[Federal Register Volume 60, Number 97 (Friday, May 19, 1995)]
[Notices]
[Pages 26908-26909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12312]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35716; File No. SR-BSE-95-07]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the Boston
Stock Exchange, Inc., Relating to Its Competing Specialist Pilot
Program
May 15, 1995.
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 May 5, 1995, the Boston Stock Exchange, Inc. (``BSE'' 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. On May 9, 1995, the BSE filed Amendment No. 1 with the
Commission.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1994).
\3\See letter from Karen Aluise, BSE, to Glen Barrentine, SEC,
dated May 9, 1995. In Amendment No. 1 the BSE removed its request to
expand the pilot program by the number of securities, as well as the
number of specialists per issue. The limitations imposed in the
original approval order will remain through the extension (maximum
of three specialists per stock; each specialist can compete in a
maximum of 20 stocks). Thus, during the pilot program, the total
number of stocks subject to competition will not exceed 360.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The BSE seeks to extend the current pilot program for competing
specialists on its floor until October 2, 1995.
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 purpose of the proposed rule change is to extend the current
pilot program for competing specialists until October 2, 1995. The
program currently provides for up to three competing specialists in a
stock on the floor of the Exchange. The pilot program provides for both
a regular specialist and a competing specialist(s) in a stock, whereas
currently there is only one specialist in that stock. Orders can be
directed to either specialist based on each customer's independent
decision,\4\ but all orders in that stock will be executed in
accordance with strict time priority. Once all limits at a price level
are depleted, each specialist is responsible for the market orders
directed to them specifically.
\4\Non-specifically directed orders would be routed to the
regular specialist.
All limit orders entrusted to each competing specialist and the
regular specialist will be represented and executed strictly according
to time priority as to receipt of the order in the BEACON System. Thus
incoming market and marketable limit orders will automatically execute
against limit orders on the books according to the order in which the
limit orders were received in the system.\5\ The regular specialist
will be responsible for updating quotations; thus all competitors must
communicate their markets to the regular specialist and be responsible
for their portion of the published bid and/or offer. Openings and
reopenings shall be coordinated through the regular specialist to
ensure they are unitary. All ITS activity must be cleared through the
regular specialist and only the regular specialist can input quotations
to reflect the Boston market. Thus to all other markets in the National
Market System, there will be only one Boston market. Trading halts will
also be coordinated through the regular specialist and any trading halt
will apply to all competitors in a stock.
\5\The BEACON System will view all of the limits on the various
books as one centralized book for purposes of order execution.
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The Exchange has adopted procedures to provide guidelines for the
pilot program participants and for the Exchange in its administration
of the program.\6\ Any new competitive situation will be reviewed by
the Exchange for the duration of the pilot program. Reports of
specialists' dealings have been reviewed on a daily basis since the
inception of the program and periodic reports have been provided to the
Commission for review. In addition, the program was fully integrated
into the Exchange's specialist performance evaluation program beginning
in December 1994.
\6\See Securities Exchange Act Release No. 34078 (May 18, 1994),
59 FR 27082 (May 25, 1994); BSE Rules Ch. XV Secs. 18 and 6(iii).
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Certain technical changes necessitated by the proposed pilot
program have been made to Chapter XV Sec. 6 regarding the specialist's
book to permit the competing specialist to see a summary of bids and
offers at each price level in the subject stock.\7\ This will enable
all competitors in a stock to know the combined market in that stock.
\7\The Commission notes that this change was made in the initial
pilot and will carry forward through the extension being approved
herein.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act in that it furthers the objectives to
promote just and equitable principles of trade, 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, and
in general, to protect investors and the public interest; and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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 comments on 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 [[Page 26909]] 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 BSE. All
submissions should refer to File No. SR-BSE-95-07 and should be
submitted by [insert date 21 days of publication].
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission finds that the BSE's proposal to extend its
preferencing pilot program to October 2, 1995 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
Section 6(b)(5) of the Act\8\ in that it will promote just and
equitable principles of trade and remove impediments to and perfect the
mechanism of a free and open market and a national market system. The
pilot is extended under the same conditions set out in the original
pilot approval order.\9\
\8\15 U.S.C. 78f(b)(5) (1988).
\9\The BSE competing specialist program is limited by the
following: (1) a competing specialist may preference up to a maximum
of 20 stocks; (2) the number of competitors in any given stock is
limited to three (one regular specialist and two competing
specialists); (3) no payment for order flow; and (4) no index
arbitrage. The Commission also notes that prior to the original
approval order the BSE represented that, during the pilot program,
the total number of stocks subject to competition will not exceed
360. See Securities Exchange Act Release No. 34078 (May 18, 1994),
59 FR 27082 (May 25, 1994).
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The Commission notes that pursuant to its original pilot approval
order, the BSE was required to submit quarterly data reports and a
report analyzing such data.\10\ The BSE has submitted data to the
Commission. In addition, the Commission has received extensive
commentary on the Cincinnati Stock Exchange's (``CSE'') request for
permanent approval of its preferencing pilot\11\ that present issues
similar to those raised by the BSE pilot. In sum, the Commission is
reviewing the comments and data submitted thus far, and believes that
due to the complexity of the issues, and significant amount of data,
the preferencing pilot should be extended to provide the Commission
with adequate time to more thoroughly evaluate the data and the issues
involved in the filing for permanent approval.
\10\See Securities Exchange Act Release No. 34078 (May 18,
1994), 59 FR 27082 (May 25, 1995).
\11\See, File No. SR-CSE-95-03, Securities Exchange Act Release
No. 35448 (March 7, 1995), 60 FR 13493 (March 13, 1995). The
comments received on this proposal are available from the CSE or the
Commission. (See Section III, supra.)
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The Commission finds good cause for 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 accelerated approval of the proposal is appropriate in
order to avoid an unnecessary interruption to the pilot while allowing
the Commission to continue to evaluate the data.
It is therefore ordered, pursuant to Section 19(b)(2)\12\ that the
proposed rule change is hereby approved, and the competing specialist
pilot is extended through October 2, 1995.
\12\15 U.S.C. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
\13\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-12312 Filed 5-18-95; 8:45 am]
BILLING CODE 8010-01-M