[Federal Register Volume 60, Number 188 (Thursday, September 28, 1995)]
[Notices]
[Pages 50226-50228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24030]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36263; File No. SR-Phlx-95-32]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to Broker-
Dealer Orders on PACE
September 21, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on
June 12, 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 have been prepared by the self-regulatory
organization. On September 19, 1995, the Exchange submitted to the
Commission Amendment No. 1 to the proposed rule change, which is also
described below.\1\ The Commission is
[[Page 50227]]
publishing this notice to solicit comments on the proposed rule change
from interested persons.
\1\ See letter from Gerald D. O'Connell, First Vice President,
Phlx, to Glen Barrentine, Team Leader, Division of Market
Regulation, SEC, dated September 7, 1995.
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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 amend Rule
229, Philadelphia Stock Exchange Automated Communication and Execution
System (``PACE''), to permit non-agency orders under certain
circumstances. Specifically, Supplementary Material .02 is proposed to
be amended to permit non-agency orders in situations where a Specialist
Agreement is in effect. The Specialist Agreement is an Exchange form
signed by a Phlx equity specialist who has agreed to accept non-agency
orders through PACE. The Agreement shall identify the member firms
responsible for the orders and shall set forth the execution parameters
applicable to the orders. The text of the proposed rule change is
available at the Exchange and at the Commission.
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 purpose of the proposed rule change is to amend Rule 229 to
permit non-agency orders on the PACE System. PACE is the Exchange's
system for the automatic delivery and execution of orders on the Phlx
equity floor. Currently, Supplementary Material .02 to Rule 229 states
that only agency orders are eligible under PACE. Further, agency orders
are defined as orders entered on behalf of public customers, which are
not for the account of a broker-dealer or any account in which a
broker-dealer or an associate person of a broker-dealer has any direct
or indirect interest.
At this time, it is proposed that under certain circumstances non-
agency orders be permitted over PACE. Phlx specialists may file a
Specialist Agreement with the Exchange to allow the receipt and
execution of such orders.\2\ A Specialist Agreement is an Exchange form
signed by a Phlx equity specialist who has agreed to accept non-agency
orders through PACE. The Agreement shall identify the member firms
responsible for the orders and shall set forth the execution parameters
applicable to the orders (i.e., order size guarantees).\3\ The
execution parameters need not include volume guarantees in excess of
firm quote obligations to buy on the displayed bid or sell on the
displayed offer for the displayed size in accordance with existing
rules for orders not currently on PACE.
\2\ According to the Exchange, Phlx equity specialists who agree
to accept non-agency orders through PACE would have the option of
agreeing to execute non-agency orders on either a manual or
automatic basis. Specifically, specialists who agree to accept such
orders for manual execution would be using the PACE system as an
order routing system and would be required to execute such orders
manually in accordance with existing Phlx rules. Where the
specialist agrees to provide for the automatic execution of non-
agency orders, such orders would be executed automatically pursuant
to the PACE execution parameters for public customer orders under
Phlx Rule 229. Telephone conversation between Jerry O'Connell, Phlx,
and Glen Barrentine and Jennifer Choi, SEC, on September 12, 1995.
\3\ According to the Exchange, specialists who agree to accept
non-agency orders through PACE would have the option of setting
different size guarantees for agency and non-agency orders. For
example, a specialist could agree to provide automatic execution of
all agency orders up to 2,000 shares while limiting the size
guarantee for non-agency orders to 1,000 shares. Conversely, a
specialist could agree to provide a larger size guarantee to non-
agency orders than to agency orders. Telephone conversation between
Jerry O'Connell, Phlx, and Glen Barrentine and Jennifer Choi, SEC,
on September 12, 1995. Except for such different size guarantees, a
specialist who agrees to provide for the automatic execution of non-
agency orders through PACE would not be allowed to vary any other
PACE execution parameters. Accordingly, such specialist would be
required to execute such orders through PACE in all other respects
in the same manner as public agency orders are currently executed
through PACE. Telephone conversation between Jerry O'Connell and
Edith Hallahan, Phlx, and Glen Barrentine and Jennifer Choi, SEC, on
September 20, 1995.
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Moreover, the Exchange would require that any specialist who has
entered into a Specialist Agreement to facilitate broker-dealer orders
on PACE, pursuant to the proposed provision, must also provide the same
execution parameters to any other member broker-dealer that desires the
same parameters (i.e., same order size guarantees) with that
specialist.\4\ This requirement is to ensure that all broker-dealers
are afforded the opportunity to receive the same treatment by a
specialist which that specialist has bestowed on any other individual
broker-dealer. Lastly, the Exchange notes that the order designator
``P'' will be utilized by the PACE system to indicate when an order is
for the account of a broker-dealer.
\4\ As a result, a specialist who agrees to provide automatic
execution for one member's non-agency orders, must be willing to
provide automatic execution for such orders of any other member who
requests it. Telephone conversation between Jerry O'Connell, Phlx,
and Glen Barrentine and Jennifer Choi, SEC, on September 12, 1995.
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The purpose of permitting non-agency orders onto PACE is to extend
the benefits of PACE to Phlx member firms for their proprietary as well
as customer orders. The Exchange believes that allowing such orders
onto PACE should serve the important function of adding liquidity and
trading opportunities to the Phlx marketplace. In addition, the
Exchange believes that PACE provides efficiencies to the Exchange's
marketplace, which reduces costs incurred through the handling of
orders on a more manual basis. This proposal contemplates that such
savings can now be realized for proprietary as well as customer orders.
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, 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, by reducing the costs and increasing the efficiencies
of handling proprietary orders.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
No written comments were either solicited or received.
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 other 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
[[Page 50228]]
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 Exchange. All
submissions should refer to File No. SR-Phlx-95-32 and should be
submitted by October 19, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-24030 Filed 9-27-95; 8:45 am]
BILLING CODE 8010-01-M
