[Federal Register Volume 62, Number 128 (Thursday, July 3, 1997)]
[Notices]
[Page 36087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17469]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38780; File No. SR-PCX-97-15]


Self-Regulatory Organizations; Pacific Stock Exchange 
Incorporated; Order Granting Approval to Proposed Rule Change Relating 
to Trading Differentials for Equity Securities

June 26, 1997.
    On May 5, 1997, the Pacific Exchange, Inc. (``PCX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``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 adopt a procedure that allows the Exchange to 
establish trading differentials on an expedited basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register, and no comments were received.\3\ This order approves the 
proposal.\4\
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    \3\ Securities Exchange Act Release No. 38580 (May 7, 1997), 62 
FR 26605 (May 14, 1997).
    \4\ The Commission previously granted temporary accelerated 
approval to the procedures described herein. Securities Exchange Act 
Release No. 38575 (May 6, 1997), 62 FR 16606 (May 14, 1997) (File 
No. SR-PCX-97-16).
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    PCX Rule 5.3(b) currently provides that, unless specifically ruled 
otherwise, the trading differentials on stocks shall be as follows: On 
stocks other than those traded on the New York Stock Exchange 
(``NYSE'') or American Stock Exchange (``Amex''): if the selling price 
is below \1/2\ of $1, the trading differential is \1/32\; if the 
selling price is \1/2\ of $1 but under $5, the trading differential is 
\1/16\; and if the selling price is $5 and above, the trading 
differential is \1/8\. This rule further provides that on stocks also 
traded on the NYSE or the Amex, the trading differentials shall be the 
same as those prescribed by such exchanges.
    The Exchange is proposing to establish a procedure whereby the 
Exchange may determine the trading differentials for equity securities 
traded on the Exchange. The Exchange is proposing this change in order 
to add flexibility, so that it can change its trading differentials on 
an immediate basis.
    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 and Section 11A of the 
Act.\5\
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    \5\ 15 U.S.C. 78f(b) and 78k-1. In approving this rule change, 
the Commission notes that it has considered the proposal's impact on 
efficiency, competition, and capital formation, consistent with 
Section 3 of the Act. Id. Sec. 78c(f).
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    There has been a movement within the industry to reduce the minimum 
trading and quotation increments imposed by the various self-regulatory 
organizations (``SROs''). The NYSE, The Nasdaq Stock Market 
(``Nasdaq''), and the Amex have recently reduced their minimum 
increments.\6\ In addition, several third market makers have begun 
quoting securities in increments smaller than the primary markets. The 
proposed rule change will allow the PCX the flexibility it needs to 
address this development and remain competitive with these markets.
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    \6\ Securities Exchange Act Release No. 38744 (June 18, 1997), 
62 FR 34334 (June 25, 1997) (granting temporary accelerated approval 
to an NYSE proposal to replace eighths with sixteenths as the 
minimum trading increment for NYSE-listed securities); Securities 
Exchange Act Release No. 38571 (May 5, 1997), 62 FR 25682 (May 9, 
1997) (approving an Amex proposal to reduce the minimum trading 
increment from \1/8\ to \1/16\ for Amex-listed equity securities); 
Securities Exchange Act Release No. 38678 (May 27, 1997), 62 FR 
30363 (June 6, 1997) (approving a proposed rule change by Nasdaq to 
reduce the minimum quotation increment from \1/8\ to \1/16\ for 
Nasdaq-listed securities).
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    Nevertheless, the Commission notes that any further change in the 
minimum increments constitutes (1) a change in a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the PCX, or (2) a 
change in an existing order-entry or trading system of an SRO, or (3) 
both. Therefore, the Exchange is still obligated to file such proposed 
changes with the Commission.\7\
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    \7\ These changes, however, may become effective upon filing if 
they meet certain statutory requirements. See 15 U.S.C. 
78s(b)(3)(A)(i) and 17 CFR 240.19b-4(e).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-PCX-97-15) is approved.

    \8\ Id. Sec. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-17469 Filed 7-2-97; 8:45 am]
BILLING CODE 8010-01-M