[Federal Register Volume 64, Number 7 (Tuesday, January 12, 1999)]
[Notices]
[Pages 1839-1841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-596]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40883; File No. SR-BSE-98-11]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Boston Stock Exchange, Inc. Relating to its Competing
Specialist Initiative
January 5, 1999.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act),\1\
[[Page 1840]]
and Rule 19b-4 thereunder,\2\ notice is hereby given that on November
23, 1998, the Boston Stock Exchange, Inc. (``BSE'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Item 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 C.F.R. 19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange seeks to amend its Procedures for Competing
Specialists to modify the procedures by which a regular specialist may
object to competition in a stock.
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 propose 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 Propose of, and
Statutory Basis, for, the Proposed Rule Change
(1) Purpose
The purpose of the proposed rule change is to amend the Procedures
for Competing Specialists, which are set forth in Chapter XV, section
18 of the Exchange's rules, to address certain administrative and
procedural issues regarding a specialist's ability to object to another
specialist's request that the Exchange permit competition in a
security. The Exchange seeks to clearly outline the procedural process
by which a regular specialist may object to competition, as well as the
appeal process in the event that the Market Performance Committee rules
against the objection.
The current rules provide that a regular specialist may object to
competition with or without cause. Only the regular specialist can
object to competition in a stock. The Commission's order approving the
Exchange's Competing Specialist Initiative noted that the Market
Performance Committee may not deny applications based solely on such an
objection, but only in circumstances wherein the stock at issue
requires special treatment such that an entering competitor could
jeopardize the fair and orderly market maintained by the regular
specialist.\3\
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\3\ See Securities Exchange Act Release No. 37045 (March 29,
1996), 61 FR 15318 (April 5, 1996).
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The Exchange's current procedure requires the regular specialist to
object in writing within 48 hours of notice of another specialist's
application to compete in a stock. This objection is then reviewed by
the Market Performance Committee, which determines whether to permit
competition. Currently, if the Market Performance Committee rules in
favor of competition, the Procedures for Competing Specialists permit
the regular specialist to appeal that ruling to the Executive Committee
of the Exchange. Moreover, a regular specialist may appeal a decision
of the Executive Committee to the Board of Governors of the
Exchange.\4\ Competition may not begin during the appeal process.\5\
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\4\ See BSE Constitution, Art. II. section 6, which provides
that certain persons affected by a decision of a committee acting
under powers delegated by the Board of Governors may require that
the Board review the decision.
\5\ The Exchange's existing procedures for handling objections
to competition were clarified during a conversation between Karen
Aluise, Vice President, BSE, and Joshua Kans, Attorney, Division of
Market Regulation, Commission, December 2, 1998.
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The Exchange seeks to streamline the procedural process for
objection and appeal. The Exchange proposes to require that a regular
specialist submit an objection on an Exchange designated form within 48
hours after receiving notice of the request to compete, and that the
regular specialist submit in writing the reasons for objecting within
24 hours of the objection. The Exchange further proposes to schedule a
Market Performance Committee meeting and to permit the regular
specialist to appear before that committee to discuss the reasons for
objection. Under the proposal, if the regular specialist appeals the
decision of the Market Performance Committee, the appeal will be heard
by the full Board of Governors of the Exchange, eliminating the interim
step of review by the Executive Committee.
In addition, the Exchange seeks to provide that, if the Market
Performance Committee rules in favor of competition, competition will
commence pending the outcome of any appeal. The Exchange believes that
the Market Performance Committee is best situated to determine whether
a regular specialist has a legitimate claim for objection. Once that
determination has been made, the appeal process could potentially last
several months or longer, effectively prohibiting competition.
Permitting the commencement of competition will permit the specialist
seeking to compete to satisfy the needs of his customers.
(2) Basis
The Exchange believes that the statutory basis for the proposed
rule change is section 6(b)(5) of the Act,\6\ in that it is designed 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 a national market system; and,
in general, to protect investors and the public interest; and is not
designed to permit unfair discrimination between customers, issuers,
brokers or dealers.
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\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 will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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 self-regulatory organization 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
[[Page 1841]]
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 available for inspection and copying at the
Commission's Public Reference Room, 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-BSE-98-11 and should be submitted by
February 2, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-596 Filed 1-11-99; 8:45 am]
BILLING CODE 8010-01-M
