[Federal Register Volume 60, Number 142 (Tuesday, July 25, 1995)]
[Notices]
[Pages 38065-38066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18214]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-35987; File No. SR-BSE-95-12]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by Boston Stock Exchange, Inc. Relating to Specialist 
Concentration

July 18, 1995.
    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 June 19, 
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, II and III below, which 
Items 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange seeks to obtain permanent approval of its Specialist 
Concentration Policy.\1\ This will permit the Exchange's Executive 
Committee to review proposed combinations that, in the Exchange's view, 
may lead to undue concentration within the specialist community.

    \1\ On February 7, 1990, the Commission approved, on a six-month 
pilot basis ending August 7, 1990, a proposed rule change by the BSE 
to establish procedures for reviewing proposed combinations among 
specialist units on the Exchange. See Securities Exchange Act 
Release No. 27684 (February 7, 1990), 55 FR 5527 (approving File No. 
SR-BSE-89-05). The Commission later approved the renewal of the 
pilot program for additional one-year periods ending August 1, 1991, 
August 13, 1992, August 13, 1993, and August 13, 1994. See 
Securities Exchange Act Release Nos. 28327 (August 10, 1990), 55 FR 
33794 (File No. SR-BSE-90-11); 29551 (August 13, 1991), 56 FR 41380 
(File No. SR-BSE-91-06); 31037 (August 13, 1992), 57 FR 37854 (File 
No. SR-BSE-92-08); and 32753 (August 16, 1993), 58 FR 44707 (File 
No. SR-BSE-93-15).
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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 test 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 seek permanent 
approval of the concentration policy, which establishes certain 
standards based on Consolidated Tape Association (``CTA'') ranking \2\ 
of specialist stocks for reviewing certain proposed mergers, 
acquisitions and other combinations between or among specialist units. 
The proposed policy would authorize the Executive Committee of the 
Board of Governors to review proposed combinations that, in the 
Exchange's view, may lead to undue concentration within the specialist 
community.

    \2\ The CTA disseminates last sale transaction information for 
trades executed on any of the participant exchanges or the Nasdaq 
Stock Market. The current CTA participants include the New York 
Stock Exchange (``NYSE''), American Stock Exchange (``Amex''), 
Chicago Stock Exchange (``CHX''), Philadelphia Stock Exchange 
(``Phlx''), Pacific Stock Exchange (``PSE''), BSE, Chicago Board 
Options Exchange (``CBOE''), Cincinnati Stock Exchange (``CSE''), 
and the National Association of Securities Dealers (``NASD''). Each 
specialist stock is ranked according to the number of CTA trades in 
such stock. The ranking is based upon the average volume of trades 
and shares reported to CTA over the past four quarters. Conversation 
between Karen Aluise, BSE, and Amy Bilbija, SEC, on July 12, 1995.
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    The Executive Committee will review any arrangement where 
previously separate specialist organizations would be operating under 
common control and would comprise:
    (a) 15% or more of the 100 most actively traded CTA stocks; or,
    (b) 15% or more of the second 100 most actively traded CTA stocks; 
or,
    (c) 20% or more of the third 100 most actively traded CTA stocks; 
or
    (d) 15% or more of all the CTA stocks eligible for trading on the 
BSE where the Free List contains fewer than 100 issues.\3\

    \3\ The Free List is made up of securities that are not 
registered to certain specialists and can be traded by any 
specialist.
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    The Executive Committee shall approve or disapprove the proposed 
combination based on its assessment of the following considerations:
    (a) Specialist performance and market quality in the stocks subject 
to the proposed combination;
    (b) The effects of the proposed combination in terms of the 
following criteria:
    (i) Strengthening the capital base of the resulting specialist 
organization;
    (ii) Minimizing both the potential for financial failure and the 
negative consequences of any such failure on the specialist system as a 
whole; and
    (iii) Maintaining or increasing operational efficiencies;
    (c) Commitment to the Exchange market, focusing on whether the 
constituent specialist organizations engage in business activities that 
might detract from the resulting specialist organization's willingness 
or ability to act to strengthen the Exchange agency/auction market and 
its competitiveness in relation to other markets; and
    (d) The effect of the proposed combination on overall concentration 
of specialist organizations.
    With respect to the criteria relating to the ``commitment to the 
Exchange market,'' the Executive Committee would look to a variety of 
factors that extend beyond compliance with the Exchange's requirements 
for providing sufficient capital, talent and order handling services. 
For example, the Committee would review and assess each constituent 
unit's past performance on the Exchange relating to such matters as:
     Acceptance and cooperation in the development, 
implementation and enhancement to the Boston Exchange Automated 
Communications and Order-routing Network (``BEACON'');
     Efforts at resolving problems concerning customer orders;

[[Page 38066]]

     Willingness to facilitate early openings in order to 
compete effectively with other exchanges; and
     Willingness to voluntarily provide Execution Guarantees 
beyond the minimum required under Rule 2039A.\4\

    \4\ See BSE Rule 2039A. The Rule states that the BSE Execution 
Guarantee shall be available to each member firm in all issues 
traded through the Intermarket Trading System (ITS) registered to a 
member specialist of the Exchange. The Rule imposes an obligation 
upon specialists to guarantee executions on all agency orders from 
100 up to and including 1,299 shares.
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2. Statutory Basis
    The Exchange believes that the basis under the Act for the proposed 
policy is Section 6(b)(5) in that the policy enables the Exchange to 
monitor the tendencies toward concentration in the specialist community 
and to intervene to prevent undue concentration. As such, it is 
designed to protect investors and the public interest, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers, or to regulate by virtue of any authority 
conferred by this title matters not related to the purpose of this 
title or the administration of the Exchange.

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.

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, 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. 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-95-12 and should be 
submitted by August 15, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-18214 Filed 7-24-95; 8:45 am]
BILLING CODE 8010-01-M