[Federal Register Volume 60, Number 88 (Monday, May 8, 1995)]
[Notices]
[Pages 22596-22597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11231]



[[Page 22596]]


SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35662; File No. SR-NYSE-95-06]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by New York Stock Exchange, Inc., Relating to Amendment of the 
Exchange's Allocation Policy and Procedures

May 2, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February 
28, 1995, 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 self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

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

    The proposed rule change consists of an amendment to the Exchange's 
Allocation Policy and Procedures (the ``Policy'') which would limit, to 
25%, the weight that the Specialist Performance Evaluation 
Questionnaire (``SPEQ'') could be given in the Exchange's allocation 
decision making process.

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 self-regulatory organization 
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 self-regulatory organization 
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 intent of the Policy is to ensure that each security is 
allocated in the fairest manner possible to the best specialist unit 
for that security. In order to enhance its stock allocation decisions, 
the Exchange conducts periodic reviews of its allocation process. As 
the result of its most recent review, the Exchange is proposing to 
amend the Policy to limit, to no more than 25%, the weight that he SPEQ 
may be given in the allocation decision making process. Currently, the 
Policy permits the Allocation Committee to grant up to one third weight 
to SPEQ results in its allocation decisions. The Allocation Committee 
also considers objective measures of specialist performance and its own 
professional judgment in making its allocation decisions.
    In 1992, the Exchange proposed to limit the weight that the SPEQ 
could be given in the allocation decision making process to 25%.\1\ At 
that time, there was no limit to the weight that the SPEQ could be 
afforded. The Exchange proposed this limit in order to increase the 
emphasis that its Allocation Committee would give to objective measures 
of performance, as well as the Committee's expert professional 
judgment. The Exchange also proposed, at that time, to amend the Policy 
to state explicitly that its objective measures of performance also 
included a specialist's TTV (twice total volume) rate, stabilization 
rate, and any other measures that the Exchange might later adopt. While 
the Commission stated its belief that it was appropriate to limit the 
SPEQ's weight in order to increase the emphasis given to objective 
measures of performance, it requested that the Exchange amend its 
proposal to limit the weight granted the SPEQ to one third.\2\

    \1\See Securities Exchange Act Release No. 33121 (October 29 
1993), 58 FR 59085 (November 5, 1993).
    \2\See Securities Exchange Act Release No. 33121, supra note 1, 
at n.3.
---------------------------------------------------------------------------

    Since 1992, the Exchange has developed two new objective measures 
of specialist performance that it believes should play an important 
role in allocation decisions. The first objective measure of 
performance pertains to specialist capital utilization. Adopted in 
December 1993, on a pilot basis, the capital utilization measure of 
specialist performance focuses on a specialist unit's use of its own 
capital in relation to the total dollar value of trading activity in 
the unit's stocks.\3\ The pilot has been extended until June 30, 
1995.\4\ The Allocation Committee is being provided with specialist 
capital utilization information for its use in allocation decisions. 
The second objective measure of performance, which was recently 
developed, pertains to ``near neighbors.'' The Exchange has filed, on a 
one year pilot basis, for Commission approval of this new measure.\5\ 
The ``near neighbors'' measure compares certain performance measures of 
a given stock (price continuity, depth, quotation spread, and capital 
utilization) to those of its ``near neighbors,'' i.e., stocks that have 
certain similar characteristics. The Exchange would provide ``near 
neighbor'' information to the Allocation Committee for its use in 
allocating newly-listed stocks.

    \3\See Securities Exchange Act Release No. 33369 (December 23, 
1993), 58 FR 69431 (December 30, 1993).
    \4\See Securities Exchange Act Release No. 35175 (December 29, 
1994), 60 FR 2167 (January 6, 1995).
    \5\See Securities Exchange Act Release No. 35661 (May 2, 1995) 
(File No. SR-NYSE-95-05).
---------------------------------------------------------------------------

    With the addition of these new objective measures of performance, 
the Exchange believes that it would be appropriate to limit the weight 
that the SPEQ is afforded in the allocation process to 25%.
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 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. The 
proposed rule change is consistent with these objectives in that it 
enables the Exchange to further enhance the process by which stocks are 
allocated.

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 Act

    Within 35 days of the publication of this notice in the Federal 
Register or within such other 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 [[Page 22597]] 
    (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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., 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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the NYSE. All 
submissions should refer to File No. SR-NYSE-95-06 and should be 
submitted by May 30, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-11231 Filed 5-5-95; 8:45 am]
BILLING CODE 8010-01-M