[Federal Register Volume 60, Number 130 (Friday, July 7, 1995)]
[Notices]
[Pages 35445-35446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16654]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35922; File No. 10-100]
Exempted Exchanges; AZX, Inc.; Amendment to Application for
Exemption From Registration as an Exchange Under Section 5 of the
Securities Exchange Act of 1934; Request for Comments
June 30, 1995.
I. Introduction
AZX, Inc., formerly known as Wunsch Auction Systems, Inc., operates
the Arizona Stock Exchange (``AZX''), a computerized, single-price
auction system that facilitates trading of registered equity securities
by broker-dealers and institutions. AZX's single-price auctions are
conducted outside the regular trading hours of the New York Stock
Exchange (``NYSE''), at 5:00 p.m. (ET) each trading day. AZX operates
pursuant to the terms and conditions of a Commission order (``exemption
order'') granting AZX a ``limited volume'' exemption from registration
as a national securities exchange,\1\ and a staff no-action letter with
respect to the non-registration of AZX as a broker-dealer, clearing
agency, transfer agent, and exclusive securities information
processor.\2\ In the exemption order, the Commission cited AZX's off
hours operation as one of the factors that justified a prediction that
AZX would have a limited volume of trading.\3\
\1\ Securities Exchange Act Release No. 28899 (February 20,
1991), 56 FR 8377.
\2\ Letter regarding Wunsch Action Systems, Inc. (February 28,
1991) (``no-action letter''). The no-action letter also provided
AZX's original crossing broker, Bankers Trust Brokerage Corporation
(``BTBC'') with relief with respect to non-registration as an
exchange, clearing agency, transfer agent, and exclusive securities
information processor. BTBC was replaced as AZX's crossing broker by
Investment Technology Group, Inc. (``ITG, Inc.'') in February 1995.
\3\ The other factors cited by the Commission in the exemption
order that justified a prediction of limited volume were the
relative infrequency of the auctions and the absence of
participation by broker-dealers with market-making obligations. 56
FR 8377, 8380.
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On June 2, 1995, AZX, Inc. filed with the Commission, pursuant to
Rule 6a-1 under the Act,\4\ an amendment to its application for
exemption from registration as a national securities exchange. In its
amendment, AZX, Inc. proposes to operate AZX during regular trading
hours.\5\ Under the proposal, AZX would conduct one additional daily
auction, at a yet-to-be chosen fixed time between 9:45 and 10:00 a.m.
(ET), in Nasdaq National Market securities.\6\ AZX initially plans to
trade only 15 of the approximately 4,140 Nasdaq National Market
securities, but will expand as demand warrants.
\4\ 17 CFR 240.6a-1.
\5\ ``Regular trading hours'' refers to the time period in which
the NYSE permits trading--9:30 a.m. to 4:00 p.m. (ET) each trading
day.
\6\ Nasdaq National Market securities were formerly known as
``Nasdaq/MNS'' securities.
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The Commission is soliciting public comment on whether it is
appropriate to amend the exemption order to reflect AZX's proposed
morning trading session in Nasdaq National Market securities.
II. The Morning Trading Session
AZX's proposed morning auction is identical to AZX's current
evening auction in terms of its: (1) Participation criteria; (2) means
of access to the system; (3) classification and visibility of orders;
(4) algorithm for discovering the price at which orders will be
executed (the ``equilibrium'' or ``auction'' price); (5) confirmation,
clearance and settlement of matched transactions; and (6) commission
structure.
The proposed morning trading auction will differ in terms of:
Eligible securities. Securities eligible to be traded in
the morning auction will be limited to Nasdaq National Market
securities. Both Nasdaq National Market and exchange-listed
[[Page 35446]]
securities are eligible for trading in the evening auction.
Time period for order entry. The time period during which
a participant may enter a limit order for auction trading will be
limited to the period from 9:00 a.m. to ``auction end'' time--a minimum
of 45 minutes and a maximum of one hour. Participants in the evening
auction may enter orders within a two-hour period (from 3:00 p.m. to
5:00 p.m.) prior to the auction end time.
Price increments for entered orders. Order must be
entered in \1/8\ point price increments, and are limited to ``odd''
sixteenths (i.e., \1/16\, \3/16\. \5/16\ etc). By contrast,
participants in the evening auction enter orders in increments of \1/
16\ point, and those orders may fall both on even sixteenths and odd
sixteenths.\7\
\7\ The purpose of the minimum \1/8\ increment is to encourage
early entry of Open Book orders, by protecting those orders from
being out-bid or -offered by small amounts, such as sixteenths, at
the end of the auction. The purpose of requiring the minimum
increments to fall on odd sixteenths is to allow a participant to
enter an order at the midpoint of the standard spread in the Nasdaq
market, so that a participant may potentially trade at a price that
is within that standard spread.
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Transaction reporting. ITG, Inc. will report transactions
executed in the morning auction to the Nasdaq transaction reporting
system. This is unlike the current after-hours auction, in which
completed transactions are not reported to any consolidated transaction
reporting system.\8\
\8\ AZX currently reports completed transactions to the NASD by
facsimile transmission at the end of each auction. The transmissions
include the name of the security traded, the volume sold, and the
equilibrium price.
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III. Solicitation of Comment
The Commission is soliciting public comment on whether to amend the
AZX exemption order to reflect the proposed trading session during
regular trading hours in Nasdaq National Market securities. Interested
persons should submit six copies of their comment letter to Jonathan G.
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street
NW., Washington, DC 20549. Copies of all submissions Commission will be
available for inspection and copying in the Commission's Public
Reference Room, 450 Fifth Street NW., Washington, DC. All submissions
should refer to the file number in the caption above and should be
submitted by July 28, 1995.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-16654 Filed 7-6-95; 8:45 am]
BILLING CODE 8010-01-M