Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by New York Stock Exchange, Inc. Relating to Amendments to Exchange Rule 104.13

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35019; File No. SR-NYSE-94-38]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by New York Stock Exchange, Inc. Relating to Amendments to

Exchange Rule 104.13

November 29, 1994.

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

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

26, 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. 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 NYSE Rule 104.13

regarding investment account transactions of specialists and related

parties. The text of the proposed rule change is as follows, with

language to be deleted in brackets and language to be added in italics:

Rule 104

.13 Investment Transactions

(a) Any transactions effected for the benefit of any of the

following [accounts] persons in stocks in which a specialist is

registered must be for investment purposes:

* * * * *

(d) [Specialists should not originate orders in the stocks in

which they are registered for any accounts over which they exercise

investment discretion.] No specialist, and no member, allied member,

approved person (other than an approved person entitled to an

exemption from this rule pursuant to Rule 98) affiliated with such

specialist, officer, employee or person active in the business of

the specialist shall originate orders in stocks in which such

specialist is registered for any account over which they exercise

investment discretion.

(e) Transactions in a stock in which a specialist is registered

effected for trust accounts, including ``blind'' accounts, for the

benefit of such specialist or any person specified in paragraph (a)

shall be subject to the provisions of this rule. Transactions in a

fund which invests broadly in securities and which may from time to

time invest in a securities in which a specialist is registered,

shall not be subject to this rule.

Rule 98 Guidelines

(a) * **

The Exchange Rules listed below impose certain restrictions on

an approved person who is associated with the specialist member

organization.

* * * * *

Rule 104.13 provides that any transaction for the

[account] benefit of an approved person associated with a specialist

member organization, in any stock in which a specialist in the

specialist member organization is registered, must be for investment

purposes and effected in a stabilizing manner, and precludes an

approved person from originating an order in such stock for any

account over which such approved person exercises investment

discretion.

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

Rule 104.13 requires that transactions effected in speciality

stocks for the accounts of specified persons affiliated with or related

to a specialist must be for investment purposes and executed in

accordance with certain restrictions relating to the price at which

transactions may take place, known as ``tick'' restrictions. The

accounts specified in the rule include accounts of employees or parties

active in the business of the specialist, the spouse or children

residing in the same household as a specialist or persons active in the

specialist business, and any approved person (individual or entity in a

control relationship) of the specialist, other than an approved person

entitled to an exemption pursuant to Exchange Rule 98.\1\

---------------------------------------------------------------------------

\1\NYSE Rule 98 and its Guidelines provide exemptions from

various Exchange rules affecting approved persons affiliated with

specialists, including Rule 104.13. The exemption is predicated on

the existence of procedures to achieve a functional separation

between the specialist organization and the approved person.

---------------------------------------------------------------------------

The Exchange believes it is appropriate to amend Rule 104.13 to

make it clear that the investment account transaction requirements

contained in the rule apply to transactions effected ``for the benefit

of'' the parties specified in the rule, rather than simply to

transactions effected for the ``account'' of such parties. This would

apply, for example, to situations where transactions may not be

effected directly for the ``account'' of one of the parties specified

in the rule, but may be effected for an account in which one of these

specified parties has a beneficial interest. The rule would also make

it clear that specialists, and persons associated with specialists, may

not originate orders in specialty stocks for any accounts over which

they exercise investment discretion.

The Exchange also is proposing to amend NYSE Rule 104.13 to make it

clear that the rule applies to transactions effected for the benefit of

trust accounts, including so-called ``blind'' trust accounts, of any

person specified in the rule. NYSE Rule 104.13 would be further amended

to provide that transactions in a broad-based fund, which may from time

to time invest in a specialty stock in the course of investing in

numerous stocks, would not be subject to the rule.

The Exchange also is proposing to amended the Guidelines to Rule 98

to reflect the amendments to NYSE Rule 104.13 noted above.

2. Statutory Basis

The basis for the proposed rule change is the requirement under

Section 6(b)(5) of the Act 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, in general to protect investors and the public interest. The

proposed amendments are consistent with these objectives in that they

ensure that the restrictions contained in Rule 104.13 are appropriately

applied to accounts that benefit the persons subject to its provisions.

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

The Exchange does not believe that the proposed rule change will

impose any inappropriate burden on competition that is not necessary or

appropriate in futherance 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 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

Interests 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 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 at the

Commission's Public Reference Section, 450 Fifth Street NW.,

Washington, DC 20549. 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-94-38 and should be

submitted by December 27, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-29934 Filed 12-5-94; 8:45 am]

BILLING CODE 8010-01-M