Directors of the New York Stock Exchange yesterday approved in principle a rule that would establish a new category of member on the trading floor - the registered competitive market-maker.
The action was a response to a recent directive of the Securities and Exchange Commission, which as of May 1 will sharply restrict the activities of the present competitive traders. Competitive traders are NYSE members whose main activity is buying and selling stocks for their own accounts.
While limiting exchange members, trading for their own accounts, the SEC directive provided an exemption for "any transaction by a dealer acting in the capacity of market-maker."
The new NYSE rule is aimed at qualifying the competitive trader for the market-maker exception.
Under the proposed rule the registered competitive market-maker will not have to confine his trading activities to any particular securities. However, he will have affirmative and negative obligations whenever he enters the trading crowd of any stack.
The NYSE said these that:
He not engage in transactions not reasonably calculated to contribute to the maintenance of a fair and orderely market.
At the request of a floor official, or a floor broker holding an unexecuted customer's order, he make a bid or offer reasonably calculated to contribute to the maintenance of a fair and orderely market.
A second rule adopted by the NYSE board would create another category of member - the registered odd-lot bond dealer. He would be permitted to buy and sell bons for his own account provided he restricted his transactions to those reasonably necessary to function as an odd-lot dealer.
The two new rules will be submitted to the SEC for approval.