[12100]
June 23, 2000
TO: EQUITY MARKETS ADVISORY COMMITTEE No. 37-00
RE: NYSE PROPOSED RULE CHANGE RELATING TO THE IMPLEMENTATION OF NYSE
DIRECT+
The Securities and Exchange Commission (“SEC”) has published for comment a proposed rule
change filed by the New York Stock Exchange1 relating to NYSE Direct+, a new facility of the Exchange
which would provide automatic execution of limit orders of 1,099 shares or less (“auto ex” orders). In
particular, the proposed rule change would, among other things, amend existing NYSE rules to define an
“auto ex” order and implement several new NYSE rules governing trading through NYSE Direct+.
Under the proposed rules, an auto ex order would be defined as a limit order of 1,099 shares or
less priced at or above the NYSE’s published offer, in the case of an order to buy, or at or below the
NYSE’s published bid, in the case of an order to sell, that will receive an automatic execution against the
interest reflected in the published quotation, provided the size of the published quotation is greater than
100 shares.
The proposed rules provide that orders of greater than 1,099 shares may not be broken down into
smaller orders in order to receive an automatic execution. In addition, the proposed rules provide that
auto ex orders for the same customer may be entered at time intervals of no less than 30 seconds between
entry of each order for the same stock.
The proposed rules also list six situations where the auto ex facility would not be available due to
market situations, lack of depth in the published quotation, or inappropriate pricing of the auto ex order,
and provides that an auto ex order that cannot be immediately executed for any of these six reasons will
be automatically entered for execution in the NYSE's auction market. The proposed rules also provide
that if the depth of the published bid or offer is not sufficient to completely fill an auto ex order, the
unfilled balance of the order will be routed to the NYSE floor and will be displayed in the auction market.
In addition, if the automatic executions of auto ex orders result in the execution of all trading interest
reflected in the NYSE’s published quotation at the bid or offer price, the Release states that the NYSE
will disseminate a bid or offer at that price of 100 shares until the specialist “re-quotes” the market.
The proposal would be implemented at the outset as a pilot program in a limited number of stocks
before being made available to all stocks. The Release states that the NYSE has discussed with SEC staff
the possibility of limiting the term of the pilot program to a one year period and that the NYSE has not yet
determined which stocks will be eligible for automatic execution under the pilot.
1 Securities Exchange Act Release No. 42913 (June 8, 2000), 65 FR 37587 (June 15, 2000) (“Release”).
2Comments on the proposed rule change are due to the SEC no later than July 6, 2000. If
you have any comments you would like the Institute to consider including in a possible comment
letter, please provide them to the undersigned by phone at (202) 371-5408, by fax at (202) 326-5839,
or by e-mail at aburstein@ici.org no later than June 29.
Ari Burstein
Assistant Counsel
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