[11740]
March 20, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 17-00
SEC RULES COMMITTEE No. 42-00
RE: INSTITUTE COMMENT LETTER ON RESCISSION OF NYSE RULE 390
______________________________________________________________________________
The Institute has filed a comment letter (attached) with the Securities and Exchange
Commission in connection with the proposed rule change filed by the New York Stock Exchange
(“NYSE”) to rescind NYSE Rule 390.
The comment letter states that, in general, the Institute supports the rescission of NYSE Rule
390. The letter states, however, that the Institute shares the NYSE’s concerns that approving the
rescission of the rule without fully considering the collateral effects on internalization may have
unintended adverse effects on the securities markets. The letter also states that we agree with the NYSE
that the practice of broker-dealer internalization raises concerns about whether agency orders are being
afforded an opportunity to receive the best possible price that may be available, as these orders do not
interact with other public orders in the markets, and questions whether true price discovery occurs in
these securities.
The Institute therefore supports the NYSE’s recommendation that the SEC adopt a market-
wide requirement that broker-dealers not be permitted to trade as principal with their own customer
orders unless they provide for “price improvement,” i.e., a price to the order that is better than the
national best bid or offer against which the order might otherwise be executed. The letter states that the
Institute believes, however, that the rescission of Rule 390 should not be delayed while the SEC
considers adopting a price improvement requirement.
Ari Burstein
Assistant Counsel
Attachment