[Federal Register Volume 59, Number 135 (Friday, July 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17258]


[[Page Unknown]]

[Federal Register: July 15, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34347; File No. SR-Amex-94-25]

 

Self-Regulatory Organizations; Notice of Filing and Order 
Granting Partial Accelerated Approval of Proposed Rule Change by the 
American Stock Exchange, Inc. Relating to Increasing the Share 
Parameters for Orders Entered Through PER

July 11, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 23, 1994, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1991).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to increase the share parameters, from 5,099 
to 30,099 shares, for orders entered through the Exchange's Post 
Execution Reporting (PER) system.
    The Exchange requests the Commission to find good cause, pursuant 
to section 19(b)(2) of the Act, for approving the portion of the 
proposed rule change that would increase PER eligibility from 5,099 to 
30,099 on those securities listed on the Exchange which are part of the 
S&P 500 Index, prior to the thirtieth day after publication in the 
Federal Register. The Exchange believes that such an increase in PER 
eligibility is responsive to the operational needs of member firms and 
will enhance efficiency by quickly expanding automated order delivery 
for those securities which, as a group, are among the most actively 
traded on the Exchange.

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 III 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 PER system provides member firms with the means to 
electronically transmit equity orders up to volume limits specified by 
the Exchange directly to the specialist's post on the Exchange Floor. 
Market and marketable limit orders and pre-opening market orders are 
placed on the specialist's electronic book. Once the PER order is 
executed, the system transmits the execution report directly back to 
the member firm.
    Since its implementation in the late 1970s, the Exchange has 
gradually increased the order parameters for PER in response to the 
operational needs of member firms, in recognition of the cost 
efficiencies gained through expanded use of automation, and to remain 
competitive with other exchanges' automated systems. Currently, the PER 
system accepts eligible market and limit orders of up to 5,099 shares.
    The last increase, approved by the Commission on July 7, 1993,\3\ 
permitted an expansion of PER eligibility for Unit Investment Trust 
securities (such as Standard & Poor's Depositary Receipts) from 5,099 
to 25,000 shares for eligible market and limit orders.
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    \3\See Securities Exchange Release No. 32544 (June 29, 1993), 58 
FR 36485, July 7, 1993.
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    In order to improve the competitiveness of PER as an order-routing 
facility, and to facilitate access to PER by larger size orders, the 
Exchange is now proposing to increase PER eligibility from 5,099 to 
30,099 shares for both market and limit round lot orders. The Exchange 
initially proposes to implement the increased PER eligibility on a 
select number of securities, namely those securities included in the 
S&P 500 Index. Currently, Exchange securities in the S&P 500 Index are:

Amdahl Corporation
Echo Bay Mines Ltd.
Giant Food Inc.
Hasbro, Inc.; and
The New York Times Company

After three months of expansion of the share parameters for PER with 
respect to securities included in the S&P 500 Index, and upon approval 
of the Exchange's Floor Governors and Senior Staff, the Exchange is 
proposing to extend increased PER eligibility for up to 30,099 shares 
to all other Exchange-listed securities.
    The Exchange represents that the current capacity of the PER system 
is well in excess of what is required to accommodate the increase in 
parameters from 5,099 to 30,099 shares for both market and limit round 
lot orders.
    The automated system utilized by PER is designed to process up to 
13.5 messages per second. The historic peak utilization of this system 
was 7.7 messages per second (on October 16, 1989), only 57% of 
capacity. Additionally, what is relevant to system capacity is the 
number of orders, not the number of shares represented by each order. 
Under the current PER parameters the Exchange already processes 60 
percent of its total volume through the PER system, which clearly 
suggests that the impact of the contemplated increase on the number of 
orders coming through the system will be small, given that each 30,099 
share order represents a much larger portion of volume than a 5,099 
share order.
    Finally, whatever additional system capacity is consumed by the 
increase in the PER parameters on an overall basis, only a portion of 
that increase will occur during the first three months, when the 
increase will apply only to the Amex stocks included in the S&P 500 
Index. While those stocks do tend to be among our most active in share 
volume, so that they comprise an appropriate initial group, in the 
aggregate they represent only a small portion of overall Exchange share 
volume. Accordingly, the increased burden on system capacity during the 
first three months should be truly negligible and the Exchange will 
have the opportunity to observe the level of increased utilization and 
factor that into its assessment of how best to implement the parameter 
increase over the remainder of the Exchange's list.\4\
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    \4\As noted, the current system capacity is far in excess of 
what is required to accommodate the proposed increase in the PER 
parameters. However, it is important to note that even in the very 
unlikely event the 13.5-messages-per-second capacity limit were to 
be reached, orders would be queued, not lost. In addition, the 
Exchange has the flexibility to control the queuing process by 
utilizing a mechanism which adjusts relative priority between 
incoming orders and executions and administrative messages.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the Act 
in general and furthers the objectives of Section 6(b)(5) in particular 
in that it will 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, and, in general, to protect investors and the 
public interest.

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

    The proposed rule change will impose no burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons 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. Sec. 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 Amex. All 
submissions should refer to File No. SR-Amex-94-25 and should be 
submitted by August 5, 1994.

IV. Commission's Findings and Order Granting Accelerated

    The Commission finds that the Amex's proposal to increase the PER 
share parameters from 5,099 to 30,099, for orders of Exchange-listed 
securities which are a part of the S&P 500 Index, is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange. Specifically, the 
Commission finds that the proposed rule change is consistent with the 
requirements of section 6(b)(5) of the Act\5\ because it will 
facilitate transactions in securities by allowing for the timely 
transmision of a larger number of orders to the Amex floor. The 
proposal will also result in more efficient and effective market 
operations, consistent with section 11A(a)(1)(B) and will further the 
maintenance of fair and orderly markets and the efficient execution of 
securities transactions consistent with section 11A(a)(1)(C) of the 
Act.\6\
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    \5\15 U.S.C. 78f(b)(5) (1988).
    \6\15 U.S.C. 78f(b)(5) and Sec. 78k-1 (1988)
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    Finally, based upon representations from the Amex, the Commission 
is satisfied that the Exchange's PER system will have adequate computer 
processing capacity to accommodate the increased order size 
eligibility--at a minimum, for those Exchange-listed securities 
included in the S&P 500 Index.
    The Commission finds good cause for partially approving the 
proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. The 
Commission believes that the expansion of PER limit sizes to the Amex-
listed S&P 500 stocks should provide substantial benefits to market 
participants and accordingly should be allowed to be implemented 
without delay at this time. Moreover, the Commission believes that 
accelerated approval of the proposal, in so far as it pertains to the 
Amex-listed securities included in the S&P 500 Index, is appropriate in 
order to allow the Amex to evaluate the impact of such an expansion to 
enable it to make an informed decision, after three months, whether or 
not it would be beneficial and feasible to expand the PER order size 
eligibility increase to all securities.
    It Is Therefore Ordered, pursuant to section 19(b)(2),\7\ that the 
portion of the proposed rule change applicable to Amex-listed 
securities included in the S&P 500 Index is hereby approved.

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    \7\15 U.S.C. 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\17 CFR 200.30-3(a)(12) (1991).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-17258 Filed 7-14-94; 8:45 am]
BILLING CODE 8010-01-M