Notice N55/99
LONDON STOCK EXCHANGE
9 September 1999
For the attention of the
chairman/senior partner/compliance officer,
all member firms N55/99
STOCK EXCHANGE NOTICE
CONSULTATION ON PROPOSED RULE AMENDMENTS
RULE AMENDMENT PACKAGE
1. As part of a periodic review of issues raised, the Exchange has
identified a number of rules and guidance notes requiring amendment or
additional explanation. This Notice and the attachment to it sets out the
proposed amendments for consultation.
2. Additions to existing wording are underlined and deletions struck
through. Member firms are invited to comment on the proposed amendments by
8th October 1999. After this date, a further Notice will be issued setting
out the final version of the amended rules and guidance and confirming the
effective date of the changes.
Explanatory notes to proposed changes
3. Definitions
(i) The definition of riskless principal transaction has been amended so that
it captures transactions which are worked during the day and allocated to the
customer's account immediately following each transaction.
(ii) The unique transaction identifier ('UTI') definition has been amended to
indicate that it can be an alphanumeric reference and also to state that, in
relation to order book trades, the trade code allocated by the trading system
forms the UTI.
(iii) The definition of when issued dealing has been amended to clarify that
such transactions are conditional upon listing. This accompanies the change
to rule 2.11 outlined overleaf.
4. Chapter 2 - Core Rules
(i) The wording of rule 2.3(e)(v), which relates to the requirement to
publicly announce the offer price prior to the start of when
issued dealing, has been revised so that it no longer requires the
announcement to be made on the day prior to the start of when issued dealing.
In addition, the rule has been amended to require that allocation details must
accompany the public announcement before when issued dealing can take place.
This ensures that retail shareholders are not disadvantaged by not knowing the
basis of their allocations at the start of dealing.
(ii) Rule 2.11 has been amended to clarify that when issued dealings do not
need individual conditional bargain permission.
(iii) An amendment to rule 2.14 accompanies the amendments made to rules 3.24
and 3.26, which now refer to the rules of the exchange on which a transaction
is executed rather than where the security is principally listed or quoted.
This allows a transaction to be conducted in accordance with the rules and
market practices of the exchange on which the transaction is actually dealt.
5. Chapter 3 - International equity market
(i) Rules 3.24 and 3.26 have been amended as described in paragraph 4 (iii)
above.
6. Chapter 4 - Domestic equity market
(i) Rule 4.10 has been amended to make it clear that a reduced size market
maker has no obligations to deal with a normal size market maker, unless the
reduced size market maker is quoting sole best bid or offer price at the time
it is challenged.
(ii) New guidance has been added to rule 4.44 which states that a market maker
will be expected to honour its obligations, whether or not a challenge is
received on a dedicated challenge line.
(iii) New guidance has been included, with reference to rule 4.74, on the
treatment of WPAs in situations where a customer wants to split an order into
cum and ex transactions.
7. Chapter 8 - Transaction and trade reporting
(i) Rule 8.1(a) has been amended to make the rule market specific throughout.
(ii) A new rule 8.4A has been added to ensure that member firms do not
duplicate trade reports unless permitted to do so by rule 8.15(c). Currently,
instances of over-reporting would be dealt with under the misleading acts rule
2.9 concerning misleading acts. A separate rule has been added, since the
Exchange considers rule 2.9 to be too far reaching in this respect.
However, any acts of duplicate reporting which are found to be deliberate
attempts to mislead the market will be treated as breaches of rule 2.9.
(iii) Rule 8.20 has been amended so that transactions in all markets between
member firms and non-member broker dealers carry the 'B' trade type indicator.
(iv) New guidance has been added to rule 8.27 to state that Exchange For
Physical (EFP) transactions should be treated as non-protected portfolio
transactions for the purposes of trade reporting, where they involve more than
20 securities.
8. Chapter 10 - Settlement and Clearance
(i) Guidance on rollover trades has been added to rule 10.2, which became
effective on 4 January 1999. It includes guidance concerning responsibilities
of member firms that use Model B clearing firms.
(ii) Rule 10.11 has been amended in order to oblige all member firms granted
an exemption under 10.11(a) and (b) to include their name and date of onward
delivery on stock transfer forms or subsequent split transfer forms.
9. Appendix 3 - Delivery of securities
(i) The rules relating specifically to the delivery of transfers for
Australian securities and Australian marked documents are no longer considered
relevant to current market practice. Therefore, rules A3.5(b), A3.5(c), A3.8
and A3.9 have been deleted.
A E Scott-Bishop
Head of Regulatory Development
Any comments or queries on this Notice should be addressed to the Market
Regulation department, telephone 0171 797 3291 (STX 33291).
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