Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices 2853

4Only coupons for the same CUSIP number,

series, and payable date can be enclosed in any one

shell.

5The depositing participant will guarantee the

validity of the coupon number, bond number,

payable date, and payable amount of the mutilated

coupon by a stamp affixed to the coupon executed

by an authorized officer of such participant. In

cases of a badly mutilated coupon, DTC may require

a letter of indemnity. In the event a paying agent

rejects a mutilated coupon, DTC will reverse any

credit made to the depositing participant’s account

with respect to such coupon. Telephone

conversation between Piku K. Thakkar, Assistant

Counsel, DTC; Ann Reich, DTC; and Mark

Steffensen, Attorney, Division, Commission

(October 17, 1995).

6When payments on the coupons are due in the

future, each deposit ticket can have up to 50 shells

attached to it, but all of the coupons in each of the

attached shells must have the same payable date.

For past-due coupons, shells with different payable

dates may be listed on the same deposit ticket.

Letter from Piku K. Thakkar, Assistant Counsel,

DTC, to Mark Steffensen, Esq., Division,

Commission (October 26, 1995).

7A stopped certificate is a certificate for which

a stop transfer instruction has been requested. A

stop transfer instruction typically is initiated as the

result of a lost or stolen stock certificate. Telephone

conversation between Piku K. Thakkar, Assistant

Counsel, DTC, and Mark Steffensen, Attorney,

Division, Commission (September 26, 1995).

8 DTC will accept past-due coupons into the

coupon selection service program for up to three

years after the original coupon payment date.

9According to DTC, payments due DTC from

issuers and paying agents are received on or before

the payable date between 97 and 98 percent of the

time. Typically, late payments are the result of

transmission problems or equipment failure which

is unrelated to the ability of the issuer or paying

agent to actually make such payments. Telephone

conversation between Piku K. Thakkar, Assistant

Counsel, DTC; Ann Reich, DTC; and Mark

Steffensen, Attorney, Division, Commission

(October 17, 1995).

10 15 U.S.C. § 78q–1(b)(3)(F) (1988).

11 17 CFR 200.30–3(a)(12) (1994).

sealed envelope or ‘‘shell’’ with no more

than 200 coupons contained in any one

shell.4 Mutilated coupons must be

guaranteed by the depositing participant

and placed into separate shells.5 DTC

requires that each shell contain the

following information on its face: (i)

CUSIP number; (ii) a description of the

issue including municipality, state,

purpose, series, date of issue, and

maturity date; (iii) payable date; (iv)

quantity of coupons enclosed; (v) dollar

value of individual coupons; (vi) total

shell value; (vii) participant number;

and (viii) contact name and telephone

number of the depositing participant.

All shells must be accompanied by a

completed deposit ticket that includes:

(i) DTC participant number; (ii) shell

quantity; (iii) total dollar value; (iv)

CUSIP number per shell; (v) coupon

quantity per shall; (vi) dollar value per

shell; and (vii) whether the coupons are

payable on a future date or are pastdue.6

DTC will verify the number of shells

listed on the deposit ticket and will give

the depositing participant a timestamped copy of the ticket. If the

number of shells listed on the deposit

ticket does not agree with the physical

number of shells, DTC will immediately

reject the entire deposit and will return

it to the participant. DTC will neither

inspect nor verify shells’ contents prior

to presentation to paying agents. The

depositing participant is responsible for

the integrity of the shells’ contents. In

the event of a coupon shell loss, the

participant must provide DTC with a

full description (including certificate

numbers) of the coupons contained in

the shell.

The paying agent may reject and

return coupons to DTC for a variety of

reasons. The most common reasons for

rejection are likely to include: (i) mixed

shell contents including mixed payable

dates, mixed series or purposes, or

mixed maturity years; (ii) incorrect

count of shell contents; (iii) called

certificate; (iv) mutilated coupon; (v)

stopped certificate; 7 or (vi) issue in

default.

DTC will pass rejected shells to its

participants in the form received from

the paying agent together with any

paying agent documentation. DTC will

not inspect or verify the contents of

rejected shells. For shells rejected after

the payable date, DTC will debit

appropriate funds from the depositing

participant’s account on the day the

rejected coupons are returned to the

participant.

DTC will credit interest to its

participants on the payable date for

coupons that are deposited (i) at least

eight business days prior to payable date

if the paying agent for the coupons is

located outside of New York City or (ii)

at least five business days prior to the

payable date if the paying agent is

located in New York City. Coupons not

deposited within the time frames

described above and past-due coupons

will be credited to participants (i) ten

business days following the date of

deposit if the paying agent is located

outside New York City or (ii) seven

business days following the date of

deposit if the paying agent is located in

New York City.8

DTC will credit the accounts of its

depositing participants on the foregoing

payable dates without regard to whether

DTC actually has received payment

from the issuer or paying agent as of

such date.9 All coupons deposited after

11 a.m. will be considered to be

received the following business day. In

addition, during the first quarter of

1996, DTC will make available a new

Participant Terminal System (‘‘PTS’’)

function which will enable DTC

participants to view the status of their

coupon deposits.

DTC will charge its participants the

following fees for this service:

Shells deposited a minimum of 15

days before payable date ............. $4.50

Shells deposited less than 15 days

before payable date (including

past-due coupons) ........................ 5.25

Rejected shells ................................. 15.00

II. Discussion

Section 17A(b)(3)(F) 10 of the Act

requires that the rules of a clearing

agency be designed to remove

impediments to and to perfect the

mechanism of a national system for the

prompt and accurate clearance and

settlement of securities transactions and

to promote the prompt and accurate

clearance and settlement of securities

transactions. The Commission believes

that DTC’s proposed rule change is

consistent with DTC’s obligations under

the Act because the new service

presents a more efficient method of

settling the payment of bearer bond

coupons and should allow DTC

participants to reduce the labor needed

to deal with may different issuers or

paying agents in connection with the

collection of coupons and the receipt of

interest payments. Furthermore, DTC

participants should be better able to

track the status of the coupon receipt

and interest payment process because

these activities will be reported directly

to them through the new PTS function.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of section 17A of the Act

and the rules and regulations

thereunder.

It is therefore ordered, pursuant to

section 19(b)(2) of the Act, that the

proposed rule change (File No. SR–

DTC–95–18) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–1474 Filed 1–26–96; 8:45 am]

BILLING CODE 8010–01–M
2854 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices

1 15 U.S.C. 78s(b)(1) (1988).

2 17 CFR 240.19b–4 (1994).

3Position limits impose a ceiling on the number

of option contracts in each class on the same side

of the market (i.e., aggregating long calls and short

puts and long puts and short calls) that can be held

or written by an investor of group of investors

acting in concern. Exercised limits restrict the

number of options contracts which an investor or

group of investors acting in concert can exercise

within five consecutive business days. Under NASD

Rules, exercise limits correspond to position limits,

such that investors in options classes on the same

side of the market are allowed to exercise, during

any five consecutive business days, only the

number of options contracts set forth as the

applicable position limit for those options classes.

See Sections 33(b) (3) and (4) of Article III of the

NASD Rules of Fair Practice.

4See Securities Exchange Act Release Nos. 36371

(October 13, 1995), 60 FR 54269 (October 20, 1995)

(order approving File No. SR–CBOE–95–42); and

36409 (October 23, 1995), 60 FR 55399 (October 31,

1995) (Order approving File Nos. SR–NYSE–95–31,

SR–PSE–95–25, SR–Amex–95–42, and SR–Phlx–

95–71).

5 In this connection, NASD rules do not

specifically govern how a specific equity option

falls within one of the three position limit tiers.

Rather, the NASD’s position limit rule provides that

the position limit established by an options

exchange(s) for a particular equity option is the

applicable position limit for purposes of the

NASD’s rule.

6 ‘‘Access’’ firms are NASD members which

conduct a business in exchange-listed options but

which are not members of any of the options

exchanges upon which the options are listed and

traded.

7To be eligible for the 10,500-contract position

limit under the options exchanges’ rules, an

underlying security must have either (i) trading

volume of at least 40 million shares during the most

recent six month trading period; or (ii) trading

volume of at least 30 million shares during the most

recent six month trading period and at least 120

million shares currently outstanding.

8Conventional equity options are defined in

Article III, Section 33(b)(2)(GG) of the NASD Rules

of Fair Practice to mean ‘‘any option contract not

issued, or subject to issuance, by The Options

Clearing Corporation.’’

9To be eligible for the 7,500-contract position

limit under the options exchanges’ rules, an

underlying security must have either (i) trading

volume of at least 20 million shares during the most

recent six month trading period; or (ii) trading

volume of at least 15 million shares during the most

recent six month trading period and at least 40

million shares currently outstanding.

10Under the rules of the options exchanges, all

securities that do not qualify for a position limit of

10,500-contracts or 7,500-contracts are subject to

the 4,500-contract tier.

11See supra note 4.

[Release No. 34–36757; File No. SR–NASD–

95–55]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the National

Association of Securities Dealers, Inc.,

To Add Two Position and Exercise

Limit Tiers for Qualifying Equity Option

Classes

January 22, 1996.

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 November

20, 1995, the National Association of

Securities Dealers, Inc. (‘‘NASD’’) filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which Items have

been prepared by the self-regulatory

organization. The NASD has requested

accelerated approval for the proposal.

This order approves the NASD’s

proposal on an accelerated basis and

solicits comments from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The NASD is proposing to amend

Article III, Section 33(b)(3)(A) of the

NASD Rules of Fair Practice to add two

new position limit tiers for option

classes overlying equity securities that

meet certain criteria for high liquidity.

Specifically, the NASD proposes to add

a 20,000-contract position limit tier and

a 25,000-contract position limit tier.

The NASD requests that the

Commission find good cause, pursuant

to Section 19(b)(2) of the Act, to approve

the proposed rule change prior to the

thirtieth day after publication in the

Federal Register.

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

NASD 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 NASD 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 NASD proposes to amend its

rules governing position and exercise

limits for equity options 3 to conform to

similar proposals by the options

exchanges which were recently

approved by the Commission.4 NASD

rules currently provide that position

and exercise limits are determined

according to a ‘‘three-tiered’’ system.

Specifically, depending upon the

trading volume and public float of the

underlying security, the position limit

for an equity option is either 4,500,

7,500, or 10,500 contracts.5

In particular, the 10,500-contract

position limit applies to: (1) Exchangelisted options traded by ‘‘access’’ 6 firms

with a corresponding 10,500-contract

position limit imposed by the options

exchange(s) on which the option is

traded; 7 (2) all conventional options

overlying equity securities which

underlie exchange-traded options that

have a 10,500-contract position limit; 8

and (3) all conventional options

overlying equity securities that qualify

for, but do not underlie, an exchangetraded option with a position limit of

10,500-contracts.

Similarly, the 7,500-contract position

limit applies to: (1) Exchange-listed

options traded by ‘‘access’’ firms with a

corresponding 7,500-contract position

limit imposed by the options

exchange(s) on which the option is

traded; 9 (2) all conventional options

overlying equity securities which

underlie exchange-traded options that

have a 7,500-contract position limit; and

(3) all conventional options overlying

equity securities that qualify for, but do

not underlie, an exchange-traded option

with a position limit of 7,500-contracts.

Lastly, the 4,500-contract position

limit applies to: (1) Exchange-listed

options traded by ‘‘access’’ firms with a

corresponding 4,500-contract position

limit imposed by the options

exchange(s) on which the option is

traded; 10 and (2) all conventional

options overlying equity securities

which either underlie exchange-traded

options that have a 4,500-contract

position limit or do not underlie an

exchange-traded option.

Through this rule filing, the NASD

proposes to add two new higher

position limit tiers that correspond to

the two new ‘‘upper’’ position limit tiers

recently approved by the Commission

for exchange-traded options.11

Specifically, the NASD proposes to add

a 20,000-contract position limit tier and

a 25,000-contract position limit tier. To

qualify for the 20,000-contract position

limit tier, the underlying security must

have at least 240 million shares

outstanding with 60 million shares

traded in the past six months, or have

80 million shares traded in the past six

months. To qualify for the 25,000-

contract position limit tier, the

underlying security must have at least

300 million shares outstanding with 75

million shares traded in the past six

months, or have 100 million shares

traded in the past six months. Thus, for

NASD members that are ‘‘access’’ firms
Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices 2855

12See supra note 4. 13 15 U.S.C. § 78f(b)(5) (1988).

14The Commission continues to believe that

proposals to increase position and exercise limits

must be justified and evaluated separately. After

reviewing the proposed exercise limits, along with

the eligibility criteria for the two new tiers, the

Commission has concluded that the proposed

exercise limit additions do not raise manipulation

problems or increase concerns over market

disruption in the underlying securities.

or that are involved in conventional

equity option transactions, the proposal

will conform the NASD’s position and

exercise limit rules to the position limit

tiers recently approved by the

Commission for the options exchanges.

The NASD believes that the proposed

‘‘upper’’ position limits are warranted

for the following reasons. First, the

higher position and exercise limits will

afford market participants, particularly

investors with sizable holdings,

accounts, or assets, greater flexibility to

employ larger options positions when

effecting their hedging and investment

strategies. Second, the higher position

limit tiers likely will facilitate greater

activity in exchange-listed options and

conventional equity options, thereby

enhancing liquidity in the markets for

exchange-traded options, conventional

equity options, and the securities

underlying those options. Third, by

conforming the NASD’s position and

exercise limits to the limits imposed by

the options exchanges, there will be no

confusion by market participants

concerning applicable position and

exercise limits. Fourth, with respect to

equity securities underlying exchangetraded options, market participants will

be able to establish conventional

options positions on these securities

equivalent in size of standardized

options positions on these securities.

Moreover, the NASD believes that the

proposed larger position limit tiers will

not compromise the integrity of the

options markets or jeopardize the

stability of the securities markets

underlying exchange-traded equity

options or conventional equity options.

Specifically, because the eligibility

standards for the higher position limit

tiers will ensure that only those

securities with a sufficiently large

capitalization and public float will be

eligible for the higher limits, the NASD

does not believe that the higher position

limit tiers will have an adverse market

impact. In addition, as noted in the

Chicago Board Options Exchange, Inc.’s

(‘‘CBOE’’) rule filing concerning the

higher position limit tiers, the largest

dollar value that could be controlled in

any equity options class by any one

investor or group of investors acting in

concert under the proposal would not

exceed .7 percent of the market

capitalization of any security eligible for

one of the higher position limit tiers.12

Accordingly, the NASD believes that the

proposed position limit tiers would

involve a very modest increase in

position limits. Furthermore, the NASD

notes that it will continue to apply its

options surveillance procedures and

that it and the options exchanges will

continue to be members of the

Intermarket Surveillance Group (‘‘ISG’’).

2. Statutory Basis

The NASD believes that the proposed

rule change is consistent with Section

15A(b)(6) of the Act.13 Section 15A(b)(6)

requires that the rules of a national

securities association be designed to

prevent fraudulent and manipulative

acts and practices, to promote just and

equitable principles of trade, to foster

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating transactions

in securities, 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.

Specifically, the NASD believes that the

proposal will promote the maintenance

of fair and orderly markets because it

will, among other things, serve to avoid

investor confusion concerning

applicable equity option position and

exercise limits as well as to facilitate the

use of equity options by investors,

without compromising the integrity of

the equity options markets or the

markets for the securities underlying

equity options.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The NASD does not believe that the

proposed rule change will impose any

inappropriate burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Comments were neither solicited nor

received with respect to 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

changes that are filed with the

Commission, and all written

communications relating to the

proposed rule changes 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 at

the Commission’s Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filings also will be available for

inspection and copying at the principal

office of the NASD. All submissions

should refer to File No. SR–NASD–95–

55 and should be submitted by February

20, 1996.

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

association, and, in particular, with the

requirements of Section 15A(b)(6).

Specifically, the Commission believes

that the proposed addition of position

and exercise limit tiers of 25,000-

contracts and 20,000-contracts for

qualifying equity options will

accommodate the needs of investors and

market participants. The Commission

also believes that the proposed rule

change will increase the potential depth

and liquidity of the equity options

market as well as the underlying cash

market without significantly increasing

concerns regarding intermarket

manipulations or disruptions of the

market for the options or the underlying

securities. Accordingly, as discussed

below, the Commission believes that the

rule proposal is consistent with the

requirements of Section 15A(b)(6), that

association rules facilitate transactions

in securities while continuing to further

investor protection and the public

interest.

In approving the increased limits, the

Commission recognizes that securities

with active and deep trading markets, as

well as with broad public ownership,

are more difficult to manipulate or

disrupt than securities having less

active and deep markets and having

smaller public floats. The proposed

additional position and exercise limit

tiers recognize this by seeking to

minimize the restraints on those options

classes that can accommodate larger

limits without significantly increasing

manipulation concerns.14 In particular,
2856 Federal Register / Vol. 61, No. 19 / Monday, January 29, 1996 / Notices

15 In this regard, the Commission notes that the

options exchanges and the NASD routinely review

the trading characteristics of the underlying stocks

to determine the appropriate position and exercise

limit tiers for the option classes.

16The Commission notes that to the extent the

potential for manipulation increases because of the

additional tiers, the Commission believes the

NASD’s surveillance programs will be adequate to

detect as well as to deter attempted manipulative

activity. The Commission will, of course, continue

to monitor the NASD’s surveillance programs to

ensure that problems do not arise.

17See supra note 4.

18 Id.

19 15 U.S.C. 78s(b)(2) (1988).

20 17 CFR 200.30–3(a)(12) (1994).

1Concurrently with the proposed rule change, the

Exchange is seeking to amend its Rule 19d–1(c)(2)

reporting plan for Rule 476A violations (‘‘Minor

Rule Violation Plan’’) to include the items proposed

for addition to the list of rules subject to Rule 476A.

See letter from Daniel Parker Odell, Assistant

Secretary, NYSE, to Glen Barrentine, Team Leader,

Division of Market Regulation, SEC, dated

December 27, 1995.

the proposed limit of 25,000-contracts

and 20,000-contracts for options on the

most actively traded, widely held

securities, permits the Commission to

avoid placing unnecessary restraints on

those options where the manipulative

potential is the least and the need for

increased positions likely is the greatest.

Accordingly, the Commission believes

that the additional position and exercise

limit tiers is warranted.

The Commission believes that the

proposed additions to the NASD’s

position and exercise limit tiers appears

to be both appropriate and consistent

with the Commission’s gradual,

evolutionary approach. There are no

ideal position limits in the sense that

options positions of any given size can

be stated conclusively to be free of any

manipulative concerns. The

Commission, however, is relying on the

absence of discernible manipulation

problems under the current framework

as an indicator that the proposed

additional limit tiers are justified.

The Commission does not believe that

the addition of the two new higher limit

tiers will have any adverse effects on the

options markets. In approving the initial

two-tiered position limit system, the

Commission stated that it did not

believe that requiring traders to keep

track of two limits rather than one was

burdensome or confusing or would lead

to accidental violations.15 The

Commission does not believe that a

change from the current three tiers to

five tiers should change this conclusion.

The Commission believes that

although position and exercise limits for

options must be sufficient to protect the

options and related markets from

disruptions by manipulations, the limits

must not be established at levels that are

so low as to discourage participation in

the options market by institutions and

other investors with substantial hedging

needs or to prevent market makers from

adequately meeting their obligations to

maintain a fair and orderly market. The

Commission believes that the NASD’s

proposal is a reasonable and

appropriately tailored effort to

accommodate the identified needs of

options market participants. In this

regard it is important to note that the

proposals only add higher position and

exercise limit tiers for classes of options

involving the most liquid stocks. As a

result, the proposal affects only a small

number of equity option classes that are

traded. In addition, based on the

NASD’s experience, the Commission

believes that the proposed additional

limit tiers should result in little or no

additional risk to the marketplace.16

The Commission finds good cause to

approve the proposed rule changes prior

to the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. Specifically, by

accelerating the approval of the NASD’s

rule proposal, the Commission is

conforming the NASD’s position and

exercise limits with those levels

recently approved for the options

exchanges.17 Accelerated approval of

the proposed rule change will thereby

provide for the desired uniformity for

position and exercise limits within the

exchange traded options market. Any

other course of action could lead to

unnecessary investor confusion. In

addition, the CBOE’s proposal was

noticed for the entire twenty-one day

comment period and generated no

negative responses.18 Accordingly, the

Commission believes that it is

consistent with Section 15A(b)(6) of the

Act to approve the proposed rule change

on an accelerated basis.

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) 19 of the Act that the

proposed rule change (File No. SR–

NASD–95–55) is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.20

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96–1475 Filed 1–26–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–36756; File No. SR–NYSE–

95–45]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc.

Relating to Additions to ‘‘List of

Exchange Rule Violations and Fines

Applicable Thereto Pursuant to Rule

476A’’

January 22, 1996.

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 December 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

revisions to the ‘‘List of Exchange Rule

Violations and Fines Applicable Thereto

Pursuant to Rule 476A’’ (the Rule 476A

Violations List) by adding to the List: (1)

misstatements or omission of fact on

any submission filed with the Exchange

as provided in NYSE Rule 476(a)(10); (2)

failure to comply with the requirements

of NYSE Rule 95 with respect to its

order identification requirements or

prohibition of transactions by members

on the Floor involving discretion; and

(3) failure to comply with certain

requirements for execution of block

cross transactions under NYSE Rule

127. The Exchange believes it is

appropriate to make the failure to

comply with the provisions of the

above-named rules subject to the

possible imposition of a fine under Rule

476A procedures.1

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.