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Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Amending NYSE Rule 416, Questionnaires and Reports

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Information about this document as published in the Federal Register.

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Start Preamble January 25, 2001.

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 December 21, 2000, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. 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 amends existing NYSE Rule 416 (“Questionnaires and Reports”). The amendment will give the Exchange general authority to require members and member organizations to submit, on an ongoing basis, certain data in a prescribed manner and form. Below is the text of the proposed rule change. Proposed new language is italicized; proposed deletions are in brackets.

* * * * *

Questionnaires and Reports

Rule 416. (a) Each member and member organization shall submit to the Exchange at such times as may be designated in such form and within such time period as may be prescribed such information as the Exchange deems essential for the protection of investors and the public interest.

(b) Unless a specific temporary extension of time has been granted, there shall be imposed upon each Start Printed Page 8830member or member organization required to file reports pursuant to this Rule, a fee of $500 [3] for each day that such report is not filed in the prescribed time. Requests for such extension of time must be submitted to the Exchange at least three business days prior to the due date.

(c) Any report filed pursuant to this Rule containing material inaccuracies shall, for purposes of this Rule, be deemed not to have been filed until a corrected copy of the report has been resubmitted.

Supplementary Material:

.10 Member organizations may be required to provide financial and operational reports as required by paragraph (a) of this Rule for affiliated organizations, including but not limited to, persons referred to in Rules 321 and 322.

.20 Each member and member organization shall, on an ongoing basis and in such format as the Exchange may require, submit to the Exchange, or its designated agent, prescribed data of the member or member organization, and of any broker-dealer that is a party to a carrying agreement with a member or member organization pursuant to NYSE Rule 382.

(See also Rule 382.)

Carrying Agreements

Rule 382.

(a) No change.

(b) No change.

(c) No change.

(d) No change.

(e) No change.

(f) No change.

(See also Rules 342 , [and] 401 , and 416)

* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commisison, the Exchange 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 palces specified in Item IV below. The Exchange 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

NYSE Rule 416 authorizes the Exchange to require members and member organizations to submit prescribed information that the Exchange believes to be essential for the protection of investors and the public interest. NYSE rule 416 has been used to require the periodic submittal of specific predefined financial, operational, and other information necessary for an effective evaluation of a member's or member organization's compliance with applicable rules and regulations. NYSE rule 416 has also been used to prepare the membership for specific initiatives such as participation in Year 2000 Testing and the conversion to Decimalization.

Under proposed rule 416.20, the Exchange may require members and member organizations to submit data, on an ongoing basis (e.g., daily, monthly, quarterly) and in such format as the Exchange may require.[4] Further, the proposed rule change provides that members and member organizations that clear and settle transactions may be required to provide data regarding both their own business as well as the business of firms that introduce to them pursuant to NYSE Rule 382 (“Carrying Agreements”). NYSE rules 382 and 416 would be cross-referenced to highlight their interaction in this regard.

The Exchange believes that the authority provided under proposed rule 416.20, while broad in nature, is necessary to facilitate the participation of members and member organizations in an industry-wide regulatory initiative with respect to clearing firms. This initiative will be coordinated by a committee that includes the Exchange, the Commission, National Association of Securities Dealers Regulation, Inc., Securities Industry Association, several member organizations, and other securities industry representatives. The committee has developed a broker-dealer reporting system intended to help identify potential sales practice violations, particularly those associated with low-priced microcap issues. Under the clearing firm initiative, data will be submitted to a processing center that will organize it according to exception parameters established by the Exchange and other self-regulatory organizations (“SROs”).

The required data will initially include, at minimum, various raw statistical data pertaining to cancelled trades. It is intended that additional data will be required at future dates. Once the reporting system is fully operational, it is expected that the trade information collected pursuant to this initiative will serve as an early warning system to “red flag” unusual trading patterns.

2. Statutory Basis

The proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and in particular, with the requirements of sections 6(b)(5) of the Act,[5] which requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and national market system, and in general, to protect investors and the public interest.

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 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 Action

Within 35 days of the publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will:

(A) By order approve such proposed rule change, or

(B) Institute proceedings to determine whether the proposed rule change should be disapproved.Start Printed Page 8831

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-NYSE-00-60 and should be submitted by February 23, 2001.

For the Commission, by the Division of Market Regulation, pursuant to the delegated authority.[6]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See Securities Exchange Act Release No. 43847 (January 16, 2001) (SR-NYSE-00-59). (increasing from $100 to $500 the late filing fee charged to members and member organizations for the failure to submit information on a timely basis).

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4.  On January 22, 2001, in a telephone conversation between Donald van Weezel, Managing Director, Regulatory Affairs, Exchange, and Heidi Pilpel, Special Counsel, Commission, the Exchange represented that it anticipates requesting members and member organizations to submit raw data electronically.

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[FR Doc. 01-2819 Filed 2-1-01; 8:45 am]