[Federal Register Volume 62, Number 129 (Monday, July 7, 1997)]
[Notices]
[Pages 36328-36329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17540]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38779; File No. SR-Phlx-97-27]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. To Trade in Sixteenths

June 26, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 11, 1997 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 
have been prepared by the self-regulatory organization (``SRO''). The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to permit Phlx equity securities to be traded in 
sixteenths. The text of the proposed rule change is as follows (deleted 
text is bracketed):
Rule 125  Variations in Bids and Offers
    Bids or offers shall [not] be made at a [less] variation [than \1/
8\ of one dollar in stocks, and \1/8\ of 1 percent of the principal 
amount of bonds, except as specifically] authorized by the Committee.

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 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
    Currently, Rule 125 states that bids or offers shall not be made at 
a less variation than \1/8\ of one dollar in stocks, and \1/8\ of 1 
percent of the principal amount of bonds, except as specifically 
authorized by the Committee. In 1995, the Floor Procedure Committee 
authorized that Phlx equity securities up to $10 that are listed on the 
American Stock Exchange, Inc. (``Amex'') be permitted to trade in 
sixteenths. Recently, the Amex received Commission approval to 
implement a minimum fractional change of \1/16\ for equity securities 
trading at or above $0.25.\2\ As a result, Amex-listed securities 
became eligible to trade in sixteenths through the Intermarket Trading 
System (``ITS''). Last month, following Floor Procedure Committee 
approval on May 6, 1997, the Exchange began trading Amex-listed issues 
trading at or above $0.25 in sixteenths.
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    \2\ Securities Exchange Act Release No. 38571 (May 5, 1997), 62 
FR 25682 (May 9, 1997) (approving File No. SR-Amex-97-14).
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    In response to recent industry events, the Exchange has determined 
that the trading increment applicable to equity securities be changed 
from \1/8\ to \1/16\, upon implementation of certain system changes by 
the Intermarket Trading System (``ITS'') to accommodate trading in 
sixteenths.\3\ Currently, Rule 125 provides that bids or offers shall 
not be made at a less variation than \1/8\ of one dollar in stocks, and 
\1/8\ of 1 percent of the principal amount of bonds, except as 
specifically authorized by the Committee. Thus, the Exchange proposes 
to delete the reference to \1/8\ and, rather than replacing it with a 
particular increment, emphasize the discretion of the Committee to 
modify trading increments.\4\
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    \3\ The Commission notes that these changes to ITS were 
implemented on June 24, 1997.
    \4\ 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 Phlx, 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. 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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    The purpose of this proposal is to extend the benefits of trading 
in a narrower increment to Phlx securities. This should promote more 
accurate

[[Page 36329]]

pricing of securities and tighter quotations.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6 \5\ of the Act in general and, in particular, with Section 
6(b)(5),\6\ in that it is designed 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, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system by adopting a 
narrower minimum fractional change in Phlx equity securities in a 
gradual, orderly fashion. The Exchange also believes the proposal is 
consistent with Section 11A of the Act because it is designed to 
promote competition among the exchanges and market makers.\7\
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    \5\ 15 U.S.C. 78f(b).
    \6\ Id. Sec. 78f(b)(5).
    \7\ Id. Sec. 78k-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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

    The foregoing rule change constitutes a change in a stated policy, 
practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule of the Phlx and, 
therefore, has become effective pursuant to Section 19(b)(3)(A) of the 
Act \8\ and subparagraph (e) of Rule 19b-4 thereunder.\9\
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    \8\ Id. Sec. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4.
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    At any time within sixty days of the filing of such proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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, N.W., Washington, D.C. 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, 450 Fifth Street, N.W., Washington, 
D.C. 20549. 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-97-27 and should be submitted by July 28, 
1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-17540 Filed 7-3-97; 8:45 am]
BILLING CODE 8010-01-M