29438 Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 36658 (Dec.

29, 1995), 61 FR 436.

4See letter from John I. Fitzgerald, Executive Vice

President, Legal Affairs and Trading Services,

Boston Stock Exchange, Inc. (‘‘BSE’’), to Jonathan G.

Katz, Secretary, SEC, dated February 21, 1996

(‘‘BSE February 21, 1996 Letter’’); letter from George

T. Simon, Foley & Lardner, on behalf of the Chicago

Stock Exchange, Incorporated (‘‘CHX’’), to Jonathan

G. Katz, Secretary, SEC, dated March 4, 1996 (‘‘CHX

March 4, 1996 Letter’’); letter from William W.

Uchimoto, First Vice President and General

Counsel, Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’), to Jonathan G. Katz, Secretary, SEC, dated

February 23, 1996 (‘‘Phlx February 23, 1996

Letter’’); letter from David P. Semak, Vice President,

Regulation, Pacific Stock Exchange Incorporate

(‘‘PSE’’), to Jonathan G. Katz, Secretary, SEC, dated

March 4, 1996 (‘‘PSE March 4, 1996 Letter’’).

5See letter from James E. Buck, Senior Vice

President and Secretary, NYSE, to Jonathan Katz,

Secretary, SEC, dated April 25, 1996 (‘‘NYSE April

25, 1996 Letter’’). Previously, the NYSE had granted

the Commission an extension of 30 days after the

date of the Commission’s receipt of the Exchange’s

response within which to act on the NYSE’s

proposal. See letter from James E. Buck, Senior Vice

President and Secretary, NYSE, to Glen Barrentine,

SEC, dated March 13, 1996.

6See letter from George W. Mann, Jr., Senior Vice

President and General Counsel, BSE, to Jonathan G.

Katz, Secretary, SEC, dated April 23, 1996 (‘‘BSE

April 23, 1996 Letter’’); letter from John I.

Fitzgerald, Executive Vice President, Legal Affairs

and Trading Services, BSE, to Jonathan G. Katz,

Secretary, SEC, dated May 6, 1996 (‘‘BSE May 6,

1996 Letter’’); letter from J. Craig Long, Foley &

Lardner, on behalf of the CHX, to Jonathan G. Katz,

Secretary, SEC, dated May 6, 1996 (‘‘CHX May 6,

1996 Letter’’); letter from William W. Uchimoto,

First Vice President and General Counsel, Phlx, to

Jonathan G. Katz, Secretary, SEC, dated May 3, 1996

(‘‘Phlx May 3, 1996 Letter’’).

7 15 U.S.C. 78s(b)(3)(A). Pursuant to Section

19(b)(3)(A), a proposed rule change may take effect

upon filing with the Commission if designated by

the self-regulatory organization as, among other

matters, establishing or changing a due, fee, or other

charge imposed by the self-regulatory organization.

8The NYSE’s transaction fee schedule defines the

term ‘‘equity’’ to include shares, rights, and

warrants.

9Securities Exchange Act Release No. 36465

(Nov. 8, 1995), 60 FR 57473 (publishing SR–NYSE–

95–38.

10Equity public agency transaction fees and

credits do not apply to principal transactions by

NYSE members for their own accounts. See NYSE

Transaction Fee Schedule n.1.

11The Common Message Switch is a data

communications application that accommodates a

wide variety of member firm computer and

technical connections, enabling a member firm to

send orders directly to the appropriate floor booth

for execution by the firm’s floor broker or by

SuperDot to the appropriate specialist post.

Accordingly, the NYSE’s transaction fee schedule

provided credits for SuperDot orders. See Securities

Exchange Act Release No. 28655 (Nov. 29, 1990),

55 FR 50260, at n.1 (publishing SR–NYSE–90–54).

12An Individual order is an order for the account

of any customer who is an individual as defined by

NYSE Rule 80A. See Securities Exchange Act

Release No. 29866 (Oct. 28, 1991), 56 FR 56432.

That rule, in turn, cites Section 11(a)(1)(E) of the

Act, which defines an individual investor as a

natural person. See Securities Exchange Act Release

No. 32377 (May 27, 1993), 58 FR 31568, at n.7

(approving NYSE’s limitation on the additional

system credit concerning nonmember competing

market makers).

13An Agency order is an order for the account of

any customer, other than a natural person, who is

a nonmember of nonmember organization. Id. at

n.8.

14The proposed rule change defines a competing

market maker as ‘‘a specialist or market maker

registered as such on a registered stock exchange

(other than the NYSE), or a market maker bidding

and offering over-the-counter in a New York Stock

Exchange-traded security.’’

15 17 CFR 240.11Ac1–3.

16 17 CFR 240.10b–10.

17See Securities Exchange Act Release No. 34902

(Oct. 27, 1994), 59 FR 55006 [hereinafter Payment

for Order Flow Release].

18See 17 CFR 240.11Ac1–2(a)(14) (defining

‘‘reporting market center’’).

19See Payment for Order Flow Release, supra

note 17.

20See Payment for Order Flow Release, supra

note 17.

Analyst shall notify applicants in

writing that such information need no

longer be submitted).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 96–14497 Filed 6–7–96; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–37273; File No. SR–NYSE–

95–47]

Self-Regulatory Organizations; New

York Stock Exchange, Inc.; Order

Granting Approval to Proposed Rule

Change Relating to the Exclusion of

Competing Market Maker Orders From

Trading at No Charge

June 4, 1996.

I. Introduction

On December 29, 1995, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) submitted to the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘Commission’’), pursuant to Section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’)1 and Rule 19b–4

thereunder,2 a proposed rule change to

exclude orders of nonmember

competing market makers from the

NYSE’s no charge provision for system

orders of 100 to 2,099 shares.

The proposed rule change was

published for comment in the Federal

Register on January 5, 1996.3 The

Commission initially received a total of

four comment letters opposing the

proposal.4 On April 26, 1996, the NYSE

submitted its response to these

comment letters.5 After receiving the

NYSE’s response, the Commission

received four additional comment

letters.6 For the reasons discussed

below, the Commission, after careful

consideration, has decided to approve

the NYSE’s proposal.

II. Background and Description of the

Proposal

A. Transaction Credits

On November 7, 1995, the NYSE,

pursuant to Section 19(b)(3)(A) of the

Act,7 filed a rule change with the

Commission that made a series of

revisions to the Exchange’s equity 8

transaction fee schedule, including the

exclusion of nonmember competing

market makers from the NYSE’s no

charge provision for system orders of

100 to 2,099 shares.9 Prior to such filing,

the NYSE’s transaction fee schedule

imposed on all public agency,10 equity

transactions the following charges:

$0.00265 per share for the first 5,000

shares;

$0.00010 per share for 5,001 to 672,500

shares; and no charge for all shares in

excess of 672,500.

The NYSE’s transaction fee schedule

also provided for a credit of $0.30 per

order for all orders of 100 to 2,099

shares that were placed through the

NYSE’s Common Message Switch

(‘‘CMS’’)11 and an additional credit of

$1.30 for all Individual 12 or Agency 13

market orders of 100 to 2,099 shares

placed through the NYSE’s CMS. Orders

executed by members and member

organizations for the account of a

competing market maker,14 however,

were not eligible for the additional

system credit. This additional system

credit was applied on a monthly basis

against the member or member

organization’s total transaction charges.

B. Payment for Order Flow

On October 27, 1994, the Commission

adopted Rule 11Ac1–3 15 and

amendments to Rule 10b–10 16 under

the Act concerning payment for order

flow practices.17 These provisions were

designed to improve the information

available to investors about their brokerdealer’s order routing practices and

disclose to investors whether the brokerdealer received market center 18

inducements for routing unspecified

order flow to a particular market.19 In

defining payment for order flow, the

Commission took a very broad approach

so that all forms or arrangements

whereby a broker-dealer received

compensation for directing order flow to

a particular market were included.

Specifically, payment for order flow was

designed to include any credit, rebate,

or discount against execution fees that

exceeds the fee charged for executing

the order.20 As a result, credits received

by NYSE members under the NYSE’s

transaction fee schedule constituted
Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices 29439

21For example, under the NYSE’s transaction fee

schedule, NYSE members and member

organizations were receiving payment for order

flow for certain system orders of 100 to 603 shares.

For orders greater than 603 shares, the NYSE equity

transaction charges exceeded the $1.60 credit

granted.

22 17 CFR 240.11Ac1–3.

23 17 CFR 240.10b–10.

24On October 13, 1995, the Commission issued a

letter to the Securities Industry Association granting

all registered broker-dealers a temporary exemption

from the confirmation disclosure requirements of

Rule 10b–10(a)(2)(C) and a no-action position

regarding the account opening provisions of Rule

11Ac1–3. This exemption and no-action position

expired on November 5, 1995. Subsequently, the

Commission issued another similar letter to the

NYSE effective from November 6, 1995 to December

31, 1995. See letter from Brandon Becker, (then)

Director, Division of Market Regulation, SEC, to

Edward A. Kwalwasser, Group Executive Vice

President, Regulation, NYSE, dated November 8,

1995.

25 15 U.S.C. 78s(b)(3)(A). See supra note 7

(detailing which rule filings may be submitted

pursuant to this section for immediate

effectiveness).

26Securities Exchange Act Release No. 36465

(Nov. 8, 1995), 60 FR 57473 (publishing the notice

and immediate effectiveness of SR–NYSE–95–38).

27See supra note 10 (noting that the fees and

credits concerning equity public agency

transactions do not apply to principal transactions

by members for their own accounts).

28Securities Exchange Act Release No. 36465

(Nov. 8, 1995), 60 FR 57473.

29See letter from Samuel F. Lek, Chief Executive

Officer, Lek, Schoenau & Company, Inc., to

Secretary, SEC, dated November 14, 1995 (opposing

the monthly equity transaction fee cap); letter from

William W. Uchimoto, First Vice President and

General Counsel, Phlx, to Jonathan Katz, Secretary,

SEC, dated November 27, 1995 (opposing the

disparate treatment of competing market maker

orders and requesting that the NYSE withdraw that

portion of the filing and refile it for notice and

action pursuant to Section 19(b)(2) of the Act); letter

from David P. Semak, Vice President of Regulation,

PSE, to Jonathan Katz, Secretary, SEC, dated

December 7, 1995 (opposing the disparate treatment

of competing market maker orders and requesting

that the NYSE withdraw that portion of the filing

and refile it for notice and action pursuant to

section 19(b)(2) of the Act).

30 15 U.S.C. 78s(b)(1).

31 15 U.S.C. 78s(b)(2).

32Section 19(b)(2) requires that a notice be

published in the Federal Register for the statutory

comment period and provides that changes

pursuant to this section are not effective until the

Commission issues an approval order.

33This rule change became effective upon filing

with the Commission pursuant to Section

19(b)(3)(A) of the Act.

34The effect of this rule change was to require

members and member organizations to report

competing market maker system orders of 100 to

2,099 shares to the Exchange. The amount of fees

due would be $0.0019 per share for all such

competing market maker orders executed by NYSE

members on the Exchange from January 2, 1996 to

the present.

35Securities Exchange Act Release No. 36659

(Dec. 29, 1995), 61 FR 432.

36Currently, the NYSE waives the equity

transaction fees for all SuperDot system orders of

100 to 2,099 shares.

37See supra notes 4 and 6.

38See supra note 5.

39 15 U.S.C. 78f(b)(4). Section 6(b)(4) requires that

the rules of an exchange provide for the equitable

allocation of reasonable dues, fees, and other

charges among its members and issuers and other

persons using its facilities.

40See BSE February 21, 1996 Letter, supra note

4; PSE March 4, 1996 Letter, supra note 4.

41 15 U.S.C. 78f(b)(5). Among other things,

Section 6(b)(5) requires that the rules of an

exchange be designed to promote just and equitable

principles of trade, to perfect the mechanism of a

free and open market and a national market system,

and, in general, to protect investors and the public

interest. Section 6(b)(5) also requires that the rules

of an exchange not be designed to permit unfair

discrimination between customers, issuers, brokers,

or dealers.

42See BSE February 21, 1996 Letter, supra note

4; BSE April 23, 1996 Letter, supra note 6; CHX

March 4, 1996 Letter, supra note 4; Phlx February

23, 1996 Letter, supra note 4; PSE March 4, 1996

Letter, supra note 4.

43See BSE February 21, 1996 Letter, supra note

4.

payment for order flow where such

credit exceeded the transaction charged

associated with such order.21 In

response to these new disclosure

requirements, the NYSE decided to

revise its transaction fee schedule so

that its members would not be required

to comply with Rule 11Ac1–3 22 and

Rule 10b–10 23 regarding disclosure of

the receipt of payment for order flow.24

C. SR–NYSE–95–38

On November 7, 1995, the NYSE

submitted a rule filing pursuant to

Section 19(b)(3)(A) of the Act 25 that

revised its equity transaction charges,

effective January 2, 1996.26 Among

other things, this filing: (1) eliminated

all SuperDot system credits, (2) reduced

the equity transaction fees on orders for

5,000 shares and under from $0.00265

per share to $0.0019 per share,27 (3)

eliminated the equity transaction

charges for SuperDot system orders of

100 to 2,099 shares, except for orders of

competing market makers, and (4)

capped monthly equity transaction fees

at $400,000. The Commission published

the notice of filing and immediate

effectiveness of this rule change on

November 8, 1995.28 Subsequently, the

Commission received three comment

letters regarding this rule change.29

D. SR–NYSE–95–46

In response to these comment letters,

the Commission requested that the

NYSE withdraw that portion of the

filing concerning the exclusion of

competing market maker orders from

the NYSE’s no charge policy and

resubmit it pursuant to Section

19(b)(1) 30 for notice and action

pursuant to Section 19(b)(2).31 This

would provide sufficient time for the

Commission to consider, and interested

parties to comment on, that portion of

the filing.32 In complying with the

Commission’s request, on December 29,

1995, the NYSE submitted two related

rule filings: SR–NYSE–95–46 and the

current proposal, SR–NYSE–95–47.

In SR–NYSE–95–46, the NYSE

revised its equity transaction charges,

effective January 2, 1996,33 to eliminate

the exclusion of competing market

maker orders from the no charge

provision for SuperDot system orders of

100 to 2,099 shares. The Exchange,

however, also reserved the right to

collect, retroactive to January 2, 1996,

the fees on such trading in the event the

Commission approved SR–NYSE–95–

47.34 The Commission published the

notice of filing and immediate

effectiveness of this rule change on

December 29, 1995.35

E. The Current Proposal

The Exchange now proposes to amend

its fee schedule to re-institute the

exclusion of competing market maker

SuperDot system orders of 100 to 2,099

shares from the NYSE’s no charge

policy. This change, in effect, would

impose a charge of $0.0019 per share on

competing market maker SuperDot

system orders of 100 to 2,099 shares

and, furthermore, allow the Exchange to

collect equity transaction charges on all

such orders that have been executed on

the NYSE since January 2, 1996.36

III. Summary of Comments

The Commission received a total of

eight comment letters from the BSE, the

CHX, the PHlx, and the PSE

(collectively referred to herein as the

‘‘commenters’’) regarding the exclusion

of competing market maker system

orders from the Exchange’s no charge

provision.37 In its response, the NYSE

supports its proposal and responds to

the first four comment letters.38 The

issues raised by the commenters are

discussed below.

A. Equitable Allocation of a Reasonable

Fee

The commenters believe that the

proposal is inconsistent with Section

6(b)(4) of the Act 39 because it

constitutes an inequitable allocation of

fees 40 and further assert that the

proposal is inconsistent with Section

6(b)(5)41 because it unfairly

discriminates among certain brokers,

dealers, and customers,42 as well as

compromises the existence of a free and

open market.43

To support its opposition to the

proposal, the CHX explains that

nonmember competing market makers

do not receive any trading advantage on

the NYSE Floor that justifies this

disparate treatment, and that this

proposal does not provide any benefit to
29440 Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices

44See CHX March 4, 1996 Letter, supra note 4.

45See CHX March 4, 1996 Letter, supra note 4.

46SEE Phlx February 23, 1996 Letter, supra note

4.

47See CHX May 6, 1996 Letter, supra note 6.

48See BSE February 21, 1996 Letter, supra note

4; BSE April 23, 1996 Letter, supra note 6; CHX

March 4, 1996 Letter, supra note 4; CHX May 6,

1996 Letter, supra note 6; Phlx February 23, 1996

Letter, supra note 4; PSE March 4, 1996 Letter,

supra note 4.

49See BSE February 21, 1996 Letter, supra note

4; BSE April 23, 1996 Letter, supra note 6; PSE

March 4, 1996 Letter, supra note 4.

50See 15 U.S.C. 78f(b)(8) and 78k–1(a)(1)(C).

Section 6(b)(8) prohibits the rules of a national

securities exchange from imposing any burden on

competition that is not necessary or appropriate in

furtherance of the purposes of the Act. In Section

11A(a)(1)(C), Congress found that, among other

things, it is in the public interest and appropriate

for the protection of investors and the maintenance

of fair and orderly markets to ensure fair

competition among brokers and dealers, among

exchange markets, and between exchange markets

and markets other than exchange markets.

51See CHX March 4, 1996 Letter, supra note 4;

PSE March 4, 1996 Letter, supra note 4.

52See PSE March 4, 1996 Letter, supra note 4.

53See BSE February 21, 1996 Letter, supra note

4; CHX March 4, 1996 Letter, supra note 4; Phlx

February 23, 1996 Letter, supra note 4; Phlx May

3, 1996 Letter, supra note 6. In its competing dealer

filing, the Amex proposed that orders for a

competing dealer would: (1) yield priority and

parity to all other off-floor orders, (2) accept parity

with orders for an account of an Amex specialist,

and (3) be excluded from the Amex’s order routing

system, the Post Execution Reporting System

(‘‘PER’’). The Amex subsequently amended this

proposal in December 1991, among other things, to:

(1) provide that orders for the account of a

competing dealer that better the existing market do

not have to yield priority and parity to off-floor

orders, (2) withdraw the portion of the proposal that

would have placed orders for the account of a

competing dealer on parity with orders for the

account of an Amex specialist, and (3) request that

the Commission temporarily defer its consideration

of the proposed prohibition of competing dealer

access to PER. See Securities Exchange Act Release

No. 30161 (Jan. 7, 1992), 57 FR 1502 (File No. SR–

Amex–90–29). The Amex thereafter withdrew this

filing at the request of Commission staff. See

Division of Market Regulation, SEC, Market 2000,

An Examination of Current Equity Market

Developments Study III–11 (Jan. 1994) [hereinafter

Market 2000] (recommending that the Amex amend

or withdraw SR–Amex–90–29).

54 ITS provides facilities and procedures for: (1)

the display of composite quotation information at

each participant market so that brokers can readily

determine the best available price for a particular

security, (2) the execution of orders between brokerdealers at respective ITS market centers, and (3) the

coordination of market openings among the linked

markets.

Brokers may execute orders in other ITS market

centers by entering a ‘‘commitment to trade’’ into

their ITS computer terminal. Currently, the Amex,

the BSE, the Chicago Board Options Exchange,

Incorporated, the CHX, The Cincinnati Stock

Exchange, the National Association of Securities

Dealers, Inc., the NYSE, the Phlx, and the PSE are

all ITS participants. See Market 2000, supra note

53, at Appendix II (providing the history of ITS).

55The NYSE notes that, in addition to itself and

other markets, all of the commenters were involved

in the development of ITS and that this

development was supervised by the Commission.

See also Market 2000, supra note 53, at Appendix

II.

56 15 U.S.C. 78k–1(a)(1)(D) (finding that the

linking of all markets will foster efficiency, enhance

competition, increase the information available to

brokers, dealers, and investors, facilitate the

offsetting of investors’ orders, and contribute to the

best execution of such orders).

57According to the prior fee schedule, neither

order type was eligible for the NYSE’s additional

system credit. See supra note 10.

58Without adjusting for the lost system credit, the

NYSE represents this as a reduction of 28%. See

NYSE April 25, 1996 Letter, supra note 5.

59The greatest differential exists between a

nonmember competing market maker system order

of 2,099 shares and another system order of 2,099

shares that qualifies for the NYSE’s no charge

policy. Under these circumstances, the competing

market maker order would incur a charge of $3.99

(2,099 shares * $0.0019 per share), while the other

order would incur no fees at all. In underscoring its

argument that this fee is nominal, the NYSE points

out that for a $30 stock the $3.99 fee would

the public.44 Therefore, the CHX argues,

there is no valid justification or legally

sufficient rational basis why

nonmember competing market makers

should pay more than all other

nonmembers for such orders.45

Separately, the Phlx contends that

competing market makers will be

required to subsidize all of the NYSE’s

other system orders of this size and,

therefore, this fee should be cost

based.46

In its response, the NYSE charges that

the commenters fundamentally misread

the provisions of the Act dealing with

competition in the national market

system (‘‘NMS’’). The NYSE argues that

the proposal does not constitute either

an inequitable allocation of fees or

unfair discrimination among brokers

and dealers because the affected parties

are in direct competition with each

other. This competition, the Exchange

asserts, justifies the disparate treatment

in this instance because to require

otherwise would obligate the NYSE to

subsidize its competitors.

The CHX characterizes the NYSE’s

logic as specious. The CHX asserts that

the proposal does not achieve one of its

stated purposes, to avoid subsidizing

the NYSE’s competitors, because

proprietary orders of regional exchange

specialists and third market makers that

are affiliated with a NYSE member are

included in the NYSE’s no charge

policy. Therefore, the CHX argues that

the NYSE’s justification is inadequate

because the proposal does subsidize

some NYSE competitors.47

B. Burden on Competition

The commenters also argue that the

proposal is inconsistent with Section

6(b)(8) 48 and Section 11A(a)(1)(C) 49 of

the Act because it raises the costs of

competing market makers without

sufficient justification and, therefore,

places an unnecessary and

inappropriate burden on competition.50

The commenters contend that raising

the costs of competing market makers in

this case will harm the depth and

liquidity of the market.51 One

commenter also believes that it will

reduce price improvement

opportunities, impair the ability of

competing market makers to perform

their required market making functions,

and, in general, disrupt the equilibrium

of the NMS.52

Several commenters also claim the

impetus for this filing is similar to a

prior American Stock Exchange, Inc.

(‘‘Amex’’) competing dealer rule

proposal that was eventually

withdrawn. In analogizing the NYSE

proposal to the prior Amex proposal,

the commenters claim the NYSE is

seeking to implement rules that

disadvantage its competition for purely

competitive reasons.53

The NYSE argues that the proposal

does not impose an inappropriate

burden on competition because

competing market makers already have

cost-free access to the NYSE through the

Intermarket Trading System (‘‘ITS’’).54

The NYSE characterizes ITS as a

carefully-constructed 55 market linkage

that has evolved over the past twenty

years to successfully balance the goals

enumerated in Section 11A(a)(1)(D) of

the Act.56

By utilizing ITS, the NYSE explains,

competing market makers still can lay

off their excess positions and interact

with trading interest on the NYSE. In

support of this argument, the NYSE

states that the commenters’ ITS

commitments executed on the Exchange

during the first three months of 1996

accounted for over twenty-one percent

of the total share volume reported by the

commenters during this time period.

As further support that the filing does

not impose an inappropriate burden on

competition, the NYSE notes that this

proposal seeks to maintain the prior

relationship between member

proprietary and nonmember competing

market maker activities in Exchangelisted securities.57 The Exchange asserts

that although the proposal replaces the

credit system with a discount system, it

maintains the status quo because the

economic effect is unchanged.

Finally, the NYSE argues that the

proposed fee for competing market

maker orders is lower than the fee

structure previously in effect and,

therefore, does not impose an

inappropriate burden on competition.

The NYSE emphasizes that the proposal

lowers the fee charged from $0.00265

per share to $0.0019 per share 58 and, in

any event, the amount charged is

nominal.59
Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices 29441

represent .006% of the $62,970 value of the trade.

See NYSE April 25, 1996 Letter, supra note 5.

60See BSE May 6, 1996 Letter, supra note 6; CHX

May 6, 1996 Letter, supra note 6; Phlx May 3, 1996

Letter, supra note 6.

61See CHX May 6, 1996 Letter, supra note 6.

62See BSE May 6, 1996 Letter, supra note 6.

63On October 10, 1995, the Commission

proposed two rules and amendments to a rule to

improve the handling and execution of customer

orders. The Proposed Limit Order Rule, Proposed

Rule 11Ac1–4, would require covered market

makers to immediately reflect in their bid or offer

the price and size of each customer limit order they

hold in a covered security at a price that would

improve their bid or offer in the security unless an

exception applies. The Proposed Price

Improvement Rule, Proposed Rule 11Ac1–5, would

require each specialist or OTC market maker in a

covered security that accepts a customer market

order to provide that order with an opportunity for

price improvement unless an exception applies.

Both of these rules contain an exception for orders

that are delivered immediately to a market maker

or system that complies with the requirements of

the applicable rule with respect to that order. See

Securities Exchange Act Release No. 36310 (Oct. 10,

1995), 60 FR 52792 (publishing File No. S7–30–95

for comment); Proposed 11Ac1–4(c)(5); Proposed

11Ac1–5(e)(4).

64See BSE February 21, 1996 Letter, supra note

4.

65See BSE April 23, 1996 Letter, supra note 6.

66See infra notes 101, 102 (discussing the

applicability of the antitrust laws and the essential

facility doctrine).

67See Phlx February 23, 1996 Letter, supra note

4.

68See NYSE April 25, 1996 Letter, supra note 5.

69 15 U.S.C. 78s(b)(2).

70 15 U.S.C. 78f(b).

71Bradford National Clearing Corp. v. Securities

and Exchange Commission, 590 F.2d 1085 (D.C. Cir.

1978).

72 15 U.S.C. 78f(b).

73See Securities Exchange Act Release No. 17371

(Dec. 12, 1980), 45 FR 83707, 83715–19

(interpreting identical provisions of Section

15A(b)).

74 Id.

75 15 U.S.C. 78f(b)(4).

76 15 U.S.C. 78f(b)(5).

77 15 U.S.C. 78f(b)(8).

78See supra note 10 (noting that the fees and

credits concerning equity public agency

transactions do not apply to principal transactions

by members for their own accounts).

79See supra notes 12 and 13 (defining Individual

and Agency orders).

In commenting further on the

proposal, the BSE, the CHX, and the

Phlx refute the NYSE’s claim that ITS

provides adequate access to the NYSE’s

market.60 They claim that ITS is too

limited in its capabilities. The CHX

adds that its specialists choose to ignore

free ITS access and pay for access to the

NYSE’s SuperDot system simply

because SuperDot is better; 61 while the

BSE asserts that its specialists are forced

to use SuperDot because ITS

commitments do not have the same

status as orders on the NYSE and do not

have any standing in the trading

crowd.62

C. Proposed Order Handling Rules 63

Finally, the BSE urges the

Commission to consider the possible

impact this proposal will have in

conjunction with the Commission’s

‘‘Proposed Limit Order Rule’’ 64 and

‘‘Proposed Price Improvement Rule.’’ 65

The BSE is concerned that a NYSE

specialist availing itself of the proposed

rules’ exceptions concerning the

immediate delivery of an Order to

another market maker or system would

be charged a different fee than a BSE

specialist doing likewise.

The NYSE did not address this issue

in its response.

D. Antitrust Considerations 66

The Phlx also requests the

Commission to consider the possible

antitrust implications this proposal

presents.67 The Phlx contends that the

NYSE enjoys a ‘‘strategic dominance’’

and that the antitrust law’s ‘‘essential

facility’’ doctrine is germane to the

Commission’s analysis of this proposal.

In support of this argument, the Phlx

claims the proposal effectively and

inappropriately excludes competing

market makers equal access to the

primary market simply because they are

competitors.

The NYSE disputes the Phlx’s

premise that the NYSE is an essential

facility. The NYSE supports its position

by asserting that: (1) the NYSE is not a

monopoly (as evidenced by the

existence of multiple other securities

markets in the United States) and (2)

competing market makers will continue

to have two forms of access to the

NYSE’s market—‘‘one free and another

at near-zero price.’’ 68

IV. Discussion

Under Section 19(b)(2) of the Act,69

the Commission must approve the

NYSE’s proposed rule change if it finds

that the proposed rule change is

consistent with the requirements of the

Act and the rules thereunder applicable

to a national securities exchange. If the

Commission is unable to make that

finding, it must institute proceedings to

consider whether to disapprove the

proposed rule change.

The statutory requirements relevant to

such a determination are found, for the

most part, in Section 6(b) of the Act.70

That section delineates the purposes the

NYSE’s rules should be designed to

achieve. Those purposes or objectives,

which take the form of positive goals,

such as investor protection, or

prohibitions, such as those against

unfair discrimination or inappropriate

burdens on competition, are stated in

the form of broad and elastic concepts.

They afford the Commission

considerable discretion to use its

judgment and knowledge in

determining whether a proposed rule

complies with the requirements of the

Act.71 Furthermore, the subsections of

Section 6(b) 72 must be read with

reference to one another and to other

provisions of the Act.73 Within this legal

framework, the Commission must weigh

and balance the strengths and

weaknesses of a proposed rule, assess

the views and arguments of others, and

make predictive judgments about the

consequences of approving the

proposed rule.74

With this in mind, and after careful

consideration of all of the comments

received, the Commission has

determined to approve the proposed

rule change. For the reasons discussed

below, 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

exchange.

In particular, the Commission finds

that the proposal is consistent with the

Section 6(b)(4) requirement that the

rules of an exchange provide for the

equitable allocation of reasonable fees

among its members; 75 the Section

6(b)(5) 76 requirements that the rules of

an exchange be designed to perfect the

national market system, and, in general,

to protect investors and the public

interest; and not designed to permit

unfair discrimination between brokers,

dealers, and customers; as well as the

Section 6(b)(8) 77 requirement that the

rules of an exchange not impose any

burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

A. The Proposal

The NYSE’s original proposal, SR–

NYSE–95–38, instituted a discount fee

system that excluded orders of

nonmember competing market makers

from the NYSE’s no charge provision for

system orders of 100 to 2,099 shares.

Instead, these orders would have been

subject to a fee of $0.0019 per share.

This modified the NYSE’s previous

system—a credit fee system. The credit

system imposed a charge of $0.00265

per share for the first 5,000 shares on all

equity public agency transactions.78 If

such an order was for 100 to 2,099

shares and was placed through the

NYSE’s CMS, it earned the NYSE

member a credit of $0.30 per order. If

this also was an Individual or Agency

market order, the NYSE member was

granted an additional credit of $1.30.79

Orders executed by members and

member organizations for the account of
29442 Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices

80See (publishing the notice and immediate

effectiveness of SR–NYSE–95–46).

81See surpa note 39 (listing the requirements of

Section 6(b)(4)).

82 15 U.S.C. 78f(b)(4).

83Under most circumstances, the fee imposed on

competing market maker orders has been reduced.

84Of course, any fee proposal must be found to

meet all applicable statutory standards.

85See supra note 41 (listing the requirements of

Section 6(b)(5)).

86See supra note 50 (listing the requirements of

Section 6(b)(8)).

87See Market 2000, supra note 53, at Appendix

II–12. The Commission previously has encouraged

all ITS participants to continue to improve the

system.

88See 15 U.S.C. 78k–1(a)(1)(D) (finding that the

linkage of all markets will foster efficiency, enhance

competition, increase the information available to

brokers, dealers, and investors, facilitate the

offsetting of investors’ orders, and contribute to the

best execution of such orders).

89See Market 2000, supra note 53, at Appendix

II–11.

90See Market 2000 supra note 53, at Study II 8–

10 (discussing quote competition between the

regional exchanges and the NYSE). See also Market

2000, supra note 53, at Study II–8 (finding that in

1992 over 92% of the regional exchanges’ volume

derived from issues traded pursuant to unlisted

trading privileges, rather than in issues where the

regional exchanges are the primary market).

a competing market maker, however,

were not eligible for the additional

system credit.

Prior to the effective date of the

discount system, the NYSE suspended

the effectiveness of the exclusion

concerning competing market maker

orders.80 Publication of the exclusion

for public comment provided additional

time for the Commission to consider,

and interested parties to comment on,

that portion of the filing. With this

filing, the NYSE seeks approval to

implement the discount system as

originally filed.

B. Section 6(b)(4) 81

Several commenters have argued that

the proposal violates section 6(b)(4).82

The Commission disagrees and finds

that the proposal constitutes an

equitable allocation of a reasonable fee.

The Commission believes the

proposed fee is reasonable because it

generally is a fee reduction. The

Commission notes that the NTSE’s new

discount system generally grants

competing market maker orders a cost

savings over the prior credit system.83

The Commission believes the fee is an

equitable allocation within the meaning

of Section 6(b)(4) because, although the

fee distinguishes between the orders of

nonmember competing market makers

and all other orders executed on the

NYSE, it does not do so in a manner that

imposes a significant cost burden on the

nonmember competing market maker

orders. In addition, the Commission is

unable to conclude that the fee is not

reasonable because nonmember

competing market makers will be able to

continue the same level of trading

activity on the NYSE as before this fee

was implemented, except that it now

will be at a lower cost.

The following illustrates this fact:

Shares Credit

System

Discount

System Savings

100 ................................................................................................................................................................ $(0.04) $0.19 $¥0.23

400 ................................................................................................................................................................ 0.76 0.76 0.00

500 ................................................................................................................................................................ 1.03 0.95 0.08

1,000 ............................................................................................................................................................. 2.35 1.90 0.45

1,500 ............................................................................................................................................................. 3.68 2.85 0.83

2,099 ............................................................................................................................................................. 5.26 3.99 1.27

The Commission emphasizes,

however, that whether a proposed fee

can be deemed an equitable allocation

of a reasonable fee depends on the facts

and circumstances under which the

proposal is being made. In evaluating

such a proposal, the Commission

necessarily would weigh and balance all

of the relevant factors. These may

include, among others, whether the

proposed fee is an increase or a

decrease, who is subject to the fee, the

basis for any classification being drawn,

the potential impact on competition,

and how any disparate treatment will

impact the goals of the Act.84

C. Section 6(b)(5) 85 and Section

6(b)(8) 86

The commenters also argue that it is

inappropriate for the NYSE to exclude

competing market maker orders from

the NYSE’s no charge policy because it

will deny the Exchange’s competitors

effective access to the NYSE’s market,

harm the depth and liquidity of the

market, disrupt the balance of

competition in the NMS, and hamper

competing market makers’ ability to

compete.

1. National Market System

The commenters allege that ITS,

although providing them with free

access to the NYSE, is not an effective

substitute for access to SuperDot. In

evaluating the role of ITS in the NMS,

the Commission recognizes that the

design of ITS is limited in scope. ITS is

not a complete intermarket linkage.87

ITS does not provide order-by-order

routing of customer orders, a

consolidated limit order book, or

automated or default based execution

systems; it does not guarantee price and

time priority. Rather, ITS utilizes

communications and technological

components of other NMS facilities so

that trading interest in various market

centers can be identified and accessed.

It also provides uniform trading rules

governing transactions in exchangelisted securities.88 These functionalities

benefit the markets, broker-dealers, and

investors by reducing fragmentation,

increasing opportunities to secure the

best execution of customer orders,

ensuring effective competition among

qualified markets, and, in general,

furthering the purposes of the NMS

established by Congress in Section 11A

of the Act.89

ITS provides an avenue for competing

market makers to lay off their excess

positions and interact with trading

interest on the NYSE, fee-free. The

Commission believes that ITS will

continue to provide an alternative

means by which competing market

makers can access the NYSE. In

addition, competing market makers will

continue to have access to the NYSE

through SuperDot.

Because access to the NYSE will not

be more restrictive under the proposed

rule change, and because competing

market makers can avail themselves of

ITS, the Commission does not believe

the proposal will harm the depth and

liquidity of the market. Moreover, the

Commission notes that the depth and

liquidity of any particular security is

dependent on numerous variables, such

as the degree of customer buying and

selling interest in the security and the

quality and capitalization of the

issuer.90 Hence, the Commission

believes it is unlikely that the cost

imposed on competing market makers

under the NYSE fee schedule will have
Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices 29443

91The Commission does not intend this proposal

to establish a precedent to permit a primary market

to make distinctions in the treatment of orders on

its Floor as a means to discriminate unfairly against

its competitors. Orders for the account of

nonmember competing market makers will

continue to be treated in the same way as other

Agency orders. See supra note 13 (defining Agency

order). For example, the proposal does not effect

any change in routing to the NYSE market; in the

priority such orders receive on the Floor; or in

surveillance by the NYSE. Therefore, this proposal

is distinguishable from the one proposed by the

Amex in SR–Amex–90–29. See Securities Exchange

Act Release No. 32377 (May 27, 1993), 58 FR 31568

(utilizing similar reasons for distinguishing SR–

Amex–90–29 from the NYSE’s limitation of its

additional system credit).

92See supra note 83.

93See NYSE April 25, 1996 Letter, supra note 5.

94 Given that the fee imposed on competing

market maker orders is being reduced from its prior

level in most instances, the Commission does not

believe that a predatory motive is the impetus for

this filing. Contra Phlx February 23, 1996 Letter,

supra note 4.

95This is especially true in light of the fact that

other means of access to the NYSE market exist.

96See Securities Exchange Act Release No. 32377

(May 27, 1993), 58 FR 31568 (noting that the NYSE

Specialist System Charge was used to partially fund

the NYSE’s credit system).

97 15 U.S.C. 78f(b)(5).

98 15 U.S.C. 78f(b)(8).

99See supra note 63 (describing the

Commission’s proposed order handling rules).

100The fifth exception to the Proposed Limit

Order Rule applies to any customer limit order

‘‘that is delivered immediately to an exchange or

association sponsored system that displays limit

orders and complies with the requirements of [the

Proposed Limit Order Rule] with respect to that

order.’’ The fourth exception to the Proposed Price

Improvement Rule applies to any customer market

order ‘‘that is delivered immediately to another

specialist or OTC market maker that complies with

the display requirements of [the Proposed Price

Improvement Rule] with respect to that order.’’ See

Securities Exchange Act Release No. 36310 (Oct. 10,

1995), 60 FR 52792 (publishing File No. S7–30–95

for comment).

101 In Silver v. New York Stock Exchange, the

Supreme Court ruled that certain instances of selfregulation that fall within the scope and purposes

of the Act could protect an exchange against an

antitrust claim. Silver, 373 U.S. 341, 360–61 (1963).

In Thill Securities Corporation v. New York Stock

Exchange, the U.S. Court of Appeals for the Seventh

Circuit interpreted this ruling to allow the securities

laws to act as an implied repealer of the antitrust

laws, but only to the minimum extent necessary to

make the securities laws work. Thill, 433 F.2d 264,

268 (7th Cir. 1970), cert. denied, 401 U.S. 994

(1971). In determining when such antitrust

immunity is applicable, one court explained,

‘‘Where the concededly self-regulatory rule or

practice complained of is within the explicit

mandate of the Exchange Act and also is actively

reviewed by the Commission, that body may and

appropriately should itself consider the policies of

both the antitrust and the securities laws.’’ Jacobi

v. Bache & Co., Inc., 377 F. Supp. 86, 92 (S.D.N.Y.

1974), aff’d, 520 F.2d 1231 (2d Cir. 1975), cert.

denied, 423 U.S. 1053 (1976).

102The essential facility doctrine, also called the

‘‘bottleneck principle,’’ requires the owner of a

facility that cannot practicably be duplicated by

would-be competitors to share this facility on fair

terms. Hecht v. Pro-Football, Inc., 570 F.2d 982, 992

(D.C. Cir. 1977), cert. denied, 436 U.S. 956 (1978).

In determining if a facility is ‘‘essential’’ under the

Sherman Act, courts look to whether ‘‘duplication

of the facility would be economically infeasible’’

and if ‘‘denial of its use inflicts a severe handicap

on potential [or current] market entrants.’’ Twin

Laboratories, Inc. v. Weider Health & Fitness, 900

F. 2d 566, 568–69 (2d Cir. 1990) (citing Hecht); MCI

Communications Corp. v. American Telephone &

Telegraph Co., 708 F.2d 1081, 1132–33 (7th Cir.)

(requiring ‘‘(1) control of the essential facility by a

monopolist; (2) a competitor’s inability practically

or reasonably to duplicate the essential facility; (3)

the denial of the use of the facility to a competitor;

and (4) the feasibility of providing the facility’’),

cert. denied, 464 U.S. 891 (1983).

103 In finding that the NYSE is not denying the

use of its facilities to its competitors, the

Commission does not reach the issue of whether the

NYSE is, in fact, an essential facility.

a significant impact on the willingness

of these market makers to contribute to

the depth and liquidity of NYSE listed

securities.

2. Disparate Treatment of Competing

Market Maker Orders 91

In determining that disparate

treatment of competing market makers

is not inconsistent with the Act in this

instance, the Commission believes three

aspects of the proposal are particularly

significant. First, the new fee schedule

generally represents a fee reduction.

Second, the NYSE is attempting to

maintain the status quo that existed

under the previous fee structure. Third,

the parties are competitors in the NMS.

First, as noted previously, this

proposal generally reduces the fee

heretofore imposed on competing

market maker orders.92 The Commission

is unable to conclude that reducing

competing market makers’ fees on most

of their SuperDot system orders will

have a significant, negative impact on

the competitors’ ability to perform their

market making functions.

Second, the Commission has due

regard for the NYSE’s proffered intent to

maintain the status quo. The Exchange

decided to change from a credit system

to a discount system in response to the

Commission’s regulatory initiatives

addressing the practice of payment for

order flow, and the NYSE has stated that

excluding orders of competing market

makers from its no charge policy is

intended ‘‘to maintain the current

relationship between member

proprietary and nonmember market

maker activities in Exchange-listed

securities.’’ 93 Orders of competing

market makers were not entitled to the

same fee treatment as other orders in the

prior fee schedule. This proposal does

not alter this result.94

Finally, the Commission does not

believe that this fee change imposes an

unnecessary burden on competition.

Fair competition in the NMS does not

require free access in all instances to a

competitor’s systems.95 Fair

competition must take into

consideration all of the relevant facts

and circumstances. To find otherwise

would negate the benefits of belonging

to a membership organization. Also, it is

important to note that membership

carries with it certain duties,

responsibilities, and costs not

applicable to nonmembers.96 Thus, in

the circumstances presented by this

filing, it is not inconsistent with fair

competition for the NYSE to charge

competing market maker orders a

reasonable fee when utilizing systems

whose development has been financed

by NYSE members.

For all of the above reasons, the

Commission finds that the NYSE

proposal is consistent with Section

6(b)(5) 97 and Section 6(b)(8) 98 of the

Act.

D. Proposed Order Handling Rules 99

The BSE is concerned that BSE

specialists availing themselves of

exceptions in the Proposed Limit Order

Rule and in the Proposed Price

Improvement Rule concerning the

immediate delivery of an order to a

market maker or system complying with

the applicable rule would be charged a

different fee than a NYSE member

complying with the same exception.100

The BSE’s comments in this

connection are premature inasmuch as

the Commission has not taken final

action on the proposed rules referred to

by the BSE. The Commission notes,

however, that the Proposed Limit Order

Rule would allow a specialist or market

maker to display the limit order in its

own quote; execute the limit order; or

send the order to another market maker

or system that would display the order

in conformity with the rule. Thus, a

competing market maker would have

two alternatives to sending the order to

another market or system. Similarly, the

Proposed Price Improvement Rule

provides market makers with an

alternative to sending their orders to

another market center.

E. Antitrust Law’s Essential Facility

Doctrine 101

The Phlx urges the Commission to

apply the antitrust law’s essential

facility doctrine because, in the Phlx’s

opinion, the NYSE is an essential

facility.102 The Commission declines to

do so in this case because, as noted

previously, the NYSE is not denying the

use of its facilities to its competitors.103

Competing market makers still have two

forms of access to the NYSE—one free

(ITS) and the order at a reduced rate

(SuperDot).

In addition, the Commission notes the

competitive environment in which
29444 Federal Register / Vol. 61, No. 112 / Monday, June 10, 1996 / Notices

104See Market 2000, supra note 53, at 6–12

(providing an overview of the intense competition

that exists in the U.S. equity market); Market 2000,

supra note 53, at Exhibit 18 (charting the NYSE’s

percentage of Consolidated Tape trades in NYSE

stocks from 1976 to 1992).

105The regional stock exchanges captured 20% of

the orders in NYSE stocks during the first six

months of 1993. Market 2000, supra note 53, at 8.

106OTC trading of exchange-listed securities is

commonly known as the ‘‘third market.’’ In 1989,

the third market garnered 3.2% of reported NYSE

share volume and 5% of reported trade volume. By

1993, third market volume had more than doubled

to 7.4% of reported NYSE reported share volume

and 9.3% of reported trade volume. Market 2000,

supra note 53, at 9.

107A PTS is a type of automated trading system

that typically is a screen-based system sponsored by

broker-dealers. PTSs are not operated as or affiliated

with self-regulatory organizations but instead are

operated as independent businesses. Participation

in these systems may be limited to institutional

investors, broker-dealers, specialists, and other

market professionals.

Although most PTS volume is in Nasdaq

securities, PTSs handled about 1.4% of the volume

in NYSE stocks in the first six months of 1993.

Market 2000, supra note 53, at 8, Study II 12–13.

108Although exact numbers are not available, the

Commission estimates that foreign market trading

in NYSE stocks amounts to approximately seven

million shares per day. See Market 2000, supra note

53, at 10–11.

109See Market 2000, supra note 53, at 8–10

(noting that automated systems allow the regional

stock exchanges, third market makers, and PTSs to

compete for order flow with the primary markets).

110 15 U.S.C. 78s(b)(2).

111 17 CFR 200.30–3(a)(12).

today’s market makers operate.104 For

example, the NYSE faces significant

competition for orders in NYSE stocks

from the regional stock exchanges,105

third market makers,106 proprietary

trading systems (‘‘PTSs’’),107 and foreign

markets.108 Modern technology has

facilitated this competition and should

continue to do so in the future.109

V. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,110 that the

proposed rule change (SR–NYSE–95–

47) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.111

Margaret H. McFarland

Deputy Secretary

[FR Doc. 96–14590 Filed 6–7–96; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF STATE

[Pubic Notice No. 2399]

Notice of Briefing

The Department of State announces

the second 1996 briefing on U.S. foreign

policy economic sanctions programs to

be held on Thursday, July 11, 1995,

from 2:00 p.m. until 3:30 p.m., in the

State Department Loy Henderson

auditorium, 2201 C Street NW.,

Washington, D.C.

This briefing, a follow-on session to

the March 6 briefing hosted by Under

Secretary for Economic, Business and

Agricultural Affairs Joan Spero, will be

hosted by Ambassador Bill Ramsay,

Deputy Assistant Secretary for Energy

Sanctions and Commodities, who will

present an overview of the sanctions

regimes overseen by the State

Department’s Bureau of Economic and

Business Affairs. State Department desk

officers will be on hand to discuss

country-specific sanctions issues

following Mr. Ramsay’s briefing.

Please Note: Persons intending to attend

the July 11 briefing must announce this not

later than 48 hours before the briefing, and

preferably further in advance, to the

Department of State by sending a fax to 202–

647–3953 (Office of the Coordinator for

Business Affairs). The announcement must

include name, company or association name,

Social Security or passport number and date

of birth. The above includes government and

non-government attendees. One of the

following valid photo ID’s will be required

for admittance: U.S. driver’s license with

picture, passport, U.S. government ID

(company ID’s are no longer accepted by

Diplomatic Security). Enter from the C Street

Main Lobby.

Dated: May 22, 1996.

David A. Ruth,

Senior Coordinator for Business Affairs.

[FR Doc. 96–14011 Filed 6–7–96; 8:45 am]

BILLING CODE 4710–07–M

OFFICE OF THE UNITED STATES

TRADE REPRESENTATIVE

Notice of Meeting of the Investment

and Services Policy Advisory

Committee

AGENCY: Office of the United States

Trade Representative.

ACTION: Notice that the June 18, 1996

meeting of the Investment and Services

Policy Advisory Committee will be held

from 10:00 a.m. to 2:00 p.m. The

meeting will be closed to the public

from 10:00 a.m. to 1:30 p.m. The

meeting will be open to the public from

1:30 p.m. to 2:00 p.m.

SUMMARY: The Investment and Services

Policy Advisory Committee will hold a

meeting on June 18, 1996, from 10:00

a.m. to 2:00 p.m. The meeting will be

closed to the public from 10:00 a.m. to

1:30 p.m. The meeting will include a

review and discussion of current issues

which influence U.S. trade policy.

Pursuant to Section 2155(f)(2) of Title

19 of the United States Code, I have

determined that this portion of the

meeting will be concerned with matters

the disclosure of which would seriously

compromise the development by the

United States Government of trade

policy, priorities, negotiating objectives

or bargaining positions with respect to

the operation of any trade agreement

and other matters arising in connection

with the development, implementation

and administration of the trade policy of

the United States. The meeting will be

open to the public and press from 1:30

p.m. to 2:00 p.m. when trade policy

issues will be discussed. Attendance

during this part of the meeting is for

observation only. Individuals who are

not members of the committee will not

be invited to comment.

DATES: The meeting is scheduled for

June 18, 1996, unless otherwise notified.

ADDRESSES: The meeting will be held at

the Jefferson Hotel at 16th and M

Streets, N.W., Washington, D.C., unless

otherwise notified.

FOR FURTHER INFORMATION CONTACT:

Suzanna Kang, Office of the United

States Trade Representative, (202) 395–

6120.

Charlene Barshefsky,

Acting United States Trade Representative.

[FR Doc. 96–14464 Filed 6–7–96; 8:45 am]

BILLING CODE 3190–01–M

Identification of Priority Foreign

Country Practices; Request for Public

Comment

AGENCY: Office of the United States

Trade Representative.

ACTION: Request for written submissions

from the public.

SUMMARY: Executive Order 12901 of

March 3, 1994, as amended by

Executive Order 12973 of September 27,

1995, requires the United States Trade

Representative (USTR) to review United

States trade expansion priorities and to

identify priority foreign country

practices, the elimination of which is

likely to have the most significant

potential to increase United States

exports, either directly or through the

establishment of a beneficial precedent.

USTR is requesting written submissions

from the public concerning foreign

country practices that should be

considered by the USTR for this

purpose.

DATES: Submissions must be received on

or before 12:00 noon on Tuesday, July

2, 1996.

ADDRESSES: 600 17th Street, NW.,

Washington, D.C. 20508.

FOR FURTHER INFORMATION CONTACT:

Questions concerning the filing of

submissions should be directed to Sybia