[Federal Register Volume 60, Number 214 (Monday, November 6, 1995)]
[Notices]
[Pages 56084-56085]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27429]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36442; File No. SR-Phlx-95-32]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change and Notice of Filing
and Order Granting Accelerated Approval to Amendment No. 2 to Proposed
Rule Change Relating to Broker-Dealer Orders on PACE
October 31, 1995.
I. Introduction
On June 12, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend Exchange Rule 229 to
allow non-agency orders on the Philadelphia Stock Exchange Automated
Communication and Execution (``PACE'') system \3\ under certain
circumstances. On September 19, 1995, the Exchange submitted to the
Commission Amendment No. 1 to the proposed rule change.\4\
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ PACE is the Exchange's system for the automatic delivery and
execution of orders on the Phlx equity floor.
\4\ See Letter from Gerald D. O'Connell, First Vice President,
Phlx, to Glen Barrentine, Team Leader, Division of Market
Regulation, SEC, dated September 7, 1995.
---------------------------------------------------------------------------
The proposed rule change was published for comment in Securities
Exchange Act Release No. 36263 (Sept. 21, 1995), 60 FR 50226 (Sept. 28,
1995). No comments were received on the proposal. On October 25, 1995,
the Exchange submitted to the Commission Amendment No. 2 to the
proposed rule change.\5\
\5\ See Letter from Gerald D. O'Connell, First Vice President,
Phlx, to Jennifer S. Choi, Division of Market Regulation, SEC, dated
October 25, 1995.
---------------------------------------------------------------------------
This order approves the proposed rule change, including Amendment
No. 2 on an accelerated basis.
II. Description of Proposal
Currently, the PACE system only accepts agency orders.\6\ The
orders accepted under the system may be executed on a fully automated
or manual basis in accordance with Rule 229.
\6\ For purposes of the PACE system, an agency order is any
order entered on behalf of a public customer, and does not include
any order entered for the account of a broker-dealer, or any account
in which a broker-dealer or an associated person of a broker-dealer
has any direct or indirect interest. See Supplementary Material. 02
to Phlx Rule 229.
---------------------------------------------------------------------------
The Exchange proposes to amend Supplementary Material .02 to Phlx
Rule 229 to permit specialists to accept non-agency orders through PACE
under certain circumstances. To do so, Phlx specialists must file with
the Exchange a Specialist Agreement, which is an Exchange form signed
by a Phlx equity specialist who has agreed to accept non-agency orders
through PACE. The Specialist Agreement must identify the member firm
that is interested in submitting orders through the PACE system and set
forth the order size parameters applicable to such orders.\7\
\7\ Pursuant to Amendment No. 2, a specialist may agree to order
size parameters for non-agency orders that are equal to or smaller
than the order size parameters provided for agency orders.
---------------------------------------------------------------------------
Under the proposed rule change, the specialist may agree to execute
non-agency orders accepted under the PACE system on an automatic or
manual basis. Specialists that choose to execute non-agency orders
automatically through PACE must provide the same PACE executions to
non-agency orders as they provide to agency orders.\8\ Specialists that
choose to execute non-agency orders manually must do so in accordance
with existing Exchange rules governing orders not on the system.
\8\ Provided that, in accordance with Amendment No. 2, a
specialist may agree to order size parameters of non-agency orders
that are smaller than the order size parameters provided to agency
orders.
---------------------------------------------------------------------------
Moreover, the proposed rule change provides that any specialist who
has agreed to facilitate broker-dealer orders on PACE must provide all
broker-dealers with the opportunity to submit non-agency orders for
execution through PACE on equal terms. As a result, a specialist may
not provide a certain order size guarantee to one broker-dealer and
then refuse to provide an equal size guarantee to another broker-
dealer. Similarly, a specialist may not agree to provide automatic
execution for one broker-dealer but not for another. Finally, under the
proposed rule change, the Exchange will utilize the ``P'' order
designator on the PACE system to indicate when an order is for the
account of a broker-dealer.
The Exchange states that the purpose of permitting non-agency
orders onto PACE is to extend the benefits of PACE to Phlx member firms
for the proprietary as well as customer orders.
The Exchange believes that allowing such orders onto PACE should
serve the important function of adding liquidity and trading
opportunities to the Phlx marketplace. Moreover, the Exchange believes
that PACE provides efficiencies to the Exchange's marketplace, which
reduces costs incurred through the handling of orders on a more manual
basis. The Exchange believes that such savings can now be realized for
proprietary as well as customer orders.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, with the requirements of Section 6(b).\9\ The Commission
believes the proposal is consistent with the Section 6(b)(5)
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, and, in general, to protect investors and the public
interest.
\9\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------
Under new Supplementary Material .02 of Rule 229, non-agency orders
may be routed through the PACE system for an automatic or manual
execution. The Commission believes that the proposed rule change will
be beneficial because it will allow broker-dealers to take advantage of
the increased speed and reduced costs associated with the use of the
Phlx's PACE system. Moreover, the Commission believes that the
Exchange's proposal is consistent with the Act in that it does not
discriminate between broker-dealers: all broker-dealer orders in a
particular stock will receive the same treatment once a specialist has
agreed to accept non-agency orders through PACE.
The Commission finds good cause for approving Amendment No. 2 to
the rule change prior to the thirtieth day after the date of
publication of notice of filing thereof. The Exchange's original
proposal was published in the Federal Register for the full statutory
period and no comments were received. In addition to clarifying and
codifying the execution options of non-agency orders routed through
PACE as originally proposed, Amendment No. 2 further restricts the
scope of the proposed rule change by prohibiting specialists from
providing
[[Page 56085]]
greater order size guarantees to non-agency orders than to agency
orders.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 2 to the proposed rule change.
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, D.C. 20549. Copies
of such filing will also be available for inspection and copying at the
principal office of the Exchange. All submissions should refer to File
No. SR-Phlx-95-32 and should be submitted by November 27, 1995.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-Phlx-95-32) is approved.
\10\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27429 Filed 11-3-95; 8:45 am]
BILLING CODE 8010-01-M