[Federal Register Volume 62, Number 35 (Friday, February 21, 1997)]
[Notices]
[Pages 8065-8067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4231]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38285; File Nos. SR-AMEX-97-07, SR-BSE-96-11, SR-CHX-
96-34, SR-CSE-97-03, SR-NASD-97-09, SR-NYSE-97-03, SR-PSE-97-05]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Changes by the American Stock Exchange, Inc., Boston Stock Exchange,
Inc., Chicago Stock Exchange, Inc., Cincinnati Stock Exchange, Inc.,
National Association of Securities Dealers, Inc., New York Stock
Exchange, Inc., and Pacific Stock Exchange, Inc., To Amend Each
Exchange's Rules Concerning the Pre-Opening Application of the
Intermarket Trading System
February 13, 1997.
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 December
10, 1996, December 19, 1996, January 29, 1997, January 31, 1997,
February 10, 1997, February 10, 1997, and February 11, 1997,
respectively, the Boston Stock Exchange Incorporated (``BSE''), the
Chicago Stock Exchange, Incorporated
[[Page 8066]]
(``CHX''), the Cincinnati Stock Exchange, Incorporated (``CSE''), the
New York Stock Exchange, Incorporated (``NYSE''), the American Stock
Exchange, Incorporated (``AMEX''), the Pacific Stock Exchange,
Incorporated (``PSE''), and the National Association of Securities
Dealers, Incorporated (``NASD'') (each individually referred to herein
as a ``Participant'' and two or more collectively referred to as
``Participants'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule changes as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization.\1\ The Commission is publishing this notice to solicit
comments on the proposed rule changes from interested persons.
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\1\ The Commission is noticing these rule filings in one notice
and will notice the proposed rule changes from the remaining self-
regulatory organizations as they are filed.
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I. Self-Regulatory Organizations' Statement of the Terms of Substance
of the Proposed Rule Changes
The proposed amendments are to enhance the operation of the Pre-
Opening Application \2\ by effectively including circuit breakers as a
trading halt situation that will trigger the Pre-Opening
Application.\3\
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\2\ The Participants filed substantially similar proposed rule
changes to amend their respective ITS Rules regarding the ITS Pre-
Opening Application. The Commission notes that some of the proposed
rule changes by the ITS Participants contain additional technical
changes. In addition, the NASD is proposing to incorporate language
into NASD Rule 5240 from the model Pre-Opening Application Rule
contained as Exhibit A to the ITS Plan that was previously
inadvertently omitted. Also, the PSE and CHX proposed amendments to
their respective Pre-Opening Application rules to add a footnote
from the model Pre-Opening Application Rule regarding the definition
of when a market in a security is considered opened or re-opened,
for purposes of pre-opening responses. The language of each proposed
rule changes is on file at the Commission and at the principal
offices of the various Participants. The file numbers for the rule
filings are as follows: SR-AMEX-97-07; SR-BSE-96-11; SR-CHX-96-34;
SR-CSE-97-03; SR-NASD-97-09; SR-NYSE-97-03; and SR-PSE-97-05.
\3\ The respective Pre-Opening Application Rules that the
Participants are proposing to amend are: AMEX, Rule 232; BSE,
Chapter XXXI; CHX, Article XX, Rule 39; CSE, Chapter 14, Rules 14.1
and 14.3; NASD, Rule 5210, 5240 and 5250; NYSE, Rule 15; and PSE,
Rule 5.20.
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II. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In their filings with the Commission, the self-regulatory
organizations included statements concerning the purpose of and basis
for the proposed rule changes and discussed any comments they received
on the proposed rule change. The text of these statements may be
examined at the places specified in Item IV below. The self-regulatory
organizations have prepared summaries, set forth in Sections A, B, and
C below, of the most significant aspects of such statements.
A. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
1. Purpose
The purpose of the proposed rule change is to enhance the operation
of the ITS Pre-Opening Application. The Participants' ITS Pre-Opening
Application rules contain basic definitions pertaining to ITS,
prescribe the types of transactions that may be effected through ITS
and the pricing of commitments to trade, and specify the procedures
pertaining to the Pre-Opening Application, whereby an Exchange
specialist (``specialist'') or a ITS/CAES market maker (``market
maker'') in any ITS participant market who wishes to open his or her
market in an ITS security may obtain any pre-opening interest in that
security by other market makers registered in that security in other
Participant markets.
The current Pre-Opening Application prescribes that, if a
specialist or a market maker anticipates that its opening transaction
in the security the specialist or market maker trades through ITS will
be at a price that represents a change from the security's previous
day's consolidated closing price of more than the ``applicable price
change,'' the specialist or market maker shall notify other Participant
markets by sending a pre-opening notification through the ITS. The
``applicable price changes'' are:
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Applicable price change
Consolidated closing price \4\ (more than)
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Network A: \5\
Under $15............................... \1/8\ point.
$15 or over............................. \1/4\ point.
Network B:
Under $5................................ \1/8\ point.
$5 or over.............................. \1/4\ point.
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\4\ If the previous day's consolidated closing price of the security
exceeded $100 and the security does not underlie an individual stock
option contract listed and currently trading on an exchange, the
``applicable price change'' is one point.
\5\ Network A is comprised of NYSE securities; Network B is comprised of
AMEX securities.
Thereafter, the specialist or market maker shall not open the market in
the security until not less than three minutes after the transmission
of the pre-opening notification. Once a specialist or market maker has
issued a pre-opening notification, other Participant markets may
transmit ``pre-opening responses'' to the specialist or market maker
through the ITS that contain ``obligations to trade.'' The specialist
or market maker is then obligated to combine these obligations with
orders it already holds in the security, and, on the basis of this
aggregated information, decide upon the opening transaction in the
security.
The Pre-Opening Application also applies whenever an ``indication
of interest'' is sent to the Consolidated Tape Association (``CTA'')
Plan Processor prior to the opening of trading in the relevant security
or prior to the reopening of trading in the relevant security following
the declaration of a trading halt for certain defined reasons, even if
the anticipated opening or re-opening price is not greater than the
``applicable price change.'' The current Pre-Opening Application
provides that the Pre-Opening Application applies when an indication of
interest is disseminated following five defined trading halt
situations; reopenings following order imbalance, order influx,
equipment changeover, news pending and news dissemination, and for a
delayed opening.
The purpose of the proposed amendments to the Participants'
respective rules, to which all the Participants have agreed, is to
amend the Pre-Opening Application to provide that the Pre-Opening
Application would be triggered whenever an ``indication of interest''
(i.e., an anticipated opening price range) is sent to the Consolidated
Tape system prior to the opening or reopening of trading in the
relevant security. Under the proposed change, the Pre-Opening
Application would also be triggered when indications of interest are
disseminated in situations other than those five defined trading halts,
including the resumption of trading following the activation of market-
wide circuit breakers. In particular, the proposed amendment would
delete the definition of ``Trading Halt,'' which is limited to the five
defined trading halt situations mentioned above, and replace all
references to ``Trading Halt'' with ``halt or suspension in trading.''
As a result, one standard procedure would then govern all trading halt
situations and would include suspensions of trading pursuant to circuit
breakers.\6\
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\6\ In its proposed rule change, the NYSE notes that indications
are also required pursuant to NYSE rules in other situations,
including circuit breaker halts, when a stock's price will change
the lesser of 10% or three points from the last sale, or five points
for stocks over $100, unless the price change is less than one
point. The NYSE notes that NYSE rules would continue to govern when
NYSE specialists would be required to issue indications of interest.
See NYSE filing SR-NYSE-97-03. Similarly, AMEX notes that in
connection with a reopening following a ``circuit breaker'' halt,
AMEX's rules require dissemination of an indication in the same
circumstances as the NYSE. AMEX notes that its proposed amendments
are intended to conform to the amendment to the ITS Plan agreed to
by the Participants. See AMEX filing SR-AMEX-97-07.
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[[Page 8067]]
2. Statutory Basis
These proposed amendments are consistent with sections 6(b)(5) and
15A(b)(6) of the Act \7\ in that it is designed to prevent fraudulent
and manipulative acts and practices, 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 to perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The amendment is also
consistent with section 11A(a)(1)(D) of the Act \8\ which provides that
the linking of all markets for qualified securities through
communications and date processing facilities will foster efficiency,
enhance competition, increase the information available to brokers,
dealers, and investors, facilitate the offsetting of investors' orders,
and contribute to the best execution of such orders. In particular, by
enhancing the linkage among all ITS Participant Markets and promoting
coordinated openings and reopenings in ITS Securities, the Participants
believe the proposed rule changes are consistent with the Act.
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\7\ 15 U.S.C. 78f(b)(6); 15 U.S.C. 78o-3(b)(6).
\8\ 15 U.S.C. 78k-1(a)(1)(D).
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B. Self-Regulatory Organizations' Statement on Burden on Competition
The Participants do not believe that the proposed rule change will
impose any inappropriate burden on competition.
C. Self-Regulatory Organizations' Statement on Comments on the Proposed
Rule Changes Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Changes 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 Room. Copies of such filing will also be
available for inspection and copying at the principal office of the
Participants. All submissions should refer to File Nos. SR-AMEX-97-07,
SR-BSE-96-11, SR-CHX-96-34, SR-CSE-97-03, SR-NASD-97-09, SR-NYSE-97-03,
and SR-PSE-97-05 and should be submitted by March 14, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4231 Filed 2-20-97; 8:45 am]
BILLING CODE 8010-01-M