[Federal Register Volume 60, Number 134 (Thursday, July 13, 1995)]
[Notices]
[Pages 36170-36172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17138]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35933; File No. SR-PHLX-95-48]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the
Philadelphia Stock Exchange, Inc., Proposing to Extend its OTC/UTP
Pilot Program
July 3, 1995.
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 June 27, 1995, 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
[[Page 36171]]
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons and simultaneously is approving the
proposal.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1991).
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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 extend the
effectiveness of the pilot program and its accompanying rules regarding
the trading of Nasdaq/National Market (``Nasdaq/NMS'') securities on
the Exchange pursuant to unlisted trading privileges (``Phlx OTC/UTP
Pilot Program'') until August 12, 1995, which is when the effectiveness
of the joint transaction reporting plan (``Joint OTC/UTP Plan'' or
``Plan'') for OTC/UTP transactions is scheduled to expire.
The Exchange requests the Commission to find good cause, pursuant
to Section 19(b)(2) of the Act, for approving the proposed rule change
prior to the thirtieth day after publication in the Federal Register.
Due to the non-controversial nature of the Phlx OTC/UTP Pilot Program,
coupled with its previously scheduled expiration date of June 30, 1995,
the Phlx respectfully requests accelerated approval of this filing.
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
In 1985, the Commission published its policy to allow the extension
of unlisted trading privileges (``UTP'') by national securities
exchanges in certain over-the-counter (``OTC'') securities, provided
that certain terms and conditions are satisfied. On June 26, 1990, the
Commission approved the Joint OTC/UTP Plan, submitted by the National
Association of Securities Dealers, Inc. (``NASD''), the American Stock
Exchange, the Boston Stock Exchange, the Midwest Stock Exchange
(``MSE,'' currently operating as the Chicago Stock Exchange, or
``Chx''), and the Phlx.\3\ The Joint OTC/UTP Plan governs the
collection, consolidation, and dissemination of quotation and
transaction information for Nasdaq/NMS securities traded on exchanges
and by NASD market makers.
\3\ See Securities Exchange Act Release No. 28146 (June 26,
1990), 55 FR 27917. The Commission has approved two extensions of
the effectiveness of the Joint OTC/UTP Plan. See Securities Exchange
Act Release No. 34371 (July 13, 1994), 59 FR 37103 (order approving
Amendment No. 1 to File No. S7-24-89), and Securities Exchange Act
Release No. 35221 (January 11, 1995), 60 FR 3886 (order approving
Amendment No. 2 to File No. S7-24-89, thereby extending the
effectiveness of the Joint OTC/UTP Plan through August 12, 1995).
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The Phlx files the current proposed rule change to continue the
effectiveness of the Phlx OTC/UTP Pilot Program that provides for
trading of Nasdaq/NMS securities on the Exchange pursuant to UTP.
Although the Chx had been trading Nasdaq/NMS securities since 1987, the
Phlx obtained temporary approval of its rules to facilitate trading
Nasdaq/NMS securities in late 1992,\4\ and began trading the securities
in February 1993. The Phlx operated the program without any adverse
consequences or developments which would have had a negative impact
upon the program.
\4\ See Securities Exchange Act Release No. 31672 (December 30,
1992), 58 FR 3054 (order approving File No. SR-PHLX-92-04). The
effectiveness of the Phlx OTC/UTP Pilot Program has been extended
twice, most recently through June 30, 1995. See Securities Exchange
Act Release No. 35191 (January 12, 1995), 60 FR 3017.
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Since April 1994, the Phlx has temporarily suspended making markets
in OTC/UTP securities. However, the Phlx desires to keep the program in
place for future use once other parts of the Joint OTC/UTP Plan are
finalized between the NASD and other participants in the Plan.
Therefore, the Phlx seeks an extension of the pilot program to further
develop the OTC/UTP program.
2. Statutory Basis
This proposal is consistent with the Section 6(b)(5) of the Act and
the rules and regulations promulgated thereunder. Specifically, the
proposal is calculated to promote just and equitable principles of
trade and to protect investors and the public interest. Due to the non-
controversial nature of the Phlx OTC/UTP Pilot Program, coupled with
the previously scheduled expiration of the Phlx's OTC/UTP privileges,
the Phlx requests accelerated approval of this filing.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx does not believe that the proposed rule change will be a
burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
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, N.W., Washington, D.C. 20549.
Copies of the submission, all subsequent American Stock 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 Room. 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-95-48 and should be submitted by August 3, 1995.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
The Commission believes that the Phlx's proposal to extend the
effectiveness of the Phlx OTC/UTP Pilot Program and accompanying rules
with respect to UTP in OTC securities is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\5\ Specifically, the
Commission believes that the proposed rule change is consistent with
Sections 6(b)(5), 11A and 12(f) of the Act.\6\
\5\ For a more detailed discussion of the Commission's findings
with respect to the Phlx OTC/UTP Pilot Program and its consistency
with the Act, see Securities Exchange Act Release No. 31672, id.
\6\ 15 U.S.C. 78f(b)(5), 78k-1 (1988), and 78l(f) (1988) (as
amended October 22, 1994). Section 6(b)(5) requires, among other
things, that the rules of an exchange be designed 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. Section 11A provides, among other things,
that it is in the public interest and appropriate for the protection
of investors to assure fair competition among brokers and dealers,
among exchange markets, and between exchange markets and markets
other than exchange markets. Section 12(f), as recently amended by
the UTP Act of 1994, provides, among other things, that exchange may
extend UTP to securities that are registered, but not listed on any
exchange, provided that certain conditions are met.
[[Page 36172]]
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In 1985, the Commission published its policy to extend UTP to
national securities exchanges in certain OTC securities provided
certain terms and conditions are satisfied.\7\ The Commission's policy
stated that UTP approval would be conditioned, in part, on the approval
of a plan to consolidate and disseminate exchange and OTC quotation
data and transaction data upon which UTP is granted. As noted above, in
1990, the Commission approved the Plan which provides for the
collection, consolidation, and dissemination of quotation and
transaction information for Nasdaq/NMS securities listed on an exchange
or traded on an exchange pursuant to a grant UTP.\8\ Transactions in
securities pursuant to the Plan are and will continue to be reported in
the consolidated transaction reporting system established under the
Plan.
\7\ See Securities Exchange Act Release No. 22412 (September 16,
1985), 50 FR 38640.
\8\ See note 3, supra.
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The Commission has emphasized that Phlx specialists trading Nasdaq/
NMS securities pursuant to the grant of UTP are subject to Plan
requirements as well as the Phlx OTC/UTP Pilot Program and Phlx By-Laws
and Rules, in general.\9\ Moreover, the Commission has stated its
intent to monitor any potential abuse of the informational advantage
that options traders could acquire from the Phlx equity floor with
respect to securities traded under the Phlx OTC/UTP Pilot Program.\10\
These requirements and the Commission's intent to monitor for abuses
will continue in effect, particularly if the Phlx removes its temporary
suspension of trading pursuant to its OTC/UTP Pilot Program and the
Plan.
\9\ See note 4, supra.
\10\ Id.
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The Commission believes that it is appropriate to extend the Phlx
OTC/UTP Pilot Program through August 12, 1995, while the Commission
evaluates the overall program for OTC/UTP and any enhancements or
changes to the program that may be necessary to further the purposes of
the Act. In the interim, however, the Commission continues to believe
that the Phlx OTC/UTP Pilot Program, as limited by the Joint OTC/UTP
Plan, generally furthers the objectives of a national market system and
is consistent with the maintenance of fair and orderly markets and the
protection of investors as required by Sections 6(b)(5), 11A and 12(f)
of the Act.
V. Conclusion
For the reasons stated above, the Commission believes that it is
appropriate to extend the Phlx OTC/UTP Pilot Program through August 12,
1995.
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. In light of the
previously scheduled expiration of the Phlx OTC/UTP Pilot Program on
June 30, 1995, the Commission believes that accelerated approval of the
proposal is appropriate in order to allow the Phlx to continue to have
rules in place for OTC/UTP trading. Further, the Phlx OTC/UTP Pilot
Program and the accompanying rules have been noticed previously in the
Federal Register for the full statutory period, and the Commission
received no comments on the proposal.\11\
\11\ See supra note 4.
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It is Therefore ordered, pursuant to Section 19(b)(2) \12\ that the
proposed rule change is hereby approved on a pilot basis through August
12, 1995.
\12\ 15 U.S.C. 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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Jonathan G. Katz,
Secretary.
[FR Doc. 95-17138 Filed 7-12-95; 8:45 am]
BILLING CODE 8010-01-M
