[Federal Register Volume 59, Number 30 (Monday, February 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3359]


[[Page Unknown]]

[Federal Register: February 14, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33594; File No. SR-Phlx-93-49]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Regarding Unbundling of 
PACE Orders

February 8, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November 
3, 1993, the Philadelphia Stock Exchange, Inc. (``Phlx'' 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. On February 1, 1994, the Phlx submitted Amendment No. 1 
to the proposal.\1\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\See letter from Gerald D. O'Connell, Vice President, Market 
Surveillance, Phlx, to Sandy Sciole, Branch Chief, Commission, dated 
February 1, 1994. The amendment clarified the language of the rule 
to prohibit any such action for the purpose of attaining PACE 
guarantees by removing the word ``primary'' which originally 
preceded ``purpose''.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx, pursuant to Rule 19b-4 of the Act, proposes to adopt 
Commentary .19 to Phlx Rule 229\2\ to prohibit the unbundling of orders 
entered for execution through the Philadelphia Stock Exchange Automated 
Communication and Execution System (``PACE'').\3\ Specifically, 
Commentary .19 would read as follows:
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    \2\Rule 229 details the execution guarantees due a PACE order. 
See Philadelphia Stock Exchange Rules, Rule 229.
    \3\PACE is the Phlx's small order entry execution system.

    Orders received by a member from a customer may not be unbundled 
for the purpose of availing upon PACE volume and size execution 
guarantees, nor may a firm solicit a customer to unbundle an order 
the purpose of availing upon PACE volume and size execution 
guarantees.

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, set 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

1. Purpose
    The Phlx proposes to adopt Commentary .19 to Phlx Rule 229 in order 
to prohibit the unbundling of certain types of orders. PACE is the 
Exchange's automated order routing, delivery and execution system for 
equity securities. Pursuant to Phlx Rule 229, customer orders entered 
through PACE are entitled to certain execution guarantees. For example, 
limit orders for less than 600 shares become due an execution once 
1,000 shares of that security prints at the limit price or better on 
the New York Stock Exchange (``primary market guarantee'').\4\
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    \4\See Phlx Rule 229, Supplementary Material .10(a).
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    Unbundling occurs when a member organization or its agent splits a 
larger sized order into two or more small-sized orders to take 
advantage of PACE execution guarantees for orders of less than 600 
shares. The Phlx proposal would prohibit members from soliciting their 
customers to unbundle orders for the purpose of taking advantage of 
these guarantees. However, the proposed prohibition against unbundling 
does not extend to any orders broken up by a non-member customer at his 
or her own discretion as long as the customer was not solicited to do 
so by the Phlx member firm for the aforementioned purpose.
2. Statutory Basis
    The proposed rule change is consistent with Section 6 of the Act in 
general, and in particular, with section 6(b)(5), in that it is 
designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, as 
well as to protect investors and the public interest, consistent with 
section 6(b)(5).

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx 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

    The Phlx has neither solicited nor received written comments on the 
proposed rule change.

 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. Person making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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. 552, will be available for inspection and copying at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the Phlx. All 
submissions should refer to File No. SR-Phlx-93-49 and should be 
submitted by March 7, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3359 Filed 2-11-94; 8:45 am]
BILLING CODE 8010-01-M