[Federal Register Volume 65, Number 171 (Friday, September 1, 2000)]
[Notices]
[Pages 53250-53251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22419]


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SECURITIES AND EXCHANGE COMMISSION


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to a Proposed Rule Change and Amendment 
No. 1 by the Philadelphia Stock Exchange, Incorporated, Establishing a 
Pilot Program Relating to Price Improvement in a Decimals Environment

August 25, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(`Act''),\1\ and Rule 19b-1 thereunder,\2\ notice is hereby given that 
on August 22, 2000, the Philadelphia Stock Exchange, Incorporated 
(``PHLX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On August 24, 2000, the Exchange amended the proposal.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons and to grant 
accelerated approval to the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See August 24, 2000 letter from John Dayton, Assistant 
Secretary and Counsel, PHLX, to Alton Harvey, Esquire, Office Chief, 
Division of Market Regulation, SEC (``Amendment No. 1''). In 
Amendment No. 1, the PHLX deleted Supplementary Material .20 to Rule 
229 in its entirety, and requested the proposed rule change be 
implemented as a pilot program through February 28, 2001.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend PHLX Rule 229, Philadelphia Stock 
Exchange Automated Communications and Execution System (PACE),\4\ on a 
pilot basis through February 28, 2001, as part of the industry-wide 
plan to implement the transition from quoting in fractions in quoting 
in decimals. The text of the proposed rule change is available to the 
PHLX and at the Commission.
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    \4\ PACE provides a system of automatic delivery and execution 
of orders on the Exchange equity floor under predetermined 
conditions.
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    The Exchange proposes to amend PHLX Rule 229 at Supplementary 
Material .07(c)(i) to state that automatically executable market and 
marketable limit orders of equities that trade in decimals pursuant to 
PHLX Rules 134 and 125 and are received through PACE shall be provided 
with automatic price improvements of at least $.01 from the PACE quote. 
The PHLX proposes to amend Supplementary Material .07(c)(i)(B) to state 
that a specialist may choose to provide automatic price improvement 
where the PACE quote is \3/16\ or greater or \1/8\ or greater for 
equities trading in fractions, or $.03 or greater or $.05 or greater 
for equities trading in decimals.
    The Exchange proposes to amend Supplementary Material .07(c)(ii) 
respecting mandatory manual double-up/double-down price protection, 
which currently requires the specialist to provide each protection in 
any instance where the bid/ask of the PACE quote is \1/8\ or greater. 
Regarding equities trading in decimals, the specialist would have to 
provide manual double-up/double-down price protection when the bid/ask 
of the PACE quote is $.01 or greater. The definition of double-up/
double-down price protection would be updated at Supplementary Material 
.07(c)(ii) to reflect trades of at least $.10 from the last regular way 
sale on the primary market for equities trading in decimals.
    The PHLX also proposes to amend Supplementary Material .05 as 
follows: if the PACE quote at the time of order entry into the system 
reflects a \1/8\ point spread or less (the difference between the best 
bid and offer) for equities trading in fractions, or $.05 or less for 
equities trading in decimals, that order will be executed immediately 
without the 30 second delay.

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 III 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
    The purpose of the proposed rule change is to amend existing PHLX 
Rule 229 to comply with the implementation of decimal pricing in the 
securities industry on August 28, 2000, and thereafter in phases. 
Certain proposes amendment to PHLX Rule 229 would clarify existing 
language that refers only to pricing in fractions. The Exchange 
proposes to add language that is applicable to both fractional and 
decimal pricing. For example, price improvement on PACE would be in 
fractions as well as in decimals expressed in multiples of the Minimum 
Price Variation (``MPV'') for equities trading in decimals.
    Other proposed amendments would add mandatory price protection in 
multiples of the MPV for equities trading in decimals, where it 
currently exists only in fractions. The Exchange also proposes to add 
decimal equivalents of existing fractional values.
2. Statutory Basis
    The PHLX believes that the proposed rule change is consistent with 
Section 6 of the Act,\5\ in general, and with Section 6(b)(5),\6\ in 
particular, in that it promotes just and equitable principles of trade, 
fosters cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system and, in general, protects investors and the public interest.
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    \5\ 15 U.S.C. 78f.
    \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 will 
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

    No written comments were either solicited or received.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing,

[[Page 53251]]

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, 
NW, Washington, DC 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 Exchange. All 
submissions should refer to file number SR-PHLX-00-08 and should be 
submitted by September 22, 2000.

IV. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Commission has reviewed carefully the Exchange's proposed rule 
change, as amended, and finds, for the reasons set forth below, the 
proposal is consistent with the requirements of Section 6 of the Act 
\7\ and the rules and regulations thereunder applicable to a national 
securities exchange. Specifically, the Commission finds the proposal, 
as amended, is consistent with Section 6(b)(5) of the Act \8\ because 
the proposal is designed to promote just and equitable principles of 
trade, remove impediments to, and perfect the mechanism of a free and 
open market. The Commission believes that the proposed rule change may 
help to facilitate a smooth transition from quoting in fractions to 
decimalization. Additionally, the Commission believes the proposal will 
benefit investors and the public interest by allowing the PHLX to 
continue to provide an opportunity for price improvement for equities 
that are quoted in decimals.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes it is consistent with the protection of 
investors and the public interest and therefore finds good cause for 
approving the proposed rule change prior to the 30th day after the date 
of publication of notice thereof in the Federal Register. The proposed 
rule change is designed to permit a smooth transition to decimal 
pricing, which is scheduled to begin in certain securities on August 
28, 2000. Accelerated approval would afford investors the benefits to 
be realized under this proposal without delay. In light of these 
factors, the Commission finds good cause to approve the proposed rule 
change on an accelerated basis.
    The Commission also believes that it is consistent with the 
protection of investors and the public interest and therefore finds 
good cause for approving Amendment No. 1 to the proposed rule change 
prior to the thirtieth day after the date of publication of notice 
thereof in the Federal Register. Amendment No. 1 requests that the 
proposed rule change be approved on a pilot basis through February 28, 
2001. The Commission believes it is prudent and reasonable to allow the 
proposed rule change to be implemented on a pilot basis, so as to 
afford investors the benefits to be realized under this proposal 
without delay. In light of these factors, the Commission finds good 
cause to approve Amendment No. 1 on an accelerated basis.
    For these reasons, and because the proposal is unlikely to raise 
new issues, the Commission deems it appropriate to approve the proposed 
rule change, as amended, on an accelerated basis. The Commission finds, 
therefore, that good cause exists, consistent with Section 19(b) \9\ 
and Section 6(b) \10\ of the Act, to grant accelerated approval of the 
proposed rule change, as amended.
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    \9\ 15 U.S.C. 78s(b).
    \10\ 15 U.S.C. 78f(b).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-PHLX-00-08), as amended, is 
hereby approved on an accelerated basis through February 28, 2001.
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    \11\ 15 U.S.C. 78s(b)(2).

    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. 00-22419 Filed 8-31-00; 8:45 am]
BILLING CODE 8010-01-M