[Federal Register Volume 66, Number 78 (Monday, April 23, 2001)]
[Notices]
[Pages 20511-20512]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9965]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-44185; File No. SR-Phlx-2001-20]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change and Amendment No. 1 by the
Philadelphia Stock Exchange, Inc. To Extend a Pilot Program Relating to
Price Protection in a Decimals Environment
April 16, 2001.
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 March 1, 2001, 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. On April
13, 2001, the Exchange amended the proposal.\3\ The Exchange filed this
proposal under section 19(b)(3)(A) of the Act,\4\ and Rule 19b-4(f)(6)
\5\ thereunder, which renders the proposal effective upon filing with
the Commission. 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).
\2\ 17 CFR 240.19b-4.
\3\ See April 23, 2001 letter from Jurij Trypupenko, Esquire,
Phlx to Alton S. Harvey, Division of Market Regulation, SEC and
attachments (``Amendment No. 1''). In Amendment No. 1, the Phlx
converted the proposed rule change to a non-controversial proposal
pursuant to Rule 19b-4(f)(6). 17 CFR 240.19b-4(f)(6). In addition,
the Phlx changed the number of the proposed rule change from SR-
Phlx-01-20 to SR-Phlx-2001-20, and made other technical, non-
substantive changes to the proposal.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange proposes to extend through August 31, 2001 the
operation of the pilot program that amended Phlx Rule 229, Philadelphia
Stock Exchange Automated Communication and Execution System (PACE)
(``Pilot''),\6\ as part of implementing industry-wide decimalization
and securities pricing in fractions and decimals.\7\ The text of the
proposed rule change is available at the Phlx and at the Commission.
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\6\ PACE provides a system of automatic delivery and execution
of orders on the Phlx equity floor under predetermined conditions.
\7\ The Pilot was established in SR-Phlx-00-08. See Securities
Exchange Act Release No. 43206 (August 25, 2000), 65 FR 53250
(September 1, 2001). The Commission notes that full implementation
of decimal pricing in equities and options was completed on April 9,
2001. While the rules governing the Pilot make reference to
fractional pricing, the Commission did not require the Phlx to amend
its rules at this time to reflect full implementation of decimal
pricing. The Phlx should, at some point in the future, file a
proposed rule change to remove references to fractional pricing from
its rules.
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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
The Phlx proposes to extend, through August 31, 2001, the
effectiveness of the Pilot that amends Phlx Rule 229 and institutes,
for equities priced in decimals, among other things, decimal-based
requirements relating to mandatory double-up/double-down price
protection and automatic price improvement, as indicated below.
Supplementary Material .05 to Rule 229 establishes that if the PACE
Quote \8\ 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.
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\8\ The PACE Quote is the National Best Bid/Offer.
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Supplementary Material .07(c) to Rule 229 establishes that
automatic price improvement and mandatory manual double-up/double-down
price protection applies to both fractional and decimal priced
equities. The Pilot provides that specialists may choose to provide
automatic price improvement of $.01 to all customers and all eligible
market orders in an equity trading in decimals (where the PACE Quote is
either $.05 or greater or $.03 or greater), or \1/16\ to equities
trading in fractions (where the PACE Quote is \3/16\ or greater or \1/
8\ or greater).\9\ And specialists that
[[Page 20512]]
do not agree to provide price improvement in a security have to provide
manual double-up/double-down price protection in any instance where the
bid/ask of the PACE Quote is \1/8\ or greater for equities trading in
fractions, or $.05 or greater for equities trading in decimals.\10\
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\9\ The Exchange previously established a six-month pilot
program relating to price improvement based on a percentage of the
spread between the bid and offer. See Securities Exchange Act
Release No. 43901 (January 30, 2001), 66 FR 8988 (February 5, 2001)
(SR-Phlx 01-12).
\10\ Double-up/double-down is defined in Supplementary Material
.07(c)(ii) to Phlx Rule 229 as a trade that would be at least \1/4\
(up or down) for equities trading in fractions or $.10 (up or down)
for equities trading in decimals from the last regular way sale on
the primary market, or, \1/4\ for equities trading in fractions or
$.10 for equities trading in decimals from the regular way sale that
was the previous intra-day change on the primary market.
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The Exchange believes that extension of the Pilot through August
31, 2001 would be conducive to the proper implementation of decimal
pricing, and should facilitate the transition to decimal pricing.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act \11\ in general, and in particular, with
Section 6(b)(5),\12\ 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 facilitates transactions in securities, removes impediments to and
perfects the mechanism of a free and open market and national market
system, and, in general, protects investors and the public interest.
The Phlx also believes the proposal will facilitate the orderly
transition to decimal pricing.
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\11\ 15 U.S.C. 78f.
\12\ 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. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
Because the foregoing proposed rule change does not:
(i) Significantly affect the protection of investors or the public
interest;
(ii) Impose any significant burden on competition; and
(iii) Become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to section 19(b)(3)(A) of the Act \13\ and
Rule 19b-4(f)(6) thereunder.\14\ 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.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ For purposes of calculating the 60-day abrogation date, the
Commission considers the 60-day period to have commended on April
13, 2001, the date of the Phlx filed Amendment No. 1.
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The Exchange has requested that the Commission accelerate the
operative date. The Commission finds good cause to designate the
proposal to become operative immediately because such designation is
consistent with the protection of investors and the public interest.
The Commission believes that the proposal should be effective and
operative immediately upon filing to ensure there is no lapse in the
Pilot's effectiveness. For these reasons, the Commission finds good
cause to designate that the proposal is both effective and operative
upon filing with the Commission.\16\
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\16\ 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). The Commission accepted the Phlx's initial filing on March
1, 2001, as satisfying the five-day pre-filing notice requirement
under Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal 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
Exchange. All submissions should refer to file number SR-Phlx-2001-20,
and should be submitted by May 14, 2001.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-9965 Filed 4-20-01; 8:45 am]
BILLING CODE 8010-01-M