[Federal Register Volume 68, Number 136 (Wednesday, July 16, 2003)]
[Notices]
[Page 42155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17925]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48144; File No. SR-Phlx-2003-31]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. to Amend the Exchange's 
Rule 229 to Provide for the Automatic Execution of Odd-lot Market and 
Marketable Limit Orders Received Over PACE During Locked and Crossed 
Markets

July 9, 2003.
    On April 23, 2002, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange''), filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Phlx Rule 229, Supplementary Material 
.08, to modify the Philadelphia Stock Exchange Automated Communication 
and Execution (``PACE'') System to provide for the automated execution 
of odd-lot market and marketable limit orders received over the PACE 
System during locked and crossed markets. When the PACE Quote \3\ is 
locked, odd-lot market and marketable limit orders entered after the 
opening will be executed at the locked price. If the PACE Quote is 
crossed, odd-lot orders will be executed automatically at the mean of 
the crossed bid and offer if the bid is higher than the offer by $.05 
or less, or manually at the price of the next unlocked and uncrossed 
PACE Quote if the bid is higher than the offer by more than $.05.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The PACE Quote is the best bid/ask quote among the American 
Stock Exchange, Boston Stock Exchange, Cincinnati Stock Exchange, 
Chicago Stock Exchange, New York Stock Exchange, Pacific Exchange or 
Philadelphia Stock Exchange, or the Intermarket Trading System/
Computer Assisted Execution System (``ITS/CAES'') quote, as 
appropriate. The Phlx has represented that the proposal, including 
the PACE quote, would not include Nasdaq securities. Telephone 
conversation between Murray L. Ross, Vice President and Secretary, 
Phlx, and Cyndi Rodriguez, Special Counsel, Division of Market 
Regulation, Commission, on July 1, 2003.
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    The proposed rule change was published for comment in the Federal 
Register on June 4, 2003.\4\ The Commission received no comments on the 
proposal.
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    \4\ See Securities Exchange Act Release No. 47942 (May 29, 
2003), 68 FR 33557 (June 4, 2003).
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    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\5\ 
Specifically, the Commission finds that the proposed rule change 
promotes the objectives of section 6(b)(5) of the Act,\6\ which 
requires, among other things, that the rules of the Exchange be 
designed to prevent fraudulent and manipulative acts and practices, 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 impediments to and perfect the 
mechanism of a free and open market and national market system, and, in 
general, to protect investors and the public interest.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change is consistent 
with the Act because the Exchange's proposed process for handling odd-
lot market and marketable limit orders after the opening should 
increase the efficiency of order handling by relieving the burden of 
specialists of dealing with manual orders of less than a round lot 
during periods of locked and crossed markets. Additionally, the 
Commission notes that the Exchange represents that the proposed rule 
change will improve and enhance order execution quality by reducing 
order execution time while simultaneously ensuring that orders receive 
the best bid or offer. Finally, the Commission notes that the proposed 
rule change is similar to that of the American Stock Exchange LLC \7\ 
and therefore raises no novel regulatory issues.
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    \7\ See Securities Exchange Act Release No. 46304 (August 2, 
2002), 67 FR 51903 (August 9, 2002).
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    It Is therefore ordered, Pursuant to section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-Phlx-2003-31) be, and hereby 
is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-17925 Filed 7-15-03; 8:45 am]
BILLING CODE 8010-01-P