68 FR 111 pgs. 34692-34693 - Self-Regulatory Organizations; Order Approving a Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Automatic Price Improvement for Buy Orders in Securities Exempt for the Short Sale Rule
Type: NOTICEVolume: 68Number: 111Pages: 34692 - 34693
Docket number: [Release No. 34-47975; File No. SR-Phlx-2003-25]
FR document: [FR Doc. 03-14566 Filed 6-9-03; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47975; File No. SR-Phlx-2003-25]
Self-Regulatory Organizations; Order Approving a Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Automatic Price Improvement for Buy Orders in Securities Exempt for the Short Sale Rule
June 4, 2003.
I. Introduction
On April 3, 2003, the Philadelphia Stock Exchange, Inc. ("Phlx" or "Exchange") filed with the Securities and Exchange Commission ("Commission"), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 ("Act"),1and Rule 19b-4 thereunder,2a proposed rule change to amend Supplementary Material .07 to Phlx Rule 229 to modify the Exchange's Automatic Price Improvement ("API") program to allow specialists to choose to improve buy orders in securities that are exempted from or otherwise not subject to the "tick" requirements of Rule 10a-1 under the Act3(the "Short Sale Rule"). The proposed rule change was published for comment in the Federal Register on April 28, 2003.4The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change.
Footnotes:
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
3 17 CFR 240.10a-1. Paragraph (a) of Rule 10a-1 covers transactions in any security registered on a national securities exchange, if trades in such security are reported pursuant to an "effective transaction reporting plan" ("Reported Securities"). A short sale of a Reported Security listed on a national securities exchange may not be effected at a price either: (1) below the last reported price of a transaction reported in the consolidated transaction reporting system ("minus tick"); or (2) at the last reported price if that price is lower than the last reported different price ("zero-minus tick")."
4 See Securities Exchange Act Release No. 47714 (April 22, 2003), 68 FR 22447.
II. Description of the Proposal
The Exchange's API program allows specialists to provide automatic price improvement to automatically executable market and marketable limit orders in New York Stock Exchange, Inc. and American Stock Exchange LLC ("Amex") listed securities received through Phlx's Automated Communication and Execution System ("PACE")5for 599 shares or less of either $.01 or a percentage of the PACE Quote when the order is received.6Specialists may choose to offer API in each individual specialty security. If a specialist offers API in an individual security, then the specialist must offer it to all customers and all eligible market orders in that security. Participation in the API program and PACE is voluntary.
Footnotes:
5 PACE is the Exchange's automated order routing, delivery, execution and reporting system for listed securities. See Phlx Rule 229.
6 See Supplementary Material .07 to Phlx Rule 229.
Currently, API is not available to certain buy orders if the execution price of those buy orders would be on a minus or zero-minus tick.7The Exchange has proposed to amend Supplementary Material .07 to Phlx Rule 229 to modify the Exchange's API program to allow specialists to choose to improve buy orders in securities that are exempted from or otherwise not subject to the "tick" requirements of the Short Sale Rule.8
Footnotes:
7 See Supplementary Material .07(c)(i)(A) to Phlx Rule 229.
8 17 CFR 240.10a-1.
III. Discussion
After careful review, 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.9In particular, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act,10which requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market, and to protect investors and the public interest. The Commission believes that expanding the types of securities that may receive API to include those securities that are not subject to the "tick" requirements of the Short Sale Rule should allow customers to receive more opportunities for price improvement.
Footnotes:
9 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
10 15 U.S.C. 78f(b)(5).
The Exchange has stated that it will issue a regulatory circular informing its members which securities are currently exempt from the "tick" requirements of the Short Sale Rule and thus available for API under the rule change. At this time, securities that trade on the Exchange that the Commission has exempted from the "tick" requirements of the Short Sale Rule include Exchange-Traded Funds ("ETFs")11and certain Trust Issued Receipts ("TIRs").12
Footnotes:
11 See , e.g. , letter from James A. Brigagliano, Assistant Director, Division of Market Regulation ("Division"), Commission, to Claire P. McGrath, Vice President, Amex, dated August 17, 2001("Amex Letter"); letter from Nancy J. Sanow, Assistant Director, Division, Commission, to James F. Duffy, General Counsel, Amex, dated January 22, 1993 (regarding SPDRs listed on the Amex); letter from James A. Brigagliano, Assistant Director, Division, Commission, to James F. Duffy, General Counsel, Amex, dated March 3, 1999 (regarding QQQs listed on the Amex).
12 See letter from James A. Brigagliano, Assistant Director, Division, Commission, to Janet L. Fisher, Cleary, Gottlieb, Steen Hamilton, dated March 19, 2002 (regarding the Biotech Basket Opportunity Exchangeable Securities series ("BOXES") traded on the Amex and Phlx). In order to be exempt from the Short Sale Rule, a TIR must meet certain size, concentration, and ADTV criteria.
IV. Conclusion
For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the requirements of the Act and rules and regulations thereunder.
It is therefore ordered , pursuant to section 19(b)(2) of the Act,13that the proposed rule change (SR-Phlx-2003-25) is approved.
Footnotes:
13 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14
Footnotes:
14 17 CFR 200.30-3(a)(12).
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-14566 Filed 6-9-03; 8:45 am]
BILLING CODE 8010-01-P