[Federal Register Volume 62, Number 195 (Wednesday, October 8, 1997)]
[Notices]
[Pages 52601-52602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26648]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39187; File No. SR-BSE-97-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Boston Stock Exchange, Inc., 
Relating to Stop Orders and Stop Limit Orders in Solely Listed Issues

October 1, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 4, 1997, 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. On September 15, 1997, the Exchange submitted to the 
Commission an amendment to the proposed rule change.\31\ The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The amendment revised the text of the proposed supplementary 
material to Section 3 of Chapter 1 of the Exchange Rules to clarify 
that it only applies to the trading of issues listed solely on the 
Exchange and that the proposal also applies to stop limit orders. 
See letter from Karen A. Aluise, Assistant Vice President, BSE, to 
Michael Walinskas, Senior Special Counsel, Division of Market 
Regulation, Commission (Sept. 15, 1997) (``Amendment No. 1'').
---------------------------------------------------------------------------

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

    The Exchange seeks to adopt a new Supplementary Material to Section 
3 of Chapter 1 of the Exchange Rules to govern the activation criteria 
for stop orders and stop limit orders in sole listed issues where 
reported executions occur away from the Exchange.
    The text of the proposed rule change is available at the Office of 
the Secretary, BSE and at the Commission.

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, 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 guide Exchange 
specialists and customers in the appropriate activation of stop orders 
and stop limit orders in sole listed issues. Due to the frequency with 
which the Exchange's sole listed issues trade in the Nasdaq market,\4\ 
it is likely that transactions will occur in that market at prices 
which would activate Exchange resident stop orders and stop limit 
orders, were such transactions to occur in the Exchange's market. At 
such times customers may look for an execution report based on trading 
that occurs in Nasdaq market. In these circumstances, Exchange 
specialists may be placed at significant market risk if a customer is 
permitted to determine after the fact that a stop order or stop limit 
order in a solely listed issue was, or was not, due based on a sale 
reported in the Nasdaq market. The proposed interpretation will remove 
any ambiguity regarding the appropriate activation of stop orders and 
stop limit orders in solely listed issues by necessitating the 
inclusion of reported regular way round-lot sales in the Nasdaq market 
in determining the activation of Exchange resident stop orders and stop 
limit orders in solely listed issues.
---------------------------------------------------------------------------

    \4\ Generally, the Exchange's solely listed issues trade on the 
Nasdaq SmallCap Market. Here, however, the exchange uses the term 
``Nasdaq market'' to include both Nasdaq SmallCap and OTC Bulletin 
Board. Telephone Conversation between Karen Aluise, Assistant Vice 
President, BSE, and Christine Richardson, Law Clerk, Division of 
Market Regulation, Commission, on September 23, 1997.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange represents that the proposed rule change is consistent 
with Section with Section (6)(b)(5) of the Act \5\ 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; to remove implements to and 
perfect the mechanism of a free and open market and a national market 
system; and, in general, to protect investors and the public interest; 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers or dealers.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. Sec. 78f(b).
---------------------------------------------------------------------------

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 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

    No written comments were either solicited or received.

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

[[Page 52602]]

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. Sec. 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 Exchange. All 
submissions should refer to File No. SR-BSE-97-04 and should be 
submitted by October 29, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-26648 Filed 10-7-97; 8:45 am]
BILLING CODE 8010-01-M