[Federal Register Volume 60, Number 142 (Tuesday, July 25, 1995)]
[Notices]
[Pages 38065-38066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-18214]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35987; File No. SR-BSE-95-12]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by Boston Stock Exchange, Inc. Relating to Specialist
Concentration
July 18, 1995.
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 June 19,
1995, the Boston Stock Exchange, Inc. (``BSE'' 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. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange seeks to obtain permanent approval of its Specialist
Concentration Policy.\1\ This will permit the Exchange's Executive
Committee to review proposed combinations that, in the Exchange's view,
may lead to undue concentration within the specialist community.
\1\ On February 7, 1990, the Commission approved, on a six-month
pilot basis ending August 7, 1990, a proposed rule change by the BSE
to establish procedures for reviewing proposed combinations among
specialist units on the Exchange. See Securities Exchange Act
Release No. 27684 (February 7, 1990), 55 FR 5527 (approving File No.
SR-BSE-89-05). The Commission later approved the renewal of the
pilot program for additional one-year periods ending August 1, 1991,
August 13, 1992, August 13, 1993, and August 13, 1994. See
Securities Exchange Act Release Nos. 28327 (August 10, 1990), 55 FR
33794 (File No. SR-BSE-90-11); 29551 (August 13, 1991), 56 FR 41380
(File No. SR-BSE-91-06); 31037 (August 13, 1992), 57 FR 37854 (File
No. SR-BSE-92-08); and 32753 (August 16, 1993), 58 FR 44707 (File
No. SR-BSE-93-15).
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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 test 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 purpose of the proposed rule change is to seek permanent
approval of the concentration policy, which establishes certain
standards based on Consolidated Tape Association (``CTA'') ranking \2\
of specialist stocks for reviewing certain proposed mergers,
acquisitions and other combinations between or among specialist units.
The proposed policy would authorize the Executive Committee of the
Board of Governors to review proposed combinations that, in the
Exchange's view, may lead to undue concentration within the specialist
community.
\2\ The CTA disseminates last sale transaction information for
trades executed on any of the participant exchanges or the Nasdaq
Stock Market. The current CTA participants include the New York
Stock Exchange (``NYSE''), American Stock Exchange (``Amex''),
Chicago Stock Exchange (``CHX''), Philadelphia Stock Exchange
(``Phlx''), Pacific Stock Exchange (``PSE''), BSE, Chicago Board
Options Exchange (``CBOE''), Cincinnati Stock Exchange (``CSE''),
and the National Association of Securities Dealers (``NASD''). Each
specialist stock is ranked according to the number of CTA trades in
such stock. The ranking is based upon the average volume of trades
and shares reported to CTA over the past four quarters. Conversation
between Karen Aluise, BSE, and Amy Bilbija, SEC, on July 12, 1995.
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The Executive Committee will review any arrangement where
previously separate specialist organizations would be operating under
common control and would comprise:
(a) 15% or more of the 100 most actively traded CTA stocks; or,
(b) 15% or more of the second 100 most actively traded CTA stocks;
or,
(c) 20% or more of the third 100 most actively traded CTA stocks;
or
(d) 15% or more of all the CTA stocks eligible for trading on the
BSE where the Free List contains fewer than 100 issues.\3\
\3\ The Free List is made up of securities that are not
registered to certain specialists and can be traded by any
specialist.
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The Executive Committee shall approve or disapprove the proposed
combination based on its assessment of the following considerations:
(a) Specialist performance and market quality in the stocks subject
to the proposed combination;
(b) The effects of the proposed combination in terms of the
following criteria:
(i) Strengthening the capital base of the resulting specialist
organization;
(ii) Minimizing both the potential for financial failure and the
negative consequences of any such failure on the specialist system as a
whole; and
(iii) Maintaining or increasing operational efficiencies;
(c) Commitment to the Exchange market, focusing on whether the
constituent specialist organizations engage in business activities that
might detract from the resulting specialist organization's willingness
or ability to act to strengthen the Exchange agency/auction market and
its competitiveness in relation to other markets; and
(d) The effect of the proposed combination on overall concentration
of specialist organizations.
With respect to the criteria relating to the ``commitment to the
Exchange market,'' the Executive Committee would look to a variety of
factors that extend beyond compliance with the Exchange's requirements
for providing sufficient capital, talent and order handling services.
For example, the Committee would review and assess each constituent
unit's past performance on the Exchange relating to such matters as:
Acceptance and cooperation in the development,
implementation and enhancement to the Boston Exchange Automated
Communications and Order-routing Network (``BEACON'');
Efforts at resolving problems concerning customer orders;
[[Page 38066]]
Willingness to facilitate early openings in order to
compete effectively with other exchanges; and
Willingness to voluntarily provide Execution Guarantees
beyond the minimum required under Rule 2039A.\4\
\4\ See BSE Rule 2039A. The Rule states that the BSE Execution
Guarantee shall be available to each member firm in all issues
traded through the Intermarket Trading System (ITS) registered to a
member specialist of the Exchange. The Rule imposes an obligation
upon specialists to guarantee executions on all agency orders from
100 up to and including 1,299 shares.
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2. Statutory Basis
The Exchange believes that the basis under the Act for the proposed
policy is Section 6(b)(5) in that the policy enables the Exchange to
monitor the tendencies toward concentration in the specialist community
and to intervene to prevent undue concentration. As such, it is
designed to protect investors and the public interest, and is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers, or to regulate by virtue of any authority
conferred by this title matters not related to the purpose of this
title or the administration of the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition.
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 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. 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. 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 BSE. All
submissions should refer to File No. SR-BSE-95-12 and should be
submitted by August 15, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-18214 Filed 7-24-95; 8:45 am]
BILLING CODE 8010-01-M
