[Federal Register Volume 64, Number 215 (Monday, November 8, 1999)]
[Notices]
[Pages 60863-60864]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29099]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-42074; File No. SR-BSE-99-11]
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order
Granting Approval to Proposed Rule Change Implementing a Post Primary
Session
October 29, 1999.
I. Introduction
On July 13, 1999, the Boston Stock Exchange, Inc. (``BSE'' 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 implement a Post Primary
Session (``PPS'').
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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The proposed rule change was published for comment in the Federal
Register on September 8, 1999. No comments were received on the
proposal. This order approves the proposal.
II. Description of the Proposal
The Exchange proposes to extend the close of trading on the BSE
from 4 p.m. to 4:15 p.m. Eastern Time, creating a new PPS. Pursuant to
Chapter I-B, Section 1 (Primary Session), the current trading hours at
the Exchange are from 9:30 a.m. until 4:00 p.m. Eastern Time. The
proposal will extend these hours for an additional fifteen minutes,
until 4:15 p.m. Eastern Time. Under the proposal, all Exchange rules
applicable to floor trading during the Exchange's Primary Session will
continue to apply during the PPS, with the following exceptions: (1)
Only orders that are designated ``PPS'' will be eligible for execution;
(2) limit order on the book from the Primary Session will not be
eligible for execution, but will carry over to the next day; (3) there
will be no automated executions; (4) there will be no application of
the Execution Guarantee Rule,\3\ and (5) GTX \4\ orders will be
executable after the close of the PPS (i.e., GTX orders are executable
after 4:15 p.m. instead of 4:00 p.m. Eastern Time). Accordingly, the
Exchange proposes to amend the following rules: (1) Chapter I-B,
Sections 2 and 3, and (2) Chapter IIB, Sections 1 and 3.
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\3\ See BSE Rules, Paragraph 2039A, Section 33.
\4\ For a description of GTX Orders, see ``GTX Orders'' infra.
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PPS Eligible Orders
Pursunt to the proposed amendment of Chapter IIB, Section 3, only
orders designated ``PPS'' will be eligible for execution during the
PPS. Since the PPS is merely an extension of the Exchange's auction
market, wherein bids and offers are continuously updated for trading
under normal auction market principles, Exchange rules will continue to
apply. Thus, to be designated as eligible for execution in the PPS, a
market, limit, or contingent order must be acceptable under current
Exchange rules.
Under the proposal, limit orders on the book from the Primary
Session are not eligible for the PPS, and must be carried over to the
next day. Also, those limits orders that are received during the PPS
(and thus PPS eligible) remain subject to the Limit Order Display
Rule.\5\
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\5\ See Chapter II, Section 40, Paragraph 2039B7.
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GTX Orders
A GTX Order is an agency limit order that is good until canceled,
and is eligible for primary market protection based on the volume that
prints on the after-hours trading session of the New York Stock
Exchange or the American Stock Exchange. Thus, a GTX Order may be
executed during regular trading hours or after the PPS, at 5 p.m.
Eastern Time, but no GTX Order may be executed during the PPS.
BEACON as a Routing System
``BEACON'' is the acronym for the Boston Exchange Automated
Communication Order-routing Network. It provides a system for the
automatic execution of orders on the Exchange under predetermined
conditions. Orders accepted under the system may be executed on a fully
automated or manual basis. The Exchange proposes to amend Chapter IIB,
Section 3(b), to indicate that BEACON will continue to operate as a
routing system for PPS eligible orders, but will not provide an
automatic execution mechanism.
Operation of the ITS System During the PPS
In the amendment to Chapter IIB, Section 3(a), the BSE represents
that ITS will be available for both inbound and outbound commitments
during the PPS to the extent that other market centers (i.e., the
Pacific Exchange, Inc. (``PCX''),\6\ the Philadelphia Stock Exchange,
Inc. (``PHLX'') \7\ and the Chicago Stock Exchange, Inc. (``CHX'')) \8\
are open for trading. The BSE also represents that it will perform
surveillance during the PPS in the same manner and using the same
techniques as those used during the Primary Session. To facilitate the
surveillance of the PPS, BSE's surveillance staff will remain on-site
during the PPS and for any necessary additional time period after the
close of the PPS.
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\6\ PCX's regular equity session closes at 4:30 p.m. Eastern
Time. During the crossing session, PCX does not utilize ITS. See PCX
Rule 4.2, Commentary .02.
\7\ PHLX operates a Post Primary Session from 4 p.m. until 4:15
p.m. Eastern Time which is an extension of its regular auction
market. During the Post Primary Session, PHLX utilizes ITS to the
same extent it does during regular trading hours. See PHLX Rule 101.
\8\ CHX's primary session closes at 4 p.m. Eastern Time. CHX
conducts an Extended Session from 4 p.m. until 4:30 p.m. Eastern
Time. Both sessions utilize ITS. See generally Article 20, CHX Rules
20, 37, 39, 40 and 41.
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Execution Guarantee Does Not Apply
The Execution Guarantee provides that Specialists must guarantee
execution on all agency market and marketable limit orders from 100 up
to and including 1,299 shares. According to the proposed amendments to
Chapter IIB, Section 3(d), the Execution Guarantee will not be
available in any form during the PPS.
III. Discussion
The Commission has reviewed carefully the BSE's proposed rule
change \9\ and finds, for the reasons set forth below, that the
proposal 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).\10\
In particular, the Commission finds the proposal is consistent with the
Section 6(b)(5) \11\ 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. The implementation of the
BSE's Post Primary Session should enhance
[[Page 60864]]
competition in the expanding after-hours market.
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\9\ In approving this rule, the Commission has considered the
proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the implementation of the Exchange's PPS
does not raise any new regulatory concerns. The Exchange will provide
full transparency by disseminating quotes through the Consolidated
Quotation System and reporting trades to the consolidated tape. The
Commission notes that investors are accustomed to trading after-hours
on regional exchanges between 4 p.m. and 4:30 p.m.,\12\ and that the
implementation of BSE's PPS does not significantly alter the after-
hours market with regard to regional exchanges during that time period.
In addition, the Commission has not received any comment letters from
the public or BSE members raising any regulatory issues in connection
with the implementation of the PPS.
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\12\ See supra footnotes 6-8.
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The Commission believes that it is reasonable for the Exchange to
implement the rule changes discussed above \13\ during the PPS. Given
that the after-hours trading market is in its nascent stage, with
differences in volatility, liquidity, and volume as compared to the
traditional trading session, the Commission believes it is reasonable
to require investors to affirmatively choose to participate in the
developing after-hours market. The Commission believes investors will
be better protected if the Exchange requires them to knowingly opt-in
to the PPS.
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\13\ See supra Section II, PPS Eligible Orders, GTX Orders, and
Execution Guarantee Does Not Apply.
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The Commission also finds that the proposal is consistent with
Section 11A(a)(1)(C) of the Act.\14\ Congress found in those provisions
that it is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for and transactions in securities, and to assure
the practicability of brokers executing investors' orders in the best
market.\15\ The proposed rule change accomplishes the objectives of the
Act by providing an opportunity for investors to trade outside of
traditional market hours, complete with the safeguards and standards
upon which investors have come to rely during traditional market hours.
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\14\ 15 U.S.C. 78k-1(a)(1)(C).
\15\ Id.
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The Commission further notes that BSE has represented it intends to
implement surveillance procedures during the PPS. Such surveillance
should assist BSE in satisfying the requirements of Section 6(b)(5) of
the Act \16\ that Exchange rules be designed to prevent fraudulent and
manipulative acts and practices, and to promote just and equitable
principles of trade. Accordingly, the Commission does not believe that
the Exchange's implementation of a PPS will have an adverse effect on
the maintenance of fair and orderly markets of disadvantage public
customers.
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\16\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\17\ that the proposed rule change (SR-BSE-99-11) is approved.
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\17\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-29099 Filed 11-5-99; 8:45 am]
BILLING CODE 8010-01-M
