Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by New York Stock Exchange, Inc. Relating to Amendments to Rule 80B (Trading Halts Due to Extraordinary Market Volatility) and Rule 51 (Hours of Business)

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-37145; File No. SR-NYSE-96-09]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

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

80B (Trading Halts Due to Extraordinary Market Volatility) and Rule 51

(Hours of Business)

April 26, 1996.

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

April 11, 1996, 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 Exchange proposes to amend Rule 80B to modify the time periods

for halting trading on the Exchange when the Dow Jones Industrial

Average (``DJIA'')* has declined by 250 or 400 points. The Exchange

proposes to amend Rule 51 to permit closing transactions after 4 p.m.

if Rule 80B is put into effect during the last half-hour of trading (in

the event of a 250-point decline) or during the last hour of trading

(in the event of a 400-point decline).

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*``Dow Jones Industrial Average'' is a service mark of Dow Jones

& Company, Inc.

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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, wet 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

2. Purpose

Rule 80B provides, in part, that if the 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. The Exchange is now proposing to revise those time periods to

one-half hour and one hour, respectively.\1\

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\1\ The NYSE has represented to the Commission that it will use

the intermarket telecommunications system known as Information

Network for Futures, Options, and Equities (``INFOE'') system as

well as the Consolidated Tape to announce the precise time when the

circuit breaker thresholds are reached. Telephone conversation

between Brian McNamara, Vice President, Market Surveillance, NYSE,

and Alton Harvey, Office Head, Division of Market Regulation, SEC on

April 24, 1996.

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Rule 80B currently also provides that if the 250-point trigger is

reached during the last hour, but before the last half-hour, of

trading, or if the 400-point trigger is reached during the last two

hours, but before the last hour, of trading, the Exchange may use

abbreviated reopening procedures either to permit trading to reopen

before 4:00 p.m. or to establish closing prices. Rule 80B further

provides that if the 250-point trigger is reached during the last half-

hour, or if the 400-point trigger is reached during the last hour, the

Exchange shall not reopen for trading on that day. The Exchange is

proposing to amend Rule 80B to provide that if the 250-point trigger is

reached during the last half-hour of trading, or if the 400-point

trigger is reached during the last hour of trading, the Exchange may

use abbreviated reopening procedures to establish new last sale

prices.\2\

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\2\ The text of the proposed rule change provides that the NYSE

may use abbreviated reopening procedures to establish new last sale

prices when the 250-point or 400-point trigger is reached at 3:30

p.m. or 3:00 p.m. respectively. Notwithstanding the Rule's reference

to specific times, however, the Exchange has interpreted its

proposed rule change as allowing the use of such reopening

procedures anytime the 250-point or 400-point levels are triggered

thirty minutes or one hour before the scheduled close, in the event

that the Exchange is scheduled to close earlier than 4:00 p.m.

Telephone conversation between Brian McNamara, Vice President,

Market Surveillance, NYSE, and Alton Harvey, Office Head, Division

of Market Regulation, SEC on April 24, 1996.

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Such closing transactions may need to be effected after 4:00 p.m.

Accordingly, the Exchange is proposing to amend Rule 51 to provide that

the 9:30 a.m. to 4:00 p.m. trading session may be extended to permit

closing transactions pursuant to Rule 80B. The Exchange proposes to

amend Rule 51 on a permanent basis.

Based on constituent input and in consultation with the Working

Group on Financial Markets (``Working Group''),\3\ the Exchange

believes that it is appropriate to reduce the time period during which

trading will be halted, particularly given the current level of

automation support for the trading process. These revised time periods

should be sufficient to provide a meaningful ``time out'' for

participants to evaluate changing market conditions, without unduly

constraining trading activity. The Exchange is not proposing, at this

time, to revise the 250/400 point triggers. The Exchange intends to

continue discussions with its constituents as to whether any revisions

to these point parameters might be appropriate.

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\3\ The Working Group on Financial Markets was established by

the President in March 1988 to determine what coordinated regulatory

actions were necessary to strengthen the nation's financial markets

in the aftermath of the October 1987 market break. The Working Group

consists of the heads of the Commission, the Board of Governors of

the Federal Reserve System, the Commodity Futures Trading

Commission, and the Department of the Treasury.

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With respect to the use of abbreviated reopening procedures, the

Exchange believes that if the trigger value is reached and trading

halted during the last half-hour, respectively, of trading, it may be

appropriate to provide the opportunity to establish new last sale

prices. In that regard, the Exchange will be assessing whether

additional procedures to facilitate a single trade auction are

appropriate. Such procedures would be filed with the Commission for

approval.

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

19, 1988, and has been extended for an additional one year period every

year since then, currently running to October 31, 1996. The Exchange is

proposing to adopt these amendments to Rule 80B to coincide with that

year-to-year pilot.

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 Exchange believes that amending Rule 80B on a one-

year pilot basis and amending Rule 51 is consistent with these

objectives in that the revised trading halt periods and opportunity to

establish new last sale prices 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 Exchange does not believe that the proposed rule change will

impose any inappropriate burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants, or Others

No written comments were either solicited or received.

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 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 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.,

[[Page 19653]]

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 Section, 450 Fifth Street, N.W., Washington, D.C. 20549.

Copies of such filing will also be available for inspection and copying

at the principal office of the Exchange. All submissions should refer

to File No. SR-NYSE-96-09 and should be submitted by May 23, 1996.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 96-10924 Filed 5-1-96; 8:45 am]

BILLING CODE 8010-01-M