[Federal Register Volume 60, Number 5 (Monday, January 9, 1995)]
[Notices]
[Pages 2422-2423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-386]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35188; File No. SR-Phlx-94-46]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Order Granting Approval to Proposed Rule Change Regarding a Post
Primary Trading Session
January 3, 1995.
I. Introduction
On October 3, 1994 the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to extend the close of trading on
the Exchange's equity trading floor from 4:00 to 4:15 p.m., creating a
new Post Primary Session (``PPS''). On November 25, 1994, the Phlx
submitted Amendment No. 1 to the proposed rule change.\3\
\1\15 U.S.C. Sec. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1991).
\3\See letter from Gerald D. O'Connell, Vice President, Market
Surveillance, Phlx, to Glen Barrentine, Senior Counsel, Commission,
dated November 23, 1994.
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The proposed rule change, as amended, was published for comment in
Securities Exchange Act Release No. 35007 (November 25, 1994), 59 FR
61915 (December 2, 1994). No comments were received on the proposal.
Pursuant to the current Phlx Rule 101 (Hours of Business), trading
in any equity security on the Exchange's equity floor ends at 4:00 p.m.
The PPS, however, will extend these hours for an additional fifteen
minutes. Thus, the hours of the Phlx's auction trading market will be
extended from the current hours of 9:30 a.m. to 4:00 p.m. to the new
hours of 9:30 a.m. to 4:15 p.m.
Under the Phlx's proposal to extend its trading hours, all Exchange
rules applicable to floor trading during the Exchange's regular
hours\4\ will continue to apply to floor trading during the PPS, except
that during the PPS, (1) orders that are designated ``PPS'' are
eligible for execution, and (2) GTX orders are executable after the
close of the PPS (i.e., GTX orders are executable after 4:15 p.m.
instead of 4:00 p.m.). In order to facilitate the extension of trading,
the [[Page 2423]] Exchange is amending the following Phlx rules: Rule
101--Hours of Business; Rule 229--Philadelphia Stock Exchange Automated
Communication and Execution System (``PACE''); Rule 232--Handling
Orders When the Primary Market is Not Open for Free Trading (EXP, PPS,
GTX Orders); and Equity Floor Procedure Advice EF-1--Designating Orders
for Execution in Instances Where the Primary Market is Not Open in an
Issue for which the Phlx is Open for Free Trading.
\4\``Regular'' hours of trading excludes the after hours trading
facility for GTX orders permissible pursuant to Phlx Rule 232(c).
This Rule defines a ``GTX'' order as one that is good until
cancelled, eligible for primary market protection based on volume
that prints on the New York Stock Exchange (``NYSE'') or American
Stock Exchange (``Amex'') after-hours trading session.
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As indicated above, Phlx Rule 101 will be amended to reflect the
extension of the hours of business. Second, the Exchange is amending
Phlx Rule 229, governing the operation of PACE, to designate PACE as an
eligible order routing system for PPS eligible orders. PACE will not,
however, be available as an order execution mechanism during PPS.\5\
\5\Orders received by 4:00 p.m. Eastern Time as determined
electronically by the PACE system are eligible for execution during
regular trading hours (i.e., before the PPS). See Phlx Rule 229
Commentary .17.
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Third, Phlx Rule 232 currently only governs after-hours trading
(crossing session) of GTX orders. The Exchange is amending it, however,
so that it will specify that GTX orders are executable after the PPS
close, and also encompass (1) PPS, and (2) rules governing trading on
the Phlx when the primary market is not open for free trading in an
issue at a time that the Phlx is open for free trading. Rather than
assigning PPS a new rule number, the applicable PPS provision is being
added to Phlx Rule 232 in order to group into a single rule the three
Exchange provisions relating to trading on the Phlx during periods when
the primary market is not open for free trading.\6\
\6\With respect to equities, ``free'' trading is that which
occurs after the initial opening of a security, but not during a
trading halt.
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With respect to the PPS provision, Rule 232 will: require that
orders be designated PPS to be eligible for execution during the PPS;
and specify that since PPS is merely an extension of the Exchange's
auction market, whereby bids and offers are dynamically updated for
trading under normal auction market principles, that Exchange rules
applicable to floor trading during the ``regular'' session will
continue to apply. In this regard, market, limit and contingent order
types currently acceptable under Exchange rules will be accepted for
PPS if so designated.\7\ Finally, the GTX provisions will be renumbered
as paragraph (c) of Phlx Rule 232.
\7\For example, pursuant to Phlx Rule 207, a ``GTC PPS'' (such
an order is good 'til cancelled but executable during PPS, and
differs from a GTX order in that the later is eligible for execution
after the close of the Exchange) order will be eligible for PPS
execution, and, if not executed, will be eligible for execution
during ensuing days because of the GTC designation.
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With respect to the situation addressed in Equity Floor Procedure
Advice EF-1--where the Phlx is open for trading before the primary
market is open, or during a non-regulatory halt in trading on the
primary market--this will be codified into Phlx Rule 232(a). In
addition, the use of the yellow ticket, designating orders eligible for
execution when the Phlx is open for trading in such a circumstance,
will be replaced with the use of the designator ``EXP'' (meaning ex-
primary) to parallel the designators ``PPS'' and ``GTX'' in Rule
232.\8\
\8\The Phlx is also making a few minor changes to clarify that
the Phlx may not be open for free trading during a regulatory
trading halt on the primary market, and to reword the three-year
cycle for imposing fines (i.e., the fine schedule is structured such
that successive violations committed during a three-year time span
result in successive increased fines).
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The Commission finds that the proposed rule change to extend the
Phlx's auction market trading session to 4:15 p.m. is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange, and, in particular, with
the requirements of Section 6(b).\9\ In particular, the Commission
believes the proposal is consistent with the Section 6(b)(5)
requirements that the rules of an exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, and, in general, to protect investors and the
public, in that it is reasonably designed to promote just and equitable
principles of trade, and, in general, perfect the mechanism of a free
and open national market system.
\9\15 U.S.C. Sec. 78f(b) (1988).
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The Commission believes that the decision to change the Exchange's
trading hours does not raise any new regulatory concerns. Currently,
auction market trading after 4:00 p.m. (EST) occurs on the Pacific
Stock Exchange (``PSE'').\10\ The Phlx system will operate in a
substantially similar manner and enable the Phlx to compete with the
PSE for after hours volume. Specifically, the Phlx PPS will continue to
provide full transparency by disseminating quotes through the
Consolidated Quotation System and reporting trades to the consolidated
tape. In addition, there will continue to be complete access to the
Phlx market during PPS and the usual auction market rules will continue
to apply. Moreover, in order to preserve the execution quality of limit
orders placed on the specialists' books during ``regular'' trading
hours, such orders will not automatically migrate to the PPS, but
rather will do so only if the order is so designated (i.e., with an EXP
indicator on the ticket). Finally, the Commission has not received any
comment letters from the public or Phlx members raising any regulatory
issues in connection with the extension of the Phlx auction market
hours to 4:15 p.m.
\10\See Securities Exchange Act Release No. 29631 (August 30,
1991), 56 FR 46025 (September 9, 1991).
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The Commission notes, however, that during the proposed extension
of trading hours, the PSE is the only other national securities
exchange that will be operating an auction market. In this regard, the
Phlx has represented to the Commission that the Intermarket Trading
System (``ITS'') will be in operation as a link between the two
exchanges during the PPS.\11\ Thus, ITS commitments will be able to be
routed back and forth, just as during the regular trading hours.
\11\See letter from Gerald O'Connell, First Vice President,
Phlx, to Amy Bilbija, Attorney, Commission, dated December 28, 1994.
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Although the NYSE is operating its Off-Hours Trading (``OHT'')
facility and the Amex is operating its after-hours trading session
during this time period, these sessions are limited to accepting single
stock orders priced at either the NYSE or Amex closing price,
respectively, or effecting portfolio trades. Because the PPS trading
session will not overlap the 5:00 p.m. executions in Crossing Session I
of the NYSE's OHT facility or the Amex's after-hours trading facility,
the proposal being approved today does not raise market structure
issues regarding the interaction between the PPS and these two after-
hours systems.
Accordingly, the Commission does not believe that an extension of
the Phlx's auction market trading hours to 4:15 p.m. will have an
adverse effect on the maintenance of fair and orderly markets or
disadvantage public customers.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Phlx-94-46) is approved.
\12\15 U.S.C. Sec. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
\13\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-386 Filed 1-6-95; 8:45 am]
BILLING CODE 8010-01-M
