Skip to Content


Self-Regulatory Organizations; Notice of Filing of Amendment No. 4 to a Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Requirements for Order Tracking by Exchange Members and Member Organizations

Document Details

Information about this document as published in the Federal Register.

Document Statistics
Document page views are updated periodically throughout the day and are cumulative counts for this document including its time on Public Inspection. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day.
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 March 8, 2002.

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 February 27, 2002, 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 NYSE. On May 24, 2000, the Exchange filed Amendment No. 1 to the proposal.[3] On August 14, 2001, the Exchange filed Amendment No. 2 to the proposal.[4] On January 17, 2002, the Exchange filed Amendment No. 3 to the proposal.[5] The Start Printed Page 11736proposed rule change was published, as amended, on January 30, 2002.[6] The Commission is publishing this notice to solicit comments on Amendment No. 4 to File No. SR-NYSE-99-51 from interested persons.

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

As originally filed in SR-NYSE-99-51, the proposed rule change consisted of amendments to NYSE Rule 132, and the proposed adoption of NYSE Rules 132A, B and C on order tracking. In Amendment No. 4 to the proposed rule change, the Exchange proposes that the requirement that copies of execution reports be entered into an Exchange database be implemented within 6 months, instead of 15 months (as originally proposed), after Commission approval of the filing.

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 NYSE 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 and is set forth in sections A, B, and C below.

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

1. Purpose

The Exchange has adopted requirements for the electronic capture of orders at the point of sale (front end systemic capture, or “FESC”)[7] and proposed requirements for the electronic capture of orders at the point of receipt (order tracking system, or “OTS”).[8] The purpose of the requirements is to create a complete systemic record of orders handled by members and member organizations. These requirements will provide benefits both to the Exchange and members in terms of recordkeeping, surveillance and order processing. As originally filed in SR-NYSE-99-51, the proposed rule change consisted of amendment of Exchange Rule 132, and adoption of new Rules 132A, B and C on order tracking. These new rules require the recording of details of orders in Exchange listed securities by members and member organizations.

Amendment No. 1 effected a minor change to proposed NYSE Rule 132(B).[9] Amendment No. 2 proposed amendments to NYSE Rules 123 and 132 to require that members and member organizations provide a drop copy of the report of execution to FESC, with the unique order identifier linking the execution report to the original order, rather than requiring that the order identifier be submitted as part of audit trail post-trade processing.[10] Amendment No. 3 discussed the Exchange's position that data be submitted to the Exchange on an “as requested” basis rather than daily as a matter of routine under NYSE Rule 132C.[11]

As originally proposed in File No. SR-NYSE-99-51, the implementation date for the entire rule change and amendments would occur fifteen (15) months after Commission approval, if such approval is granted. The Exchange now proposes to amend this time frame with respect to the drop copy of execution reports requirement only (as described in Amendment No. 2 to the proposed rule change) to a shorter time frame, namely six (6) months after Commission approval of the filing. The Exchange believes that this is feasible since the system architecture for the Exchange database (FESC) is already in place. This six-month time frame should allow sufficient time for members and member organizations to do programming and training so that execution reports can be captured and drop-copied into the Exchange database. In addition, the Exchange believes that the phasing-in of the requirements will give members and member organizations time to better plan for full implementation of the rule changes proposed in File No. SR-NYSE-99-51.

2. Statutory Basis

The Exchange believes that the basis under the Act for Amendment No. 4 to this proposed rule change is the requirement under section 6(b)(5)[12] that an Exchange have rules that are designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The NYSE believes that this amendment to the proposed rule change will enhance the Exchange's tools to effectively surveil its market. The Exchange notes that the proposed rule change fulfills an undertaking contained in an order issued by the Commission relating to the Exchange's regulatory responsibilities.[13] Specifically, the Order directed the Exchange to “design and implement * * * an audit trail sufficient to enable the NYSE to reconstruct its market promptly. * * *” The Order called for “an accurate, time-sequenced record of orders * * *” throughout an order's life, from receipt through execution or cancellation and for synchronization of clocks used in connection with the audit trail of orders.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

The Exchange has neither solicited nor received written comments on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of 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 the proposed rule change, or

(B) Institute proceedings to determine whether the proposed rule change should be disapproved. Start Printed Page 11737

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. 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 NYSE. All submissions should refer to Amendment No. 4 of File No. SR-NYSE-99-51 and should be submitted by April 5, 2002.

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


3.  See Letter from James E. Buck, Senior Vice President and Secretary, NYSE, to Jennifer Colihan, Attorney, Division of Market Regulation (“Division”), Commission, dated May 22, 2000 (“Amendment No. 1”). In Amendment No. 1, the Exchange deleted the phrase “or execution” from proposed Rule 132B(a)(1)(C) as unnecessary for application of the Rule.

Back to Citation

4.  See Letter from Darla C. Stuckey, Assistant Secretary, NYSE, to Nancy J. Sanow, Assistant Director, Division, Commission, dated August 14, 2001 (“Amendment No. 2”). In Amendment No. 2, the Exchange proposed to: (1) amend Rule 123 by adding proposed paragraph (f) which would set forth the details required to be recorded of each execution report, including a unique order identifier, and (2) amend Rule 132.30 by deleting 132.30(10), which would have required a unique order identifier be added to the data elements in post trade processing. The Exchange represents that this change will ensure that a unique order identifier will be attached throughout the life of an order, thus simplifying the tracking process.

Back to Citation

5.  See Letter from Darla Stuckey, Corporate Secretary, NYSE, to Belinda Blaine, Associate Director, Division, Commission, dated January 17, 2002 (“Amendment No. 3”). In Amendment No. 3, the Exchange explained that it did not believe that it was cost-effective to store all order tracking data collected from members on a daily basis, and clarified that therefore members would be required to submit data to the NYSE on an “as requested” basis rather than daily as a matter of routine. The Exchange also represented that the data collected would be used solely for regulatory purposes, and that it would not use data received from its members pursuant to the proposed rules to gain a competitive advantage over another self-regulatory organization or broker-dealer. Lastly, the Exchange explained what it considered order origination and time of receipt of an order.

Back to Citation

6.  See Securities Exchange Act Release No. 45326 (January 23, 2002), 67 FR 4479.

Back to Citation

7.  See Securities Exchange Act Release No. 43689 (December 7, 2000), 65 FR 79145 (December 18, 2000).

Back to Citation

8.  See note 6, supra.

Back to Citation

9.  See note 3, supra.

Back to Citation

10.  See note 4, supra.

Back to Citation

11.  See note 5, supra.

Back to Citation

13.  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 (“the Order”).

Back to Citation

[FR Doc. 02-6262 Filed 3-14-02; 8:45 am]