[Federal Register Volume 69, Number 165 (Thursday, August 26, 2004)]
[Notices]
[Pages 52534-52535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-1930]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50220; File No. SR-BSE-2004-37]


Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change To Extend Its Clean Cross Rule to the Trading of Exchange-
Listed Securities

August 19, 2004.
    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 August 18, 2004, 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 Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons and is approving the 
proposal on an accelerated basis.
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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 replicate a section of its Nasdaq trading 
rules relating to orders to buy and sell the same security into its 
rules applicable to the trading of exchange-listed securities.
    The text of the proposed rule change is below. Proposed new 
language is italicized; proposed deletions are in brackets.
* * * * *

Rules of the Boston Stock Exchange

Chapter II--Dealings on the Exchange
* * * * *
Sec. 18 Orders To Buy and Sell the Same Security
    When a member has an order to buy and an order to sell the same 
security, he shall audibly offer such security, if bonds, at 1/8 of 1%, 
and if stocks, at the approved Minimum Price Variation (``MPV'') (as 
defined in Chapter II, Section 41), higher than his bid before making a 
transaction with himself.
    When a member has an order to buy and an order to sell an 
equivalent amount of the same security, and both orders are for 5,000 
shares or more and are for accounts other than the accounts of the 
executing member, the member may cross such orders at a price which is 
at or within the prevailing bid or offer. The member's bid or offer 
shall be entitled to priority at such cross price, provided that the 
proposed cross transaction is of a size greater than the aggregate size 
of all of the interest communicated on the Exchange floor at that 
price. Another member may trade with either the bid or offer side of 
the presented cross transaction only to provide a price which is better 
than the cross price as to all or part of such bid or offer. A member 
who is providing a better price to one side of the cross transaction 
must trade with all other market interest having priority at that price 
before trading with any part of the cross transaction.
* * * * *

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 the 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 restate a section of 
the Rules of the Board of Governors of the Exchange (the ``BSE Rules'') 
relating to Orders to Buy and Sell the Same Security (``Clean Cross 
Rule''). Currently, the Exchange has a Clean Cross Rule set forth in 
Chapter XXXV of the BSE Rules, which is applicable to the trading of 
Nasdaq securities.\3\ The Exchange is seeking to restate this rule, 
verbatim, in Chapter II of the BSE Rules, so that it would also apply 
to the trading of exchange-listed securities. In extending its Clean 
Cross Rule to exchange-listed securities, the BSE believes it would be 
on a competitive par with other exchanges that have Clean Cross Rules. 
The BSE notes, for example, that the American Stock Exchange (``Amex'') 
has a Clean Cross Rule upon which the BSE Clean Cross Rule is based.\4\
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    \3\ See Chapter XXXV, section 6 of the BSE Rules.
    \4\ See Amex Rule 126, Commentary .02. See also, e.g., Article 
XX, Rule 23 of the Chicago Stock Exchange, Incorporated (Order to 
Buy and Sell the Same Security); Rule 126 of the Philadelphia Stock 
Exchange, Inc. (``Crossing'' Orders).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\5\ in general, and with 
Section 6(b)(5) of the Act,\6\ in particular, 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 is not designed to permit unfair discrimination 
between customers, brokers, or dealers, or to regulate, by virtue of 
any authority, matters not related to the administration of the 
Exchange.
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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 burden on competition.

[[Page 52535]]

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 comments on the 
proposed rule change.

III. 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-BSE-2004-37 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to SR-BSE-2004-37. This file number 
should be included on the subject line if e-mail is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 
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, 450 Fifth Street, NW., Washington, 
DC 20549. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to SR-BSE-2004-37 and should be submitted on 
or before September 16, 2004.

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

    The Commission finds that the proposed rule change is consistent 
with the Act and the rules and regulations under the Act applicable to 
a national securities exchange. In particular, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\7\ in that it is designed to promote just and equitable principles 
of trade, to remove impediments to and to perfect the mechanism of a 
free and open market and a national market system, to prevent 
fraudulent and manipulative acts, and, in general, to protect investors 
and the public interest.\8\
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    \7\ 15 U.S.C. 78f(b)(5).
    \8\ In approving this rule change, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 15 
U.S.C. 78c(f).
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    The rule change will allow a member to initiate a clean cross 
transaction in an exchange-listed security of 5,000 shares or more at a 
price at or within the prevailing bid or offer. The Commission believes 
that such a rule strikes a reasonable balance between allowing floor 
brokers on the Exchange to execute crossing transactions and allowing 
specialists and market makers to provide price improvement. The 
Commission also believes that the 5,000 share threshold will ensure 
that the proposed rule change will apply primarily to larger block-
sized orders where the depth of the prevailing bid or offer may be less 
likely to satisfy either side of the clean cross. The Commission notes 
that the proposed rule change preserves the auction market principle of 
price improvement by permitting the cross transaction to be broken up 
at a better price.
    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice thereof in the Federal Register.
    Because it previously has approved similar rules on other exchanges 
\9\ as well as a substantively identical BSE rule that provides for 
clean cross transactions in Nasdaq securities,\10\ the Commission 
believes that accelerated approval of a BSE rule that provides for 
clean cross transactions in exchange-listed securities is appropriate.
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    \9\ See, e.g., Amex Rule 126, Commentary .02. See also 
Securities Exchange Act Release No. 44123 (March 28, 2001), 66 FR 
18124 (April 5, 2001) (SR-Amex-01-02) (approving Amex Rule 126, 
Commentary .02); Securities Exchange Act Release No. 47345 (February 
11, 2003), 68 FR 8316 (February 20, 2002) (SR-Amex-2002-89) 
(reducing minimum number of shares eligible for Amex Clean Cross 
Rule to 5,000).
    \10\ See Chapter XXXV, section 6 of the BSE Rules. See also 
Securities Exchange Act Release No. 44952 (October 18, 2001), 66 FR 
54039 (October 25, 2001) (SR-BSE-2001-01) (approving Chapter XXXV, 
section 6 of the BSE Rules).
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V. Conclusion

    Is it therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-BSE-2004-37) be, and it 
hereby is, approved on an accelerated basis.
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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. E4-1930 Filed 8-25-04; 8:45 am]
BILLING CODE 8010-01-P