[Federal Register Volume 62, Number 10 (Wednesday, January 15, 1997)]
[Notices]
[Pages 2202-2204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-901]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38138; File No. SR-BSE-96-12]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Boston Stock Exchange, Inc. Relating to Amendments to
Chapter 11, Section 34A (``Trading Halts Due to Extraordinary Market
Volatility'')
January 8, 1997.
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 December 31, 1996, the Boston Stock Exchange, Inc. (``BSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Exchange submitted to the Commission
Amendment No. 1 to its proposal on January 7, 1997,\3\ The Commission
is
[[Page 2203]]
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 Letter from Karen A. Aluise, Assistant Vice President,
BSE, to Holly Smith, Associate Director, Division of Market
Regulation, SEC, dated January 7, 1997 (``Amendment No. 1''). For a
description of Amendment No. 1, see infra note 5 and accompanying
text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Rule--Chapter 11, Section 34A
(Trading Halts Due to Extraordinary Market Volatility ``circuit
breakers'')--to increase the trigger levels for its circuit breakers.
The existing circuit breakers would be triggered if the Dow Jones
Industrial Average (``DJIA'') \4\ declines by 250 and 400 points,
respectively, from its previous day's close. The Exchange proposes
establishing new thresholds of 350 and 550 points decline in the DJIA
before the respective one-half hour and one hour circuit breakers are
triggered.\5\
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\4\ ``Dow Jones Industrial Average'' is a service mark of Dow
Jones & Company, Inc.
\5\ In Amendment No. 1, the BSE corrected a typographical error
which would have left the existing second circuit breaker level at
400 points. Amendment No. 1 clarifies the BSE's proposal that, if
the DJIA declines by 550 or more points from its previous trading
day's closing value, trading on the Exchange will halt for one hour.
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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 self-regulatory organization
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 self-regulatory organization
has prepared summaries of the most significant aspects of such
statements set forth in Sections A, B, and C below.
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 raise the circuit
breaker levels from 250 points to 350 points and from 400 points to 550
points to account for the overall rise in market values since the rules
were first adopted on a pilot basis. These levels have not been changed
since the inception of the pilot program in 1988. At that time, a 250
point drop in the Dow Jones Industrial Average (``DJIA'') \6\
represented approximately a 12% decline, and a 400 point drop
represented a decline of about 19%. Today, these values represent
roughly a 3.8% and 6.2% decline respectively. The proposed 350 and 550
points trigger levels would respectively represent around a 5.4% and
8.5% decline in the DJIA.
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\6\ ``Dow Jones Industrial Average'' is a service mark of Dow
Jones and Company, Inc.
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Chapter II, Section 34A currently provide that if the DJIA falls
250 or more points below its previous trading day's closing value,
trading in all stocks on the Exchange will halt for one-half hour. It
further provides that, if on the same day the DJIA drops 400 or more
points from its previous trading day's close, trading on the Exchange
will halt for one hour. The Exchange seeks to amend this section to
provide that if the DJIA falls 350 points or more below its previous
trading day's closing value, trading in all stocks on the Exchange will
halt for one-half hour; and, if on that same day, the DJIA drops 550
points or more from its previous trading day's close, trading on the
Exchange will halt for one hour.
The circuit breaker rules are a coordinated effort by the equities
and futures markets to halt trading in all stocks, stock options, stock
index options, stock futures, and options on stock futures when the
DJIA reaches certain established trigger values. As such, these changes
are intended to mirror the rules of the New York Stock Exchange
(``NYSE'') that would become applicable during periods of extraordinary
market conditions.
The Exchanges's circuit breaker rules were originally approved by
the Commission for a one-year pilot on December 14, 1988,\7\ and were
extended for a two year pilot on October 23, 1989,\8\ October 28,
1991,\9\ October 29, 1993,\10\ and October 25, 1995.\11\ The 1995 pilot
program is due to expire on October 31, 1997, and the Exchange seeks to
adopt these amendments to coincide with the current pilot program.
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\7\ See Securities Exchange Act Release No. 26357 (December 14,
1988), 53 FR 51182.
\8\ See Securities Exchange Act Release No. 27370 (October 23,
1989), 54 FR 43881.
\9\ See Securities Exchange Act Release No. 29868 (October 28,
1991), 56 FR 56535.
\10\ See Securities Exchange Act Release No. 33120 (October 29,
1993), 58 FR 59503.
\11\ See Securities Exchange Act Release No. 36414 (October 25,
1995), 60 FR 55630.
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2. Statutory Basis
The statutory basis for the proposed rule change is the requirement
under Section 6(b)(5) that an exchange have rules that are 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, in general, to protect investors and the public
interest. The Exchange believes that the proposed amendments to Chapter
II, Section 34A are consistent with these objectives in that the
proposed trading halt requirement during periods of significant market
stress can be expected to provide market participants with a reasonable
opportunity to become aware of and respond to significant price
movements, thereby facilitating in an orderly manner the maintenance of
an equilibrium between buying and selling interest.
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 purpose of the Act.
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 any comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing of
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 it reasons for so finding or (ii) as to
which the self-regulatory organization 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. 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.
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
[[Page 2204]]
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 Section, 450 Fifth Street, N.W., Washington, D.C. 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-96-12 and the submitted by February 5, 1997.
For the Commission, by the Divisions 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. 97-901 Filed 1-14-97; 8:45 am]
BILLING CODE 8010-01-M
