[Federal Register Volume 59, Number 30 (Monday, February 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3359]
[[Page Unknown]]
[Federal Register: February 14, 1994]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33594; File No. SR-Phlx-93-49]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Regarding Unbundling of
PACE Orders
February 8, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November
3, 1993, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the self-regulatory
organization. On February 1, 1994, the Phlx submitted Amendment No. 1
to the proposal.\1\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\See letter from Gerald D. O'Connell, Vice President, Market
Surveillance, Phlx, to Sandy Sciole, Branch Chief, Commission, dated
February 1, 1994. The amendment clarified the language of the rule
to prohibit any such action for the purpose of attaining PACE
guarantees by removing the word ``primary'' which originally
preceded ``purpose''.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx, pursuant to Rule 19b-4 of the Act, proposes to adopt
Commentary .19 to Phlx Rule 229\2\ to prohibit the unbundling of orders
entered for execution through the Philadelphia Stock Exchange Automated
Communication and Execution System (``PACE'').\3\ Specifically,
Commentary .19 would read as follows:
---------------------------------------------------------------------------
\2\Rule 229 details the execution guarantees due a PACE order.
See Philadelphia Stock Exchange Rules, Rule 229.
\3\PACE is the Phlx's small order entry execution system.
Orders received by a member from a customer may not be unbundled
for the purpose of availing upon PACE volume and size execution
guarantees, nor may a firm solicit a customer to unbundle an order
the purpose of availing upon PACE volume and size execution
guarantees.
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, 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
1. Purpose
The Phlx proposes to adopt Commentary .19 to Phlx Rule 229 in order
to prohibit the unbundling of certain types of orders. PACE is the
Exchange's automated order routing, delivery and execution system for
equity securities. Pursuant to Phlx Rule 229, customer orders entered
through PACE are entitled to certain execution guarantees. For example,
limit orders for less than 600 shares become due an execution once
1,000 shares of that security prints at the limit price or better on
the New York Stock Exchange (``primary market guarantee'').\4\
---------------------------------------------------------------------------
\4\See Phlx Rule 229, Supplementary Material .10(a).
---------------------------------------------------------------------------
Unbundling occurs when a member organization or its agent splits a
larger sized order into two or more small-sized orders to take
advantage of PACE execution guarantees for orders of less than 600
shares. The Phlx proposal would prohibit members from soliciting their
customers to unbundle orders for the purpose of taking advantage of
these guarantees. However, the proposed prohibition against unbundling
does not extend to any orders broken up by a non-member customer at his
or her own discretion as long as the customer was not solicited to do
so by the Phlx member firm for the aforementioned purpose.
2. Statutory Basis
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, prevent
fraudulent and manipulative acts and practices, 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, as
well as to protect investors and the public interest, consistent with
section 6(b)(5).
B. Self-Regulatory Organization's Statement on Burden on Competition
The 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 Received from Members, Participants or Others
The Phlx has neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the 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 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. Person 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 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 Phlx. All
submissions should refer to File No. SR-Phlx-93-49 and should be
submitted by March 7, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-3359 Filed 2-11-94; 8:45 am]
BILLING CODE 8010-01-M
