Self-Regulatory Organizations; Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Amendments to the Allocation Policy and Procedures

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34325; File No. SR-NYSE-94-18]

Self-Regulatory Organizations; Filing of Proposed Rule Change by

the New York Stock Exchange, Inc. Relating to Amendments to the

Allocation Policy and Procedures

July 7, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on May

26, 1994, the New York Stock Exchange, Inc. (``NYSE'' or ``Exchange'')

filed with the Securities and Exchange Commission (``Commission'' or

``SEC'') the proposed rule change as described in Items I, II and III

below, which Items have been prepared by the self-regulatory

organization. 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 consists of amendments to the Exchange's

Allocation Policy and Procedures.\1\

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\1\The exact text of the proposed rule change was attached as

Exhibit A to File No. SR-NYSE-94-18 and can be obtained at the

places specified in Item IV below.

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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 self-regulatory organization

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. The self-regulatory organization

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

The intent of the Exchange's Allocation Policy and Procedures

(``Policy'') is to ensure that each security is allocated in the

fairest manner possible to the best specialist unit for that security.

In order to enhance its stock allocation decisions, the Exchange

conducts a periodic review of its allocation process. As the result of

the Exchange's most recent review, a number of changes to the Policy,

discussed below, are being proposed.

The Exchange proposes to change the composition of the Allocation

Committee (the committee that determines which specialist unit will

specialize in a particular security). The Committee, which consists of

nine members, would include three broker Governors\2\ (one of whom may

be an independent/two-dollar broker),\3\ four other Floor brokers from

the Allocation Panel (one of whom must be an independent/two-dollar

broker), and two allied members\4\ from the Market Performance

Committee or the Panel. For options allocations, only one Governor

would sit on the Committee. Currently, only one Governor sits as a

member of the Allocation Committee, and the policy does not require

that one member of the Committee be an independent/two-dollar broker.

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\2\A Floor Governor is an individual, designated as such by the

Chairman of the Exchange's Board of Directors, who is empowered to

perform any duty, make any decision or take any action assigned to

or required of a Floor Director as prescribed by the rules of the

Exchange's Board of Directors.

\3\The Exchange defines an ``independent/two-dollar broker'' as

a member on the Exchange floor acting as a broker for other members.

\4\An allied member is a general partner, principal executive

officer or employee who controls a member firm or member

organization.

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The Exchange is proposing to change the quorum requirement for the

Allocation Committee to require that at least two Floor Broker

Governors be present out of the seven member quorum. For options

allocations, a quorum would include one Governor. Currently, only one

Governor is required for a quorum.

The Exchange is proposing to allow Governors to serve as chairman

of the Allocation Committee. Currently, they are not eligible to serve.

The Policy would also be amended to require all candidates for chairman

to have prior experience on the Allocation Committee.

The Exchange proposes to amend the Policy to state that all

incoming Allocation Committee members are expected to observe as many

Committee meetings as possible prior to beginning their terms as

Committee members.

The Exchange is proposing to change the composition of the

Allocation Panel (the 36 member group from which the Allocation

Committee is drawn). The panel would be composed of 36 members,

including 28 Floor brokers and eight allied members, plus the eight

broker Governors and four allied members serving on the Exchange's

Market Performance Committee. Currently, the four allied members of the

Market Performance Committee do not serve on the Panel.

Selection to the Allocation Panel currently occurs through an

annual appointment process which utilizes input from the membership.

The Exchange is proposing to amend the Policy to require Panel members

to be nominated by the Exchange membership.

To be eligible to serve on the Allocation Panel, the Exchange

currently requires Floor brokers to have five years of trading Floor

experience. The Policy also states that to the maximum extent possible,

the Panel should consist of a core group of experienced, senior

professionals, such as former Allocation Committee chairmen, senior

Floor Officials, and current and former Floor Governors. In the case of

allied members, the member organization is appointed to the Panel and

it selects a representative to serve. The Exchange is proposing to

amend the Policy to require that the allied members chosen to serve

have at least five years of experience in trading listed equities and

have a senior position on the trading desk. The Policy would also be

amended to permit allied members to designate one alternate who meets

the Panel qualifications, subject to approval by the Floor Directors.

The Exchange is proposing to amend the Policy to provide for a four

month term of service on the Allocation Committee for all members,

including Governors. The current terms are six months for non-Governor

members and two months for Governors. The Exchange is also proposing to

codify the existing practice of permitting Panel members to serve a

maximum of six consecutive one year terms and to stagger terms so that

every two months four or five members would rotate from the Allocation

Committee.

Finally, the Exchange is proposing to codify its practice on the

allocation of merging listed companies. The Policy would be amended to

state that when two listed companies merge, the new entity would be

assigned to the specialist in the company determined to be the

surviving/dominant company. If no surviving/dominant company could be

identified, the entity would be referred to the Allocation Committee

for allocation. Currently, the Market Performance Committee, with the

assistance of Exchange Counsel and the Marketing Division, makes the

determination of which company is the surviving/dominant company.

(2) Statutory Basis

The basis under the Act for this proposed rule change is the

requirement under Section 6(b)(5) 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 proposed amendments are consistent with these

objectives in that they enable the Exchange to further enhance the

process by which stocks are allocated to ensure fairness and equal

opportunity in the process.

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 other 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.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and

arguments concerning the foregoing. 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

of 5 U.S.C. Sec. 552, will be available for inspection and copying at

the Commission's Public Reference Room, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of the 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-94-18 and should be

submitted by August 11, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-16896 Filed 7-12-94; 8:45 am]

BILLING CODE 8010-01-M