[Federal Register Volume 67, Number 56 (Friday, March 22, 2002)]
[Notices]
[Pages 13399-13400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6940]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45580; File No. SR-Phlx-2002-18]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. To Make Permanent a 
PACE Automatic Price Improvement Pilot Program and a PACE Order 
Execution and Price Protection Pilot Program

March 18, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4\2\ thereunder, notice is hereby given that 
on March 11, 2002, 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 Exchange. The 
Exchange has requested accelerated approval of the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
the

[[Page 13400]]

proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to make permanent two Philadelphia Stock 
Exchange Automated Communication and Execution System (``PACE'')\3\ 
pilot programs that were introduced with the advent of decimal pricing 
in the securities industry. The first PACE pilot program, which is 
found in Supplementary Material .07(c)(i) to Phlx Rule 229, consists of 
an automated price improvement feature that incorporates a percentage 
of the spread between the bid and the offer (``Price Improvement 
Pilot''). It has been in effect since January 30, 2001.\4\
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    \3\ PACE is the Phlx's automated order routing, delivery, 
execution and reporting system for equities.
    \4\ The price improvement pilot program was established in SR-
Phlx-2001-12. See Securities Exchange Act Release No. 43901 (January 
30, 2001), 66 FR 8988 (February 5, 2001) (SR-Phlx-2001-12). It was 
extended several times, currently through April 15, 2002. See 
Securities Exchange Act Release Nos. 44672 (August 9, 2001), 66 FR 
43285 (August 17, 2001)(SR-Phlx-2001-67); 45078 (November 19, 2001), 
66 FR 59293 (November 27, 2001) (SR-Phlx-2001-101); and 45284 
(January 15, 2002), 67 FR 3253 (January 23, 2002) (SR-Phlx-2002-01).
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    The second PACE pilot program, which is found in Supplementary 
Material .05 and .07(c)(ii) to Phlx Rule 229, incorporates immediate 
execution of certain market orders through the Public Order Exposure 
System (``POES'') and mandatory double-up/double-down price protection 
(``Order Execution/Price Protection Pilot''). It has been in effect 
since August 25, 2000.\5\
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    \5\ The order execution and price protection pilot program was 
established in SR-Phlx-00-08. See Securities Exchange Act Release 
No. 43206 (August 25, 2000), 65 FR 53250 (September 1, 2000). It was 
extended several times, currently through April 15, 2002. See 
Securities Exchange Act Release Nos. 44185 (April 16, 2001), 66 FR 
20511 (April 23, 2001)(SR-Phlx-2001-20); 44818 (September 19, 2001), 
66 FR 49240 (September 26, 2001)(SR-Phlx-2001-81); 45079 (November 
19, 2001), 66 FR 59292 (November 27, 2001)(SR-Phlx-2001-102); and 
45295 (January 16, 2002), 67 FR 3624 (January 24, 2002) (SR-Phlx-
2002-03).
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    The Phlx is not making any changes to the Price Improvement Pilot 
or the Order Execution/Price Protection Pilot, with the exception of 
deleting language that indicates that they are pilot programs. Upon 
approval of the proposed rule change, the Price Improvement Pilot and 
the Order Execution/Price Protection Pilot will be permanent. The text 
of the proposed rule change is available at 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 Phlx 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 Phlx 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 Phlx proposes to make permanent the Price Improvement Pilot and 
the Order Execution/Price Protection Pilot. No other changes are 
proposed to these pilot programs.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6 of the Act \6\ in general, and in particular, with Section 
6(b)(5),\7\ in that it is designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and protect 
investors and the public interest by providing for automatic price 
improvement and automatic execution of certain market orders and 
mandatory double-up/double-down price protection for equities traded 
over the PACE system on a permanent basis.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx 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. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within 35 days of the date of 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 Exchange consents, the Commission will:
    (A) By order approve such 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, 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 
Exhange 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 filings will also be 
available for inspection and copying at the principal office of the 
Phlx. All submissions should refer to File No. SR-Phlx-2002-18 and 
should be submitted by April 12, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-6940 Filed 3-21-02; 8:45 am]
BILLING CODE 8010-01-P