[Federal Register Volume 62, Number 93 (Wednesday, May 14, 1997)]
[Notices]
[Pages 26606-26607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12547]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38575; File No. SR-PCX-97-16]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Temporary Accelerated Approval of a Proposed Rule Change by
the Pacific Exchange, Inc. Relating to Trading Differentials for Equity
Securities
May 6, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 5, 1997, the Pacific
Exchange, Inc. (``PCX'' or ``Exchange'') filed with the Securities and
Exchange Commission (``SEC'' or ``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by the self-regulatory organization (``SRO''). The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons and to grant accelerated approval on a
temporary basis to the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to adopt a procedure, effective for
ninety days, under which the Exchange may establish trading
differentials for equity securities at its discretion.
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 III 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
PCX Rule 5.3(b) currently provides that, unless specifically ruled
otherwise, the trading differentials on stocks shall be as follows: On
stocks other than those traded on the New York Stock Exchange
(``NYSE'') or American Stock Exchange (``Amex''): if the selling price
is below \1/2\ of $1, the trading differential is \1/32\; if the
selling price is \1/2\ of $1 but under $5, the trading differential is
\1/16\; and if the selling price is $5 and above, the trading
differential is \1/8\. The rule further provides that on stocks also
traded on the NYSE or the Amex, the trading differentials shall be the
same as those prescribed by such exchanges.
The Exchange is proposing to establish a procedure, effective for
ninety days, under which the Exchange may determine the trading
differentials for equity securities traded on the Exchange. The
Exchange is proposing this change in order to add flexibility, so that
it can change the trading differentials on an immediate basis. The
Exchange notes that some exchanges do not have specific rules on
trading differentials and are able to change them on an immediate
basis. The Exchange intends to base any changes to trading
differentials on competitive considerations and other factors as
appropriate, but such trading differentials will conform to any
applicable Intermarket Trading System (``ITS'') rules.\2\
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\2\ The PCX indicated to the Commission that it intends to take
into account the manner in which ITS is operating at the time the
Exchange is considering changes to its trading differentials.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \3\ of the Act in general and furthers the objectives of
Section 6(b)(5) \4\ in particular in that it is designed to facilitate
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market, and to promote just and equitable
principles of trade.
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\3\ 15 U.S.C. 78f(b).
\4\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
[[Page 26607]]
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 written comments.
III. 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, NW., Washington, DC 20545.
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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Room, 450 Fifth Street, NW.,
Washington, DC 20549. Also copies of such filing will be available for
inspection and copying at the principal office of the PCX. All
submissions should refer to File No. SR-PCX-97-16 and should be
submitted by June 4, 1997.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
The Commission finds that the proposed rule change 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 and Section 11A of the
Act.\5\
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\5\ 15 U.S.C. Secs. 78f(b) and 78k-1. In approving this rule
change, the Commission notes that it has considered the proposal's
impact on efficiency, competition, and capital formation, consistent
with Section 3 of the Act. Id. Sec. 78c(f).
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Recently, there has been a movement within the industry to reduce
the minimum trading and quotation increments imposed by the various
SROs. The Amex recently reduced its minimum trading increment, and
Nasdaq has proposed to reduce its minimum quotation increment.\6\ In
addition, several third market makers have begun quoting securities in
increments smaller than the primary markets. The proposed rule change
will allow the PCX the flexibility it needs to address this development
and remain competitive with these markets.
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\6\ Securities Exchange Act Release No. 39571 (May 5, 1997)
(approving Amex proposal to reduce the minimum trading increment
from \1/8\ to \1/16\ for Amex-listed equity securities priced at or
above $10.00); Securities Exchange Act Release No. 38531 (Apr. 21
1997), 62 FR 20233 (Apr. 25, 1997) (publishing notice of a proposed
rule change by the Nasdaq Stock Market to reduce the minimum
quotation increment from \1/8\ to \1/16\ for Nasdaq-listed
securities priced equal to or greater than $10.00).
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice thereof into the Federal Register.\7\ As discussed above, the
proposal provides the PCX with the ability to quickly modify its
trading increment to meet changing market conditions. This will enable
the PCX to quote competitively with other markets. Waiting the full
statutory review period for the proposed rule change could place the
PCX at a significant competitive disadvantage to other markets. At the
same time, the proposal is effective for only ninety days. This will
provide the Commission with a sufficient period to receive and assess
comments on the PCX's proposal before it is adopted on a permanent
basis.\8\ Therefore, the Commission believes it is consistent with
Section 6(b)(5) and Section 19(b)(2) of the Act to grant accelerated
approval on a temporary basis to the proposed rule change.\9\
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\7\ A prior proposal by another exchange to reduce its minimum
fractional change was published for the full statutory comment
period without any comments being received by the Commission.
Securities Exchange Act Release No. 38571 (May 5, 1997) (approving a
proposed rule change by the Amex to reduce the minimum trading
differential from \1/8\ to \1/16\ for equity securities priced at or
above $10.00).
\8\ The Exchange has submitted a companion filing that requests
permanent approval of the procedures described herein. See File No.
SR-PCX-97-15.
\9\ 15 U.S.C. Secs. 78f(b)(5) and 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\10\ that the proposed rule change (SR-PCX-97-16) is hereby
approved on an accelerated basis through August 3, 1997.
\10\ 15 U.S.C. 78s (b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12547 Filed 5-13-97; 8:45 am]
BILLING CODE 8010-01-M
