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

[Federal Register Volume 60, Number 88 (Monday, May 8, 1995)]

[Notices]

[Pages 22596-22597]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 95-11231]

[[Page 22596]]

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35662; File No. SR-NYSE-95-06]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by New York Stock Exchange, Inc., Relating to Amendment of the

Exchange's Allocation Policy and Procedures

May 2, 1995.

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 February

28, 1995, 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 an amendment to the Exchange's

Allocation Policy and Procedures (the ``Policy'') which would limit, to

25%, the weight that the Specialist Performance Evaluation

Questionnaire (``SPEQ'') could be given in the Exchange's allocation

decision making process.

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 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 periodic reviews of its allocation process. As

the result of its most recent review, the Exchange is proposing to

amend the Policy to limit, to no more than 25%, the weight that he SPEQ

may be given in the allocation decision making process. Currently, the

Policy permits the Allocation Committee to grant up to one third weight

to SPEQ results in its allocation decisions. The Allocation Committee

also considers objective measures of specialist performance and its own

professional judgment in making its allocation decisions.

In 1992, the Exchange proposed to limit the weight that the SPEQ

could be given in the allocation decision making process to 25%.\1\ At

that time, there was no limit to the weight that the SPEQ could be

afforded. The Exchange proposed this limit in order to increase the

emphasis that its Allocation Committee would give to objective measures

of performance, as well as the Committee's expert professional

judgment. The Exchange also proposed, at that time, to amend the Policy

to state explicitly that its objective measures of performance also

included a specialist's TTV (twice total volume) rate, stabilization

rate, and any other measures that the Exchange might later adopt. While

the Commission stated its belief that it was appropriate to limit the

SPEQ's weight in order to increase the emphasis given to objective

measures of performance, it requested that the Exchange amend its

proposal to limit the weight granted the SPEQ to one third.\2\

\1\See Securities Exchange Act Release No. 33121 (October 29

1993), 58 FR 59085 (November 5, 1993).

\2\See Securities Exchange Act Release No. 33121, supra note 1,

at n.3.

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

Since 1992, the Exchange has developed two new objective measures

of specialist performance that it believes should play an important

role in allocation decisions. The first objective measure of

performance pertains to specialist capital utilization. Adopted in

December 1993, on a pilot basis, the capital utilization measure of

specialist performance focuses on a specialist unit's use of its own

capital in relation to the total dollar value of trading activity in

the unit's stocks.\3\ The pilot has been extended until June 30,

1995.\4\ The Allocation Committee is being provided with specialist

capital utilization information for its use in allocation decisions.

The second objective measure of performance, which was recently

developed, pertains to ``near neighbors.'' The Exchange has filed, on a

one year pilot basis, for Commission approval of this new measure.\5\

The ``near neighbors'' measure compares certain performance measures of

a given stock (price continuity, depth, quotation spread, and capital

utilization) to those of its ``near neighbors,'' i.e., stocks that have

certain similar characteristics. The Exchange would provide ``near

neighbor'' information to the Allocation Committee for its use in

allocating newly-listed stocks.

\3\See Securities Exchange Act Release No. 33369 (December 23,

1993), 58 FR 69431 (December 30, 1993).

\4\See Securities Exchange Act Release No. 35175 (December 29,

1994), 60 FR 2167 (January 6, 1995).

\5\See Securities Exchange Act Release No. 35661 (May 2, 1995)

(File No. SR-NYSE-95-05).

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

With the addition of these new objective measures of performance,

the Exchange believes that it would be appropriate to limit the weight

that the SPEQ is afforded in the allocation process to 25%.

2. Statutory Basis

The basis under the Act for the 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, in general, to protect investors and the public interest. The

proposed rule change is consistent with these objectives in that it

enables the Exchange to further enhance the process by which stocks are

allocated.

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 Act

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 [[Page 22597]]

(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, 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. Sec. 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-95-06 and should be

submitted by May 30, 1995.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95-11231 Filed 5-5-95; 8:45 am]

BILLING CODE 8010-01-M