Skip to Content

Notice

Self-Regulatory Organizations; New York Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 3 to Proposed Rule Change Relating to Error Accounts, Floor Member Account Disclosure, and Erroneous Transaction Reports

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble September 6, 2001.

I. Introduction

On June 15, 1999, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“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 require that each member maintain an error account, and to require each member to report to the Exchange any securities account in which the member has a financial interest or over which the member has discretionary authority. The proposed rule change also includes provisions concerning error transaction procedures, recordkeeping, and other related matters. On December 13, 1999, the NYSE filed Amendment No. 1 to the proposed rule change with the Commission.[3] The proposed rule change, as amended, was published for comment in the Federal Register on February 10, 2000.[4] The Commission received no comments on the proposal.

On January 8, 2001, the NYSE filed Amendment No. 2 to the proposed rule change with the Commission. Amendment No. 2 added provisions to the proposed rule change to: (a) specify that no non-error trading may take place in a member's error account; (b) require a member to inform the NYSE anytime the member closes a securities account in which the member has an interest; and (c) provide a means for an error to be accepted, under certain conditions, where an order has been correctly executed, but the wrong price and/or the wrong size has been reported to the customer. Amendment No. 2 was published for comment in the Federal Register on July 14, 2001.[5] The Commission received no comments on Amendment No. 2.

On August 13, 2001, the NYSE filed Amendment No. 3 to the proposed rule change with the Commission. Amendment No. 3 would amend NYSE Rule 134 to require each member who initiates a transaction on the Floor of the Exchange to offset an error to create a time-stamped order ticket to evidence the transaction and to indicate that the transaction is to cover an error.

This order approves the proposed rule change as amended, accelerates approval of Amendment No. 3, and solicits comments from interested persons on that amendment.

II. Discussion

The Commission finds that the proposed rule change as amended is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange [6] and, in particular, the requirements of section 6 of the Act [7] and the rules and regulations thereunder. The Commission finds specifically that the provisions of the proposed rule change contained in the original filing and the amendments are consistent with section 6(b)(5) of the Act [8] because they will enable the NYSE to more effectively monitor the activities of its members and investigate circumstances of suspected abuse.[9]

The Commission also notes that these provisions are likely to aid the NYSE in fulfilling some of the requirements of the undertakings included in the order issued by the Commission relating to the settlement of an enforcement action against the NYSE for failure to enforce compliance with section 11(a) [10] and Rule 11a-1 [11] under the Act and NYSE Rules 90, 95, and 111.[12]

The Commission finds that Amendment No. 3 is consistent with the Act because it will help provide a more complete and accurate record of errors that occur on the Floor and enhance the ability of the Exchange to examine a member's error account activities. The Commission finds good cause to approve Amendment No. 3 to the proposed rule change prior to the thirtieth day after the date of publication of notice of filing of Amendment No. 3 in the Federal Register. The Commission believes that Amendment No. 3 will improve the overall effectiveness of the proposed rule change, while imposing no significant additional regulatory burden. Accelerated approval of the amendment will enable the Exchange to implement its several changes related to error transactions and erroneous reports at once.

III. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 3, including whether the amendment 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 Start Printed Page 47711public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. All submissions should refer to File No. SR-NYSE-99-25 and should be submitted by October 4, 2001.

IV. Conclusion

For the reasons discussed above, the Commission finds that the proposal, as amended, is consistent with the Act and the rules and regulations thereunder.

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[13] that the proposed rule change (File No. SR-NYSE-99-25), as amended, be, and it hereby is, approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[14]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Amendment No. 1 added further procedures and recordkeeping requirements to the proposed rule change, as well as a provision concerning the reporting of profitable errors.

Back to Citation

4.  See Securities Exchange Act Release No. 42381 (February 3, 2000), 65 FR 6673.

Back to Citation

5.  See Securities Exchange Act Release No. 44427 (June 21, 2001), 66 FR 33282.

Back to Citation

6.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

Back to Citation

9.  The Commission notes that the recordkeeping provision of the proposed rule change requires a member or member organization to maintain, besides the information specifically identified in the rule, “such other information [with respect to errors] as the Exchange may from time to time require.” To adopt any such additional requirement, the Exchange would need to file a rule change proposal with the Commission pursuant to the provisions of Rule 19b-4 under the Act.

Back to Citation

12.  See In the Matter of New York Stock Exchange, Inc., Securities Exchange Act Release No. 41574 (June 29, 1999); Administrative Proceeding File No. 3-9925.

Back to Citation

[FR Doc. 01-22953 Filed 9-12-01; 8:45 am]

BILLING CODE 8010-01-M