[Federal Register Volume 59, Number 65 (Tuesday, April 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8081]
[[Page Unknown]]
[Federal Register: April 5, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33833; File No. 4-208]
Intermarket Trading System; Order Approving Eleventh Amendment to
the ITS Relating To Use of a Back-Up System
March 30, 1994.
On December 21, 1993, the Intermarket Trading System (``ITS'')
submitted to the Securities and Exchange Commission (``Commission'') an
amendment to the restated ITS Plan pursuant to Section 11A of the
Securities Exchange Act of 1934 (``Act''), 15 U.S.C. 78k-1, and Rule
11a3a-2 thereunder.\1\ The ITS participants filed the proposal to make
several technical amendments to the ITS Plan including amendments
relating to the use of a back-up system. Notice of the proposal
appeared in the Federal Register on February 1, 1994.\2\ The Commission
received no comments on the proposal. For the reasons discussed below,
the Commission is approving the proposal.
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\1\The ITS is a National Market System (``NMS'') plan approved
by the Commission pursuant to Section 11A of the Act and Rule 11Aa3-
2. The ITS was designed to facilitate intermarket trading in
exchange-listed equity securities based on current quotation
information emanating from the linked markets. Securities Exchange
Act Release No. 19456 (January 27, 1983), 48 FR 4938.
Participants to the ITS Plan include the American Stock
Exchange, Inc. (``Amex''), the Boston Stock Exchange, Inc.
(``BSE''), the Chicago Board Options Exchange, Inc. (``CBOE''), the
Chicago Stock Exchange, Inc. (``CHX''), the Cincinnati Stock
Exchange, Inc. (``CSE''), the National Association of Securities
Dealers, Inc. (``NASD''), the New York Stock Exchange, Inc.
(``NYSE''), the Pacific Stock Exchange, Inc. (``PSE''), and the
Philadelphia Stock Exchange, Inc. (``PHLX'').
\2\Securities Exchange Act Release No. 33520 (January 25, 1994),
59 FR 4731.
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The proposal makes several technical amendments to the ITS Plan to:
(1) Provide for use of a back-up system in the event ITS becomes
inoperable; (2) recognize the use of the Regional Computer Interface
(``RCI'') by the Amex; (3) eliminate references to line costs and line
sharing; (4) require a biennial rather than an annual audit by an
independent public accountant; (5) change all references to the Midwest
Stock Exchange, Inc. (``MSE'') to CHX; and (6) correct the addresses of
the CHX, CSE, and PSE.
The proposal adds Section 15 to the ITS Plan to provide for the use
of a back-up system. In the event the ITS system becomes inoperable,
ITS would utilize a designated NYSE operating system (``NYSE System'')
on a preemptive and priority basis. The NYSE System is comprised of
computers and peripheral equipment sufficient to operate ITS at a
minimum 50% of the ITS's rated 17 messages per second capacity and 75%
of the ITS's disk capacity. The NYSE System would assume the functions
of the ITS within two hours in the event of a limited disaster and on
the next day in the event of a full site disaster.
The proposal amends the ITS Plan to provide for the use of the RCI
by the Amex through the Amex Display Book Manager (``DBM''). The Amex
DBM is a computerized system that when fully implemented will, to some
extent, replace the original ITS stations on the Amex trading floor.
The proposal will permit communications, through the Amex DBM, between
the ITS and the Amex floor.
The proposal eliminates references in the ITS Plan to line costs
and line sharing. Because of technological advances, references to line
costs and line sharing are no longer applicable. The ITS Plan will
continue to delineate development and production costs.
The proposal amends the ITS Plan's audit provision to require a
biennial rather than an annual audit of expenses, allocations, and
computations, by an independent public accountant. The proposal
requires an internal audit to review all expenses, allocations, and
computations by ITS for those years when an independent audit is not
conducted.
The proposal provides other technical amendments to the ITS Plan.
The proposal changes all references to the MSE to CHX; and would
correct the addresses of the CHX, CSE, and PSE.
The Commission finds that approval of the amendment is consistent
with the Act, in particular, with sections 11A(a)(1) (C)(ii) and (D)
which provide for fair competition among the ITS participants and their
members, and the linking of all markets for qualified securities
through communications and data processing facilities which foster
efficiency, enhance competition, increase the information available to
brokers, dealers, and investors, facilitate the offsetting of
investors' orders, and contribute to the best execution of such orders.
The Commission also finds the amendment consistent with Rule 11Aa3-
2(c)(2) which requires the Commission to determine that the amendment
is necessary and appropriate in the public interest, for the protection
of investors and the maintenance of fair and orderly markets, to remove
impediments to, and perfect the mechanisms of, a national market system
or otherwise in furtherance of the purpose of the Act.
The proposal provides for the use of a back-up facility in the
event the ITS system becomes inoperable, and enhances order routing and
execution of communications between the Amex and the other ITS
participants. This will improve the efficiency and reliability of ITS,
especially during periods of high trading volume.\3\ The proposal
provides additional, technical amendments to the ITS Plan consistent
with ITS's purpose: To facilitate intermarket trading in exchange-
listed equity securities.
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\3\See Division of Market Regulation, Commission, Market 2000,
An Examination of Current Equity Market Developments, (January
1994), Appendix II.
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For the foregoing reasons, the Commission finds that the ITS
amendment is consistent with the Act and the rules and regulations
thereunder applicable to the ITS and, in particular, Sections 11A(a)(1)
(C)(ii) and (D) of the Act and Rule 11Aa3-2(c)(2).
It is therefore ordered, pursuant to Section 11A(a)(3)(B) of the
Act, that the amendment be, and hereby is, approved.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority, 17 CFR 200.30-3(a)(29).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8081 Filed 4-4-94; 8:45 am]
BILLING CODE 8010-01-M