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. 1 to Proposed Rule Change To Adopt a New Specialist Performance Measure

[Federal Register Volume 62, Number 230 (Monday, December 1, 1997)]
[Notices]
[Pages 63592-63593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31389]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39344; File No. SR-NYSE-96-34]


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. 1 to Proposed 
Rule Change To Adopt a New Specialist Performance Measure

November 21, 1997.

I. Introduction

    On December 3, 1996, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to 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 adopt a new specialist performance measure.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that it previously approved the portion 
of the proposed rule filing making permanent the Near Neighbor, 
Capital Utilization and Rule 103A pilot programs for measuring 
specialist performance. See Securities Exchange Act Release No. 
38150 (January 10, 1997), 62 FR 2704 (January 17, 1997). This order 
approves the remaining portion of the proposed rule change to adopt 
a new specialist performance measure, ``adjusted stabilization.''
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    Notice of the proposed rule change, together with the substance of 
the proposal, was published for comment in Securities Exchange Act 
Release No. 38150 (January 10, 1997), 62 FR 2704 (January 17, 1997). No 
comments were received on the proposal. The Exchange filed Amendment 
No. 1 to the proposed rule change on October 23, 1997.\4\
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    \4\ Amendment No. 1 states that the new performance measure, 
adjusted stabilization, will be solely for use by the Allocation 
Committee, and that the information will be provided to the 
Allocation Committee on a one-year pilot basis. See letter from 
James E. Buck, Senior Vice President, NYSE, to Michael Walinskas, 
Senior Special Counsel, Market Regulation, Commission, dated October 
22, 1997.
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II. Description

    The Exchange proposes to add on a one-year pilot basis, solely for 
use by the Allocation Committee in evaluating specialist performance, 
the concept of

[[Page 63593]]

``adjusted stabilization'' rates. Specialists are expected to stabilize 
stock price movements by buying and selling from their own accounts 
against the prevailing trend of the market. The current definition of 
stabilization is dealer purchases on minus and zero minus ticks, and 
sales on plus and zero plus ticks. The Exchange believes that certain 
trades outside of the definition of stabilization are not necessarily 
destabilizing. These would consist of proprietary zero plus tick 
purchases on the current bid (provided the current bid is below the 
offer at the time of the immediately preceding trade) and proprietary 
zero minus tick sales on the current offer (provided the current offer 
is above the bid at the time of the immediately preceding trade). 
Hence, the Exchange is grouping these trades with the trades within the 
current definition of stabilization to form an ``adjusted 
stabilization'' category for review by the Allocation Committee. 
Adjusted stabilization rate information would be provided, on a one-
year pilot basis, solely to the Allocation Committee to assist it in 
assessing the value added by specialists to the depth and liquidity of 
stocks they currently trade.

III. Discussion

    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, and, in 
particular, with the requirements of Section 6(b).\5\ Specifically, the 
Commission believes the proposal is consistent with the Section 6(b) 
(5) requirements that the rules of an exchange be designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts, and, in general, to protect investors and the 
public.\6\
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    \5\ 15 U.S.C. 78f(b).
    \6\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    The Commission believes that the proposed rule change is reasonable 
under the Act in that continuing to further develop objective measures 
of specialist performance, by adopting the ``adjusted stabilization'' 
measure, should help perfect the mechanism of a free and open market 
and protect investors and the public interest. The Commission believes 
that ``adjusted stabilization'' is a useful concept because it could 
reflect liquidity added to the market by specialists that is not 
otherwise captured by the current definition of stabilization, by 
reflecting the fact that on certain zero plus tick purchases or zero 
minus tick sales the specialist is not initiating either a transaction 
or a price change, but is adding depth to the market at prices at which 
transactions have already occurred.
    The Commission finds good cause to approve Amendment No. 1 to the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. 
Specifically, Amendment No. 1 will ensure that the new measure of 
specialist performance is used solely by the Allocation Committee to 
help evaluate specialist performance and the depth and liquidity 
specialists add to the stocks they trade. Also, by providing for the 
new measure on a one-year pilot basis, the Exchange will be able to 
monitor the success of the new performance measure in helping to 
evaluate specialist performance. In addition, the substance of the 
proposed rule change was noticed for the full statutory period and no 
comments were received. Accordingly, the Commission believes that it is 
consistent with Section 6(b)(5) of the Act to approve Amendment No. 1 
to the proposal on an accelerated basis.
    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1 to the rule proposal. 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 
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 on 5 U.S.C. 552, will be 
available for inspection and copying at the Commission's Public 
Reference Room. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-NYSE-96-34 and should be 
submitted by December 22, 1997.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the portion of the proposed rule change (SR-NYSE-96-34) 
involving the adoption of ``adjusted stabilization'' rate information 
as a specialist performance measure,\8\ as amended, is approved on a 
one-year pilot basis through November 21, 1998.

    \7\ 15 U.S.C. 78s (b) (2).
    \8\ The Commission notes that this order only approves a portion 
of the proposed rule change. See supra note 3.
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a) (12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-31389 Filed 11-28-97; 8:45 am]
BILLING CODE 8010-01-M