[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