Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the New York Stock Exchange, Inc. Relating to a Proposed Extension of the Trading Halt Provisions of Rule 80B

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34799 ; File No. SR-NYSE-94-33]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change and Amendment No. 1 Thereto by the New York Stock Exchange, Inc.

Relating to a Proposed Extension of the Trading Halt Provisions of Rule

80B

October 6, 1994.

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

(``Act''),\1\ notice is hereby given that on September 22, 1994, 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 self-regulatory organization. On September 30,

1994, the Exchange filed Amendment No. 1 to the proposed rule

change.\2\ The Commission is publishing this notice to solicit comments

on the proposed rule change from interested persons.

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\1\15 U.S.C. 78s(b)(1).

\2\In Amendment No. 1, the NYSE requests that the Commission

find good cause for accelerating approval of its proposal pursuant

to Section 19(b)(2) of the Act to allow approval of its proposal

prior to the October 31, 1994 expiration of the Rule 80B temporary

approval. In addition, Amendment No. 1 corrects a typographical

error appearing in Section I of Exhibit 1 to the filing by replacing

1994 with 1995. See letter from Brian M. McNamara, Vice President,

Market Surveillance, NYSE, to Sharon Lawson, Assistant Director,

Division of Market Regulation, Commission, dated September 29, 1994

(``Amendment No. 1'').

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

of the Proposed Rule Change

The Exchange proposes to extend the effectiveness of the ``circuit

breaker'' provisions of Exchange Rule 80B until October 31, 1995.

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

Rule 80B provides, in part, that if the Dow Jones Industrial

Average (``DJIA'') falls 250 or more points below its previous trading

day's closing value, trading in all stocks on the Exchange will halt

for one hour. It further provides that if on the same day the DJIA

drops 400 or more points from its previous trading day's close, trading

on the Exchange will halt for two hours.

Rule 80B was enacted in response to studies of the October 1987

Market Break. Following the Market Break, numerous market analyses and

reports were undertaken. One such report was the Interim Report of the

Working Group on Financial Markets (``Working Group'') issued in May

1988 by the Undersecretary for Finance of the Department of the

Treasury, and the Chairmen of the Commission, the Commodity Futures

Trading Commission and the Board of Governors of the Federal Reserve

System. The Working Group recommended ``coordinated trading halts and

reopenings for large, rapid market declines that threaten to create

panic conditions.'' The Working Group specifically recommended, and the

Exchange endorsed, temporary halts in the trading of all stocks, stock

options, and stock index options as well as the trading of stock index

futures and options on stock index futures when the DJIA reaches

certain trigger values. The Presidential Task Force on Market

Mechanisms, (``Brady Commission''), also endorsed the concept of

coordinated market trading halts.

Rule 80B was approved by the Commission on a pilot basis on October

19, 1988, and has been extended for another year every October since

then. This pilot is due to expire on October 31, 1994. Since the

original adoption of the rule in 1988, the provisions of Rule 80B have

not been triggered. The Exchange continues to believe that coordinated

trading halts and reopenings during large, rapid market declines is a

viable concept, and is therefore seeking to extend the effectiveness of

Rule 80B for another year, until October 31, 1995.

The Exchange adopted Rule 80B with the understanding that all

United States stock exchanges and the National Association of

Securities Dealers would adopt rules or procedures substantively

identical to Rule 80B with respect to the trading of stocks, stock

options and stock index options, and that the Chicago Board of Trade,

the Chicago Mercantile Exchange, the Kansas City Board of Trade and the

New York Futures Exchange would adopt rules halting the trading of

stock index futures and options on such futures contracts under

circumstances substantively identical to those contained in Rule 80B.

The Exchange is seeking the extension of the effectiveness of Rule 80B

with the understanding that the market centers referred to above will

similarly extend the effectiveness of their respective rules which are

substantively identical to Rule 80B.

The Exchange believes that its proposal is consistent with the

requirement of Section 6(b)(5) of the Act that an Exchange have rules

that are designed to promote just and equitable principals of trade,

remove impediments to, and perfect the mechanism of, a free and open

market, and in general protect investors and the public interest. The

Exchange believes that extending the effectiveness of Rule 80B for an

additional year is consistent with these objectives in that a trading

halt requirement during a period of significant stress can be expected

to provide market participants with a reasonable opportunity to become

aware of and respond to significant price movements, thereby

facilitating, in an orderly manner, the maintenance of an equilibrium

between buying and selling interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The NYSE believes that the proposed rule change will not 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

The Exchange requests that the Commission find good cause for

approving its proposal prior to the thirtieth day after publication in

the Federal Register to allow for the uninterrupted effectiveness of

Exchange Rule 80B which otherwise expires on October 31, 1994.

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 such 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. 552, will be available for inspection and copying in the

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

Washington, D.C. Copies of such filing will also be available for

inspection and copying at the principal office of the above-mentioned

self-regulatory organization. All submissions should refer to File No.

SR-NYSE-94-33 and should be submitted by November 4, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\3\

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\3\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-25480 Filed 10-13-94; 8:45 am]

BILLING CODE 8010-01-M