[Federal Register Volume 59, Number 135 (Friday, July 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17258]
[[Page Unknown]]
[Federal Register: July 15, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34347; File No. SR-Amex-94-25]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Partial Accelerated Approval of Proposed Rule Change by the
American Stock Exchange, Inc. Relating to Increasing the Share
Parameters for Orders Entered Through PER
July 11, 1994.
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 23, 1994, the American Stock Exchange, Inc. (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items 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.
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\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 Exchange proposes to increase the share parameters, from 5,099
to 30,099 shares, for orders entered through the Exchange's Post
Execution Reporting (PER) system.
The Exchange requests the Commission to find good cause, pursuant
to section 19(b)(2) of the Act, for approving the portion of the
proposed rule change that would increase PER eligibility from 5,099 to
30,099 on those securities listed on the Exchange which are part of the
S&P 500 Index, prior to the thirtieth day after publication in the
Federal Register. The Exchange believes that such an increase in PER
eligibility is responsive to the operational needs of member firms and
will enhance efficiency by quickly expanding automated order delivery
for those securities which, as a group, are among the most actively
traded on the Exchange.
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
The PER system provides member firms with the means to
electronically transmit equity orders up to volume limits specified by
the Exchange directly to the specialist's post on the Exchange Floor.
Market and marketable limit orders and pre-opening market orders are
placed on the specialist's electronic book. Once the PER order is
executed, the system transmits the execution report directly back to
the member firm.
Since its implementation in the late 1970s, the Exchange has
gradually increased the order parameters for PER in response to the
operational needs of member firms, in recognition of the cost
efficiencies gained through expanded use of automation, and to remain
competitive with other exchanges' automated systems. Currently, the PER
system accepts eligible market and limit orders of up to 5,099 shares.
The last increase, approved by the Commission on July 7, 1993,\3\
permitted an expansion of PER eligibility for Unit Investment Trust
securities (such as Standard & Poor's Depositary Receipts) from 5,099
to 25,000 shares for eligible market and limit orders.
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\3\See Securities Exchange Release No. 32544 (June 29, 1993), 58
FR 36485, July 7, 1993.
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In order to improve the competitiveness of PER as an order-routing
facility, and to facilitate access to PER by larger size orders, the
Exchange is now proposing to increase PER eligibility from 5,099 to
30,099 shares for both market and limit round lot orders. The Exchange
initially proposes to implement the increased PER eligibility on a
select number of securities, namely those securities included in the
S&P 500 Index. Currently, Exchange securities in the S&P 500 Index are:
Amdahl Corporation
Echo Bay Mines Ltd.
Giant Food Inc.
Hasbro, Inc.; and
The New York Times Company
After three months of expansion of the share parameters for PER with
respect to securities included in the S&P 500 Index, and upon approval
of the Exchange's Floor Governors and Senior Staff, the Exchange is
proposing to extend increased PER eligibility for up to 30,099 shares
to all other Exchange-listed securities.
The Exchange represents that the current capacity of the PER system
is well in excess of what is required to accommodate the increase in
parameters from 5,099 to 30,099 shares for both market and limit round
lot orders.
The automated system utilized by PER is designed to process up to
13.5 messages per second. The historic peak utilization of this system
was 7.7 messages per second (on October 16, 1989), only 57% of
capacity. Additionally, what is relevant to system capacity is the
number of orders, not the number of shares represented by each order.
Under the current PER parameters the Exchange already processes 60
percent of its total volume through the PER system, which clearly
suggests that the impact of the contemplated increase on the number of
orders coming through the system will be small, given that each 30,099
share order represents a much larger portion of volume than a 5,099
share order.
Finally, whatever additional system capacity is consumed by the
increase in the PER parameters on an overall basis, only a portion of
that increase will occur during the first three months, when the
increase will apply only to the Amex stocks included in the S&P 500
Index. While those stocks do tend to be among our most active in share
volume, so that they comprise an appropriate initial group, in the
aggregate they represent only a small portion of overall Exchange share
volume. Accordingly, the increased burden on system capacity during the
first three months should be truly negligible and the Exchange will
have the opportunity to observe the level of increased utilization and
factor that into its assessment of how best to implement the parameter
increase over the remainder of the Exchange's list.\4\
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\4\As noted, the current system capacity is far in excess of
what is required to accommodate the proposed increase in the PER
parameters. However, it is important to note that even in the very
unlikely event the 13.5-messages-per-second capacity limit were to
be reached, orders would be queued, not lost. In addition, the
Exchange has the flexibility to control the queuing process by
utilizing a mechanism which adjusts relative priority between
incoming orders and executions and administrative messages.
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the Act
in general and furthers the objectives of Section 6(b)(5) in particular
in that it will 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, and, in general, to protect investors and the
public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will impose no 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 solicited or received with respect to the
proposed rule change.
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 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. Sec. 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 Amex. All
submissions should refer to File No. SR-Amex-94-25 and should be
submitted by August 5, 1994.
IV. Commission's Findings and Order Granting Accelerated
The Commission finds that the Amex's proposal to increase the PER
share parameters from 5,099 to 30,099, for orders of Exchange-listed
securities which are a part of the S&P 500 Index, is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange. Specifically, the
Commission finds that the proposed rule change is consistent with the
requirements of section 6(b)(5) of the Act\5\ because it will
facilitate transactions in securities by allowing for the timely
transmision of a larger number of orders to the Amex floor. The
proposal will also result in more efficient and effective market
operations, consistent with section 11A(a)(1)(B) and will further the
maintenance of fair and orderly markets and the efficient execution of
securities transactions consistent with section 11A(a)(1)(C) of the
Act.\6\
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\5\15 U.S.C. 78f(b)(5) (1988).
\6\15 U.S.C. 78f(b)(5) and Sec. 78k-1 (1988)
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Finally, based upon representations from the Amex, the Commission
is satisfied that the Exchange's PER system will have adequate computer
processing capacity to accommodate the increased order size
eligibility--at a minimum, for those Exchange-listed securities
included in the S&P 500 Index.
The Commission finds good cause for partially approving the
proposed rule change prior to the thirtieth day after the date of
publication of notice of filing thereof in the Federal Register. The
Commission believes that the expansion of PER limit sizes to the Amex-
listed S&P 500 stocks should provide substantial benefits to market
participants and accordingly should be allowed to be implemented
without delay at this time. Moreover, the Commission believes that
accelerated approval of the proposal, in so far as it pertains to the
Amex-listed securities included in the S&P 500 Index, is appropriate in
order to allow the Amex to evaluate the impact of such an expansion to
enable it to make an informed decision, after three months, whether or
not it would be beneficial and feasible to expand the PER order size
eligibility increase to all securities.
It Is Therefore Ordered, pursuant to section 19(b)(2),\7\ that the
portion of the proposed rule change applicable to Amex-listed
securities included in the S&P 500 Index is hereby approved.
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\7\15 U.S.C. 78s(b)(2) (1988).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\17 CFR 200.30-3(a)(12) (1991).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-17258 Filed 7-14-94; 8:45 am]
BILLING CODE 8010-01-M
