[Federal Register Volume 64, Number 4 (Thursday, January 7, 1999)]
[Notices]
[Pages 1061-1062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-300]
[[Page 1061]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40842; File No. SR-Phlx-98-46]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Amending Rule 229,
Philadelphia Stock Exchange Automatic Communication and Execution
(``PACE'') System, Raising the Minimum Order Delivery Requirement for
Specialists from 1099 Shares to 2099 Shares
December 28, 1998.
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 November 12, 1998, the Philadelphia Stock Exchange, Inc.
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``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.
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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 Phlx proposes to amend Rule 229, PACE,\3\ to raise the minimum
order delivery requirement for specialists from 1099 shares to 20999
shares.
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\3\ PACE is the Exchange's automatic order routing and execution
system for securities on the equity trading floor. See Phlx. Rule
229.
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Currently, Rule 229 sets the minimum order delivery requirement for
specialists at 1099 shares. Specialists are required to accept and the
PACE system will accept, agency orders up to 1099 shares. Phlx Rule
229, Supplementary Material .06 through .10 contains the language
requiring specialists to accept orders of 1099 shares over PACE in
various situations. Section 229.06 governs market orders entered before
the New York market opening. Section 229.07(b) governs market orders
entered after the New York market opens. Section 229.09 governs limit
orders. Sections 229.10(b)-(c) govern the method of execution given to
PACE orders. The proposed rule change will increase the minimums
contained in these sections to 2099 shares. Additionally, specialists
will continue to be able to raise their own minimum delivery
requirements for individual stocks to levels higher than the proposed
minimum of 2099 shares.
II. Self-Regulatory Organization's Statements Regarding 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
In summary, the Exchange is proposing to extend the benefits of its
PACE System to a larger group of orders by increasing the minimum
guaranteed order delivery size to 2099 shares. A higher minimum
guarantee order delivery size will accommodate and encourage larger
orders. By accepting larger orders, the Exchange should be able to
attract more customers and larger volume of the PACE System. Thus, the
benefits of automated order routing systems, like PACE, would be
extended to additional orders.
Currently, Phlx specialists are required to accept delivery of
orders up to 1099 shares. By raising this requirement, specialists
will, at a minimum, accept PACE orders up to 2099 shares. The Exchange
believes that 2099 shares is an appropriate minimum in today's
marketplace in light of current volumes. Further, the current level of
1099 shares was set in place in 1986,\4\ when market volumes were
lower. Additionally, the 2099 level is consistent with the 2099 level
at the Chicago Stock Exchange.\5\
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\4\ See Securities Exchange Act Release No. 23620 (September 16,
1986), 51 FR 33968 (September 24, 1986) (SR-Phlx-86-30).
\5\ See Chicago Stock Exchange Article XX, Rule 37.
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Specialists may increase the number of shares that they guarantee
to accept above this minimum number. These guarantees, both mandatory
and higher voluntary guarantees, tend to encourage customers to direct
order flow to the Phlx specialist using the PACE System. Increased
requirements should further encourage customers to increase order flow
to Phlx specialists using the PACE System. Additionally, specialists
may continue to voluntarily increase this requirement above 2099 shares
for individual stocks.
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act in general, and in particular, with Section
6(b)(5), in that it is designed to promote just and equitable
principles of trade, remove impediments to and perfect the mechanism of
a free and open market and a national market system by increasing the
minimum delivery requirement for specialist using the PACE System,
thereby extending the benefits of PACE to additional orders.
B. Self-Regulatory Organization's Statement on Burden on Competition
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 Receive 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 reason for so finding or (ii) as to
which the Phlx consents, the Commission will:
(A) By order approve the 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
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. 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
[[Page 1062]]
available for inspection and copying in the Commission's Public
Reference Section, 450 Fifth Street, NW, Washington, DC 20549. 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
No. SR-Phlx-98-46 and should be submitted by January 28, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-300 Filed 1-6-99; 8:45 am]
BILLING CODE 8010-01-M