[Federal Register Volume 65, Number 93 (Friday, May 12, 2000)]
[Notices]
[Pages 30666-30667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11919]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42762; File No. SR-PHLX-00-37]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Starting the Automatic Price Improvement 
Feature and the Mandatory Manual Double-up Double-down Price Protection 
Feature at (9:30 A.M.)

May 5, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 20, 2000, the 
Philadelphia Stock Exchange, Inc. (``Phlx'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. 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 begin the Automatic Price Improvement feature 
(``API'') of the Philadelphia Stock Exchange, Inc. Automatic 
Communication and Execution (``PACE'') System at 9:30 A.M. instead of 
9:45 A.M. In addition, the Exchange also proposes to begin the 
Mandatory Manual Double-up Double-down price protection at 9:30 A.M. 
instead of 9:45 A.M. The Text of the proposed rule change is available 
at the Office of the Secretary, the Phlx 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 Exchange 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 Exchange 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
    PACE is the Exchange's automated order routing and execution system 
on the equity trading floor. The PACE System accepts orders for 
automatic or manual execution in accordance with the provisions of Phlx 
Rule 229, which governs the PACE System and defines its parameters. The 
API feature of the PACE System allows the specialist to voluntarily 
provide automatic price improvement to market and marketable limit 
orders to all customers in a security for orders which are 599 shares 
or less, and when the PACE quote \2\ is \3/16\ or \1/8\ for greater.\3\
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    \2\ The PACE quote consists of the best bid/offer among the 
American, Boston, Cincinnati, Chicago, new York, Pacific and 
Philadelphia Stock Exchanges. See Phlx Rule 229.
    \3\ See Phlx Rule 229, Commentary .07(c)(i).
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    The specialist must provide Mandatory Manual Double-up Double-down 
price protection where the specialist does not agree to use the API

[[Page 30667]]

feature. Specifically, Mandatory Manual Double-up Double-down price 
protection is used to provide price improvement for those securities 
that the specialist has determined are not appropriate for the API 
feature because the security is less liquid or less volatile.\4\
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    \4\ See Securities Exchange Act Release No. 39548 (January 13, 
1998), 63 FR 3596 (January 23, 1998) (order approving API feature 
and Mandatory Manual Double-up Double-down price protection).
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    Currently, both the API feature and the Mandatory Manual Double-up 
Double-down price protection begin at 9:45 A.M. The Exchange proposes 
to begin both features at 9:30 A.M., when the market generally opens. 
The PACE timer will be reset to start the API feature fifteen minutes 
earlier, which should in turn permit those orders that were excluded 
due to time constraint to receive the benefits of the price improvement 
through the API feature. The time change for the Mandatory Manual 
Double-up Double-down price protection will require the specialist to 
begin the same obligations fifteen minutes earlier. This will allow 
those stocks which are not subject to automatic price improvement to 
receive the benefits of Mandatory Manual Double-up Double-down price 
protection fifteen minutes earlier.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \5\ of the Act, in general, and furthers the objectives of 
Section 6(b)(5),\6\ in particular, in that it is designed to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, as well as to protect investors and the 
public interest by enhancing efficiency through automation and 
providing automatic price improvement to more equity orders.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any inappropriate burden on competition.

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

    Pursuant to Section 19(b)(3)(A) \7\ of the Act and Rule 19b-4(e)(6) 
\8\ thereunder, the proposed rule change has become effective upon 
filing as it effects a change that: (1) Does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) by its terms, does not 
become operative for 30 days from the date of filing, or such shorter 
time that the Commission may designate if consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission accelerate the operative date of the 
proposal in order for the new 9:30 start time for both the API Feature 
and the Mandatory Manual Double-up Double-down price protection 
provision to become operative promptly.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4.
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    The Commission finds good cause for accelerating the operative date 
of the proposal as of the date of this notice.\9\ The Commission has 
previously found that both the API Feature and the Mandatory Manual 
Double-up Double-down price protection provision may enhance 
intermarket competition and order execution quality on the 
Exchange.\10\ In addition, the Commission previously found that both 
features should contribute to the maintenance of orderly markets by 
Phlx specialists because they help to reduce the price variations 
occurring from trade to trade on low volume.\11\ With the current 
proposal, investors could receive all of these potential benefits at 
9:30 when the market opens. The Commission also notes that the original 
proposal was published for the full comment period, and the Commission 
received no comments.
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    \9\ For purposes only of accelerating the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \10\ See supra, note 4.
    \11\ Id. 
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    At any time within 60 days of the filing of the 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, including whether the proposed rule 
change is consistent with the Act. 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-
0609. 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 in the 
Commission's Public Reference Room. 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-00-37 and should 
be submitted by June 2, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-11919 Filed 5-11-00; 8:45 am]
BILLING CODE 8010-01-M