[Federal Register Volume 60, Number 134 (Thursday, July 13, 1995)]
[Notices]
[Pages 36170-36172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17138]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35933; File No. SR-PHLX-95-48]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc., Proposing to Extend its OTC/UTP 
Pilot Program

July 3, 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 June 27, 1995, 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 

[[Page 36171]]
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 and simultaneously is approving the 
proposal.

    \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 Phlx, pursuant to Rule 19b-4 of the Act, proposes to extend the 
effectiveness of the pilot program and its accompanying rules regarding 
the trading of Nasdaq/National Market (``Nasdaq/NMS'') securities on 
the Exchange pursuant to unlisted trading privileges (``Phlx OTC/UTP 
Pilot Program'') until August 12, 1995, which is when the effectiveness 
of the joint transaction reporting plan (``Joint OTC/UTP Plan'' or 
``Plan'') for OTC/UTP transactions is scheduled to expire.
    The Exchange requests the Commission to find good cause, pursuant 
to Section 19(b)(2) of the Act, for approving the proposed rule change 
prior to the thirtieth day after publication in the Federal Register. 
Due to the non-controversial nature of the Phlx OTC/UTP Pilot Program, 
coupled with its previously scheduled expiration date of June 30, 1995, 
the Phlx respectfully requests accelerated approval of this filing.

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
    In 1985, the Commission published its policy to allow the extension 
of unlisted trading privileges (``UTP'') by national securities 
exchanges in certain over-the-counter (``OTC'') securities, provided 
that certain terms and conditions are satisfied. On June 26, 1990, the 
Commission approved the Joint OTC/UTP Plan, submitted by the National 
Association of Securities Dealers, Inc. (``NASD''), the American Stock 
Exchange, the Boston Stock Exchange, the Midwest Stock Exchange 
(``MSE,'' currently operating as the Chicago Stock Exchange, or 
``Chx''), and the Phlx.\3\ The Joint OTC/UTP Plan governs the 
collection, consolidation, and dissemination of quotation and 
transaction information for Nasdaq/NMS securities traded on exchanges 
and by NASD market makers.

    \3\ See Securities Exchange Act Release No. 28146 (June 26, 
1990), 55 FR 27917. The Commission has approved two extensions of 
the effectiveness of the Joint OTC/UTP Plan. See Securities Exchange 
Act Release No. 34371 (July 13, 1994), 59 FR 37103 (order approving 
Amendment No. 1 to File No. S7-24-89), and Securities Exchange Act 
Release No. 35221 (January 11, 1995), 60 FR 3886 (order approving 
Amendment No. 2 to File No. S7-24-89, thereby extending the 
effectiveness of the Joint OTC/UTP Plan through August 12, 1995).
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    The Phlx files the current proposed rule change to continue the 
effectiveness of the Phlx OTC/UTP Pilot Program that provides for 
trading of Nasdaq/NMS securities on the Exchange pursuant to UTP. 
Although the Chx had been trading Nasdaq/NMS securities since 1987, the 
Phlx obtained temporary approval of its rules to facilitate trading 
Nasdaq/NMS securities in late 1992,\4\ and began trading the securities 
in February 1993. The Phlx operated the program without any adverse 
consequences or developments which would have had a negative impact 
upon the program.

    \4\ See Securities Exchange Act Release No. 31672 (December 30, 
1992), 58 FR 3054 (order approving File No. SR-PHLX-92-04). The 
effectiveness of the Phlx OTC/UTP Pilot Program has been extended 
twice, most recently through June 30, 1995. See Securities Exchange 
Act Release No. 35191 (January 12, 1995), 60 FR 3017.
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    Since April 1994, the Phlx has temporarily suspended making markets 
in OTC/UTP securities. However, the Phlx desires to keep the program in 
place for future use once other parts of the Joint OTC/UTP Plan are 
finalized between the NASD and other participants in the Plan. 
Therefore, the Phlx seeks an extension of the pilot program to further 
develop the OTC/UTP program.
2. Statutory Basis
    This proposal is consistent with the Section 6(b)(5) of the Act and 
the rules and regulations promulgated thereunder. Specifically, the 
proposal is calculated to promote just and equitable principles of 
trade and to protect investors and the public interest. Due to the non-
controversial nature of the Phlx OTC/UTP Pilot Program, coupled with 
the previously scheduled expiration of the Phlx's OTC/UTP privileges, 
the Phlx requests accelerated approval of this filing.

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

    The Phlx does not believe that the proposed rule change will be a 
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 either solicited or received.

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, N.W., Washington, D.C. 20549. 
Copies of the submission, all subsequent American Stock 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 
copying at the Commission's Public Reference Room. 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-95-48 and should be submitted by August 3, 1995.
IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission believes that the Phlx's proposal to extend the 
effectiveness of the Phlx OTC/UTP Pilot Program and accompanying rules 
with respect to UTP in OTC securities is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\5\ Specifically, the 
Commission believes that the proposed rule change is consistent with 
Sections 6(b)(5), 11A and 12(f) of the Act.\6\

    \5\ For a more detailed discussion of the Commission's findings 
with respect to the Phlx OTC/UTP Pilot Program and its consistency 
with the Act, see Securities Exchange Act Release No. 31672, id.
    \6\ 15 U.S.C. 78f(b)(5), 78k-1 (1988), and 78l(f) (1988) (as 
amended October 22, 1994). Section 6(b)(5) requires, among other 
things, that the rules of an exchange be designed 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. Section 11A provides, among other things, 
that it is in the public interest and appropriate for the protection 
of investors to assure fair competition among brokers and dealers, 
among exchange markets, and between exchange markets and markets 
other than exchange markets. Section 12(f), as recently amended by 
the UTP Act of 1994, provides, among other things, that exchange may 
extend UTP to securities that are registered, but not listed on any 
exchange, provided that certain conditions are met.

[[Page 36172]]

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    In 1985, the Commission published its policy to extend UTP to 
national securities exchanges in certain OTC securities provided 
certain terms and conditions are satisfied.\7\ The Commission's policy 
stated that UTP approval would be conditioned, in part, on the approval 
of a plan to consolidate and disseminate exchange and OTC quotation 
data and transaction data upon which UTP is granted. As noted above, in 
1990, the Commission approved the Plan which provides for the 
collection, consolidation, and dissemination of quotation and 
transaction information for Nasdaq/NMS securities listed on an exchange 
or traded on an exchange pursuant to a grant UTP.\8\ Transactions in 
securities pursuant to the Plan are and will continue to be reported in 
the consolidated transaction reporting system established under the 
Plan.

    \7\ See Securities Exchange Act Release No. 22412 (September 16, 
1985), 50 FR 38640.
    \8\ See note 3, supra.
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    The Commission has emphasized that Phlx specialists trading Nasdaq/
NMS securities pursuant to the grant of UTP are subject to Plan 
requirements as well as the Phlx OTC/UTP Pilot Program and Phlx By-Laws 
and Rules, in general.\9\ Moreover, the Commission has stated its 
intent to monitor any potential abuse of the informational advantage 
that options traders could acquire from the Phlx equity floor with 
respect to securities traded under the Phlx OTC/UTP Pilot Program.\10\ 
These requirements and the Commission's intent to monitor for abuses 
will continue in effect, particularly if the Phlx removes its temporary 
suspension of trading pursuant to its OTC/UTP Pilot Program and the 
Plan.

    \9\ See note 4, supra.
    \10\ Id.
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    The Commission believes that it is appropriate to extend the Phlx 
OTC/UTP Pilot Program through August 12, 1995, while the Commission 
evaluates the overall program for OTC/UTP and any enhancements or 
changes to the program that may be necessary to further the purposes of 
the Act. In the interim, however, the Commission continues to believe 
that the Phlx OTC/UTP Pilot Program, as limited by the Joint OTC/UTP 
Plan, generally furthers the objectives of a national market system and 
is consistent with the maintenance of fair and orderly markets and the 
protection of investors as required by Sections 6(b)(5), 11A and 12(f) 
of the Act.

V. Conclusion

    For the reasons stated above, the Commission believes that it is 
appropriate to extend the Phlx OTC/UTP Pilot Program through August 12, 
1995.
    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. In light of the 
previously scheduled expiration of the Phlx OTC/UTP Pilot Program on 
June 30, 1995, the Commission believes that accelerated approval of the 
proposal is appropriate in order to allow the Phlx to continue to have 
rules in place for OTC/UTP trading. Further, the Phlx OTC/UTP Pilot 
Program and the accompanying rules have been noticed previously in the 
Federal Register for the full statutory period, and the Commission 
received no comments on the proposal.\11\

    \11\ See supra note 4.
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    It is Therefore ordered, pursuant to Section 19(b)(2) \12\ that the 
proposed rule change is hereby approved on a pilot basis through August 
12, 1995.

    \12\ 15 U.S.C. 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\ 17 CFR 200.30-3(a)(12) (1991).
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Jonathan G. Katz,
Secretary.
[FR Doc. 95-17138 Filed 7-12-95; 8:45 am]
BILLING CODE 8010-01-M