[Federal Register Volume 59, Number 242 (Monday, December 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31103]


[[Page Unknown]]

[Federal Register: December 19, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35089; File No. SR-Phlx-94-58]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc., Relating to its Rule 
229 Governing Execution of PACE Orders

December 12, 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 December 
1, 1994, 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 December 12, 1994, the Exchange filed with the 
Commission Amendment No. 1 to the proposed rule change.\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 William W. Uchimoto, Vice President and 
General Counsel, Phlx, to Glen Barrentine, Senior Counsel, SEC, 
dated December 12, 1994. Amendment No. 1 made certain clarifying 
changes to the proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Philadelphia Stock Exchange, Inc., pursuant to Rule 19b-4 of 
the Act, proposes to amend the Supplementary Material section to its 
Rule 229 respecting the Philadelphia Stock Exchange Automated 
Communication and Execution System (``PACE''). The text of the proposed 
rule change is as follows [new text is italicized; deleted text is 
bracketed]:
Rule 229
* * * Supplementary Material
* * * Execution of Market Orders
    .05  Subject to Supplementary Material Section .07, all round-lot 
market orders up to 500 shares and PRL market orders up to 599 
shares\2\ will be [executed automatically upon entry into the system; 
provided, however,] stopped at the PACE Quote\3\ at the time of entry 
into the system (``Stop Price'') and be subject to a delay of up to 15 
seconds from being executed in order to receive an opportunity for 
price improvement. If such market order is not executed within the 15 
second window, the order will be automatically executed at the Stop 
Price. If the PACE Quote at the time of order entry into the system 
reflects a 1/8 point spread between the best bid and offer, that order 
will be executed immediately without the 15 second delay. Subject to 
these procedures, the specialist may voluntarily agree to execute 
round-lot [and PRL] market orders of a size greater than 500 shares and 
PRL market orders of a size greater than 599 shares [automatically] 
upon entry into the system.
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    \2\The term ``PRL'' means a combined round-lot and odd-lot 
order. See Phlx Rule 229.
    \3\The term ``Pace Quote'' means the best bid/ask quote among 
the American, Boston, Cincinnati, Chicago, New York, Pacific, or 
Philadelphia stock exchanges, or the Intermarket Trading System/
Computer Assisted Execution System quote, as appropriate. See Phlx 
Rule 229.
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* * * * *
    .07(a)  Member organizations which enter market orders (round-lots 
up to 500 shares and PRL's up to 599 shares) after the opening may 
elect to have such orders executed (i) [automatically on the PACE 
Quote] in accordance with the procedures set forth in Supplementary 
Material Section .05 or, (ii) if such execution price would be outside 
the New York market high-low range for the day manually at or within 
the New York market high-low range of the day.

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 purpose of the proposed rule change is to provide for an 
enhancement to PACE by providing Phlx specialists the opportunity to 
effect price improvement for market orders in securities sent through 
PACE when the spread between the PACE Quote, which reflects the 
consolidated national best bid and offer, exceeds \1/8\ point in any 
PACE eligible security. The proposed rule change provides for an 
automatic stop of such orders and a fifteen second execution delay, 
allowing a Phlx specialist to manually provide for price improvement 
equal to or better than the stock price.\4\ Specifically, all round-lot 
market orders of up to 500 shares and all combined round-lot and odd-
lot orders of up to 599 shares will be stopped at the PACE Quote at the 
time of entry into PACE (stopped at the best bid for sell orders; at 
the best ask for buy orders) and shall be subject to a delay of up to 
fifteen seconds from being executed in order to provide an opportunity 
for price improvement by the Phlx specialist. If a particular market 
order is not executed within fifteen seconds, the order will be 
automatically executed by the system at the stop price. If the PACE 
Quote at the time of order entry reflects a spread between the best bid 
and offer of \1/8\ point, PACE market orders shall be system executed 
immediately.
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    \4\Accordingly to the Phlx, the proposed rule change does not 
apply to limit orders, including marketable limit orders, because 
such orders are executed manually and, therefore, already have an 
opportunity for price improvement. Telephone conversation between 
William W. Uchimoto, Vice President and General Counsel, Phlx, and 
Glen Barrentine, Senior Counsel, SEC, on December 9, 1994.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 in general and 
Section 6(b)(5) in particular in that it is designed to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and to protect investors and the public 
interest. Additionally, the proposed system enhancement and rule change 
are consistent with the mandate of Section 11A(a)(1)(C)(iv) of the Act 
respecting ``[t]he practicability of brokers executing investors' 
orders in the best market.''

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

    The Exchange 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 Exchange 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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 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 copy at the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 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-94-58 and should be 
submitted by January 9, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-31103 Filed 12-16-94; 8:45 am]
BILLING CODE 8010-01-M