[Federal Register Volume 63, Number 81 (Tuesday, April 28, 1998)]
[Notices]
[Pages 23324-23326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39903; File No. SR-NYSE-98-13]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to the Trading of 
Bonds

April 22, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 15, 1998, 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. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).

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[[Page 23325]]

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

    The NYSE is proposing amendments to its rules and procedures 
governing the trading of bonds. The Exchange is deleting obsolete 
provisions of its bond trading rules, streamlining those rules, and 
consolidating the bond-trading rules in new Rule 86. In addition to 
adopting new Rule 86, the proposal includes amendments to the following 
Exchange rules: Rule 13; Rule 61; Rule 70; Rule 72; Rule 76; Rule 79A; 
and Rule 85.

II. Self-Regulatory Organization's Statement of the Proposed 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. The NYSE 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 currently trades non-convertible bonds in its 
Automated Bond System<SUP></SUP> (``ABS'') and convertible bonds on 
its bond Floor. Later this year, the Exchange will move all bond 
trading into ABS. Currently, various Exchange rules govern the trading 
of bonds, particularly Rule 85, governing the trading of ``cabinet'' 
securities. The proposed rule change will provide for uniform bond 
trading procedures and will consolidate those procedures in new Rule 
86.\2\ The rule change (i) will incorporate into new Rule 86 the same 
price/time priority matching procedures as Rule 85, (ii) will establish 
appropriate cross references to new Rule 86 in other NYSE rules and 
(iii) will eliminate the rules governing trading on the bond Floor, 
which will no longer be necessary.
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    \2\ New Rule 86 specifies that these bond trading procedures 
apply only to bonds ``traded through ABS.'' The Exchange trades 
certain bonds, such as equity-linked securities, on its stock Floor. 
These securities are traded pursuant to NYSE equity-trading 
procedures and are not subject to Rule 86. See Securities Exchange 
Act Release No. 32650 (July 16, 1993) 58 FR 39586 (July 23, 1993).
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    A substantive change the Exchange is proposing involves the 
crossing of bonds. Currently, Rule 85 requires that a member hold a 
proposed cross for a ``reasonable'' period of time before effecting the 
cross, and that the member announce the intention to effect the cross 
on the bond Floor. For the purposes of ABS, the Exchange has 
interpreted this as requiring a member to display a proposed cross in 
ABS for two minutes prior to effecting the trade. The Exchange's 
experience with these crossing procedures indicates that they no longer 
are needed. There are very few crosses in ABS (approximately two to 
four a day), and those that do take place are of small size (generally 
between two and nine bonds). Furthermore, most crosses involve 
instances where bond brokers receive matching buy and sell orders from 
two different correspondent firms within two minutes of each other. 
Also, members may cross orders of ten bonds and over off the Exchange, 
with the result being that the current rule places the Exchange at a 
competitive disadvantage to off-Exchange markets.
    The final change to the bond trading rules moves the rules 
governing transactions at wide variations from Rule 79A.40 to new Rule 
86(g). For non-convertible bonds, the Exchange is retaining the 
requirement that a Floor Official approve all sales made two points 
away from the last sale or more than 30 days after the last 
transaction. The Exchange is not proposing to apply those requirements 
to convertible bonds, since such bonds generally are priced in relation 
to the underlying equity security. However, new Rule 86(g) allows a 
Floor Governor to impose the same requirements on the trading of 
convertible bonds if market conditions warrant.
2. Statutory Basis
    The basis under the Act for the proposed rule change is the 
requirement under Section 6(b)(5) that an exchange have rules that are 
designed to 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.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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 not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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 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 such 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 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, 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 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 the File No. SR-NYSE-98-13 and 
should be submitted by May 19, 1998.

    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).

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[[Page 23326]]

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-11210 Filed 4-27-98; 8:45 am]
BILLING CODE 8010-01-M