[Federal Register Volume 62, Number 70 (Friday, April 11, 1997)]
[Notices]
[Pages 17899-17901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9348]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38478; File No. SR-NYSE-97-11]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the New York 
Stock Exchange, Inc. Relating to Requirements for Notification by 
Member Organizations of Participation in Distributions

April 4, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on March 31, 
1997, 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons. For the 
reasons discussed below, the Commission is granting accelerated 
approval of the proposed rule change.

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

    The NYSE is proposing a new rule, Rule 392, and an amendment to 
existing Rule 460 to require notification by member organizations when 
they are participating in an offering of securities listed on the 
Exchange. Proposed new language is in italics; proposed deletions are 
in brackets.

Notification Requirements for Offerings of Listed Securities

    Rule 392. (a) A member or member organization which acts as the 
lead underwriter of any offering in a listed security, other than a 
secondary distribution pursuant to Rule 393, shall notify the Exchange 
of such offering in such form and within such time frame as may be 
prescribed by the Exchange and shall provide the information required 
below:

1. name of security
2. symbol
3. type of security
4. number of shares offered
5. offering price
6. date of pricing
7. time pricing
8. pricing basis (e.g., NYSE or Consolidated close)
9. beginning and ending dates of restricted period under Regulations M 
(if applicable)
10. syndicate members
11. firm submitting notification
12. name of individual submitting notification
13. telephone number
14. such other information as the Exchange may from time to time 
require

    (b) Any Exchange member or member organization effecting a 
syndicate covering transaction or imposing a penalty bid in a listed 
security shall provide notice of such to the Exchange in such format 
and within such time frame as the Exchange may from time to time 
require.

Rule 460  Specialists Participating in Contests

* * * * *
Supplemetary Material
* * * * *
    .20 The restrictions in paragraphs (a) and .10 above shall not 
apply, except as provided herein, to an approved person entitled to an 
exemption from this Rule pursuant to Rule 98. The restriction on 
acquisition of 10% or more of the outstanding shares of any equity 
security in which an associated specialist is registered, as provided 
in Rule 460.10, shall apply to such approved person separate and 
distinct from the restriction as applied to any or all other persons 
specified in rule 460.10, and positions of the approved person shall 
not be aggregated with the positions of any one or more other persons 
specified in Rule 460.10. The same principle applies with respect to 
the reporting of positions specified in Rule 460.10. An approved person 
entitled to an exemption from this Rule may engage in business 
transactions with a company in whose stock an associated specialist is 
registered, may accept a finder's fee from such company, and may act as 
an underwriter in any capacity for a distribution of securities issued 
by such company. [When an approved person entitled to an exemption from 
this Rule is acting or has agreed to act in any underwriting capacity 
for a distribution of (i) any security in which an associated 
specialist is registered; (ii) any security which is immediately 
exchangeable for or convertible into a security in which an associated 
specialist is registered; and (iii) any security which entitles the 
holder thereof immediately to acquire a security in which an associated 
specialist is registered, the associated specialist member organization 
shall ``give up the book'' in the security in which a specialist member 
of the specialist member organization is registered to another 
specialist organization satisfactory to the Exchange which shall serve 
as a full time relief specialist until such book may, in accordance 
with this Rule, be reacquired by the member organization that is 
associated with the approved person. The period during which the member 
organization shall give up the book as provided above shall commence 
not later than the date specified in (A), (B), or (C), whichever is 
applicable, of Rule 10b-6(a)(3)(xi) of the Securities and Exchange 
Commission under the Securities Exchange Act of 1934 and shall end when 
the approved person has completed his participation in such 
distribution in accordance with paragraph (c)(3) of that Rule.]
    .30(a) An approved person associated with a specialist member 
organization (``Affiliated Specialist'') that is entitled to an 
exemption from certain Exchange rules pursuant to Exchange rule 98 
shall notify the Exchange of its participation in any distribution or 
tender or exchange offer of any security covered by paragraph (b) of 
this rule, in such form and within such time frame as may be prescribed 
by the Exchange and shall provide the information required below:

1. name of security
2. symbol
3. type of security
4. symbol of reference security or securities (if different from 
security being distributed
5. description of distribution or tender or exchange offer
6. distribution price or terms of tender or exchange offer
7. date of pricing
8. time of pricing
9. pricing basis (e.g., NYSE or Consolidated close)
10. beginning and ending dates of the restricted period under 
Regulation M (if applicable) or, for a tender or exchange offer, the 
date the offer is publicly announced and its expiration date
11. firm submitting notification
12. name and title of individual submitting notification
13. telephone number
14. such other information as the Exchange may from time to time 
require

    (b) The notification requirements of this rule are applicable to 
any security in which the Affiliated Specialist is registered where 
such security is either:
    (i) the subject of a tender or exchange offer (or any other 
security which is immediately convertible into or exchangeable for such 
security) for purposes of Rule 10b-13 under the Securities Exchange Act 
of 1934; or,

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    (ii) a covered security as defined in Rule 100 of Regulation M.

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 III below. The NYSE has prepared summaries, 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 SEC has adopted Regulation M to replace certain trading 
practices rules under the Securities Exchange Act of 1934 (the 
``Act''). Like the rules it replaces, Regulation M proscribes certain 
activities that offering participants might engage in to manipulate the 
price of an offered security. However, the six rules adopted under 
Regulation M represent a streamlined and more flexible approach to 
regulating conduct during offerings. An essential part of this approach 
is reliance on surveillance conducted by self-regulatory organizations 
with respect to offerings of securities traded in their marketplaces.
    The Exchange has surveillance procedures in place which monitor 
markets for various types of manipulative activity. The Exchange is 
proposing a new rule and an amendment to a rule to require notification 
by member organizations when they are participating in an offering of 
securities listed on the Exchange.
Rule 392  (Notification Requirements for Offerings of Listed 
Securities)
    This rule will require notification to the Exchange whenever a 
member or member organization acts as a lead underwriter of any 
offering of a listed security. Such notification will enable the 
Exchange to monitor trading in the security or any related security 
traded on the Exchange for possible price manipulation. The data 
required to be transmitted to the Exchange include the name and type of 
the security, symbol, number of shares offered, offering price, date, 
time and basis of pricing, applicable restricted period and syndicate 
members, as well as the firm, name and telephone number of the 
individual submitting the notification.
    Rule 392 will also require notification, effective April 1, 1997, 
to the Exchange of any initial syndicate covering transaction to reduce 
a short position created in connection with the offering, and the 
imposition of any penalty bid by a managing underwriter against a 
syndicate member that has sold any of the securities originally 
distributed which are subsequently purchased in a syndicate covering 
transaction. These notifications are required by Rule 104(h) under 
Regulation M.
Rule 460.30
    Under Regulation M and Exchange Rule 98, specialist organizations 
associated with an underwriter of their specialty stock will not have 
to ``give-up-the-book'' during distributions of such stocks if they 
have functional separation procedures in place approved by the 
Exchange. Rule 460.20 is being amended accordingly to reflect this 
change. However, when such an underwriter is engaged in a distribution 
of a specialty stock, the Exchange will conduct specific types of 
surveillance on trading in the security by the specialist and 
associated underwriter to monitor for possible manipulation of the 
stock. These surveillance procedures were designed when the Exchange 
received no-action relief from Rules 10b-6 and 10b-13 under the Act 
from the requirement for specialists to ``give up the book'' during 
participation in a distribution of a specialty stock by an affiliated 
broker-dealer, and are being carried forward under Regulation M.
    Rule 460.30 will require notification to the Exchange, the earlier 
of two business days prior to pricing the offering or one business day 
prior to the commencement of the restricted period for a distribution 
participant as defined in Rule 100 under Regulation M, whenever an 
approved person associated with a specialist member organization 
(``Affiliated Specialist'') that has a functional separation approved 
pursuant to Rule 98 participates in the distribution of a security in 
which the Affiliated Specialist is registered. With respect to tender 
or exchange offers, notification must be made to the Exchange prior to 
the commencement of the Rule 10b-13 covered period, i.e., from the time 
the offer is publicly announced until its expiration. The data elements 
required are similar to those in Rule 392.
2. Statutory Basis
    The NYSE believes that the proposed rule change is consistent with 
provisions of Section 6(b)(5) of the Act \1\ in that the proposed rule 
change is designed to promote just and equitable principles of trade, 
to remove impediments to, and perfect the mechanism of a free and open 
market and, in general, to protect investors and the public interest.
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    \1\ 15 U.S.C. Sec. 78f(b)(5) (1988).
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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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street N.W., Washington, D.C. 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 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 
above-mentioned self-regulatory organization. All submissions should 
refer to the file number in the caption above and should be submitted 
by May 2, 1997.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Commission finds that the NYSE's proposal is consistent with 
the Act and the rules and regulations thereunder applicable to national 
securities exchanges. Specifically, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act 
which requires that an exchange have rules that are designed to

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prevent fraudulent and manipulative acts and practices, 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.
    In addition, the Commission believes the Exchange's policy 
requiring notification by member organizations when they are 
participating in an offering of securities listed on the Exchange will 
facilitate compliance of Exchange members with the requirements of 
Regulation M, SEC Rules 100 through 105, and Rule 10b-13 under the Act. 
The Commission, therefore, finds good cause for approving the proposed 
rule change prior to the thirtieth day after the date of publication of 
filing thereof in the Federal Register.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\2\ that the proposed rule change be and hereby is approved.
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    \2\ 15 U.S.C. Sec. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12) (1996).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-9348 Filed 4-10-97; 8:45 am]
BILLING CODE 8010-01-M