Discussion

    The Commission finds that the proposed rule change relating to 
commission-free executions and cancelled/replaced orders is consistent 
with the requirements of the Act. In particular, the Commission finds 
the proposal is consistent with Section 6(b)(5) \5\ which requires, 
among other things, that the rules of an exchange be 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 proposed rule change is also consistent with Section 
11A(a)(1)(C) \6\ of the Act which states that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure, among other things, 
economically efficient execution of securities transactions, and fair 
competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchanges.
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    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78k-1(a)(1)(C).
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    The proposed rule change eliminating commissions on orders received 
through the SuperDOT system that are executed within a timely fashion 
furthers the Exchange's ability to compete effectively for order flow 
from other marketplaces. Competition between and among markets drives 
market intermediaries to provide more efficient services which, in 
turn, promotes a free and open market and benefits investors and the 
public interest. Investors and the public interest may also benefit 
from the accompanying reduction in transaction costs.\7\
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    \7\ In approving this rule change, 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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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing in the Federal Register. In addition to the reasons 
noted above, the Exchange has stated that the program is operating 
without problems. Because the pilot approval expires on April 26, 2000, 
accelerated approval of this filing will permit the Exchange to 
continue its program for commission-free execution of orders received 
through SuperDOT permanently and without interruption, and will resolve 
the treatment of cancelled and replaced orders.

IV. Conclusion

    It Is Therefore Ordered, pursuant to 19(b)(2) of the Act,\8\ that 
the proposed rule change (SR-NYSE-00-09) is approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-11228 Filed 5-04-00; 8:45 am]
BILLING CODE 8010-01-M