Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to extend through November 5, 2001 its Philadelphia Stock Exchange Automated Communication and Execution System (“PACE”)
The only substantive change the Phlx proposes at this time is to extend the pilot program through November 5, 2001.
The remaining changes proposed at this time are non-substantive formatting and language changes. These are cosmetic changes to ensure that the pilot program reflects amendments that were made in previous filings that were inadvertently overlooked. The underscored proposed language was added in SR–Phlx 00–54,
The Exchange recognizes that all options currently trade in decimals, and is proposing the non-substantive language changes herein to conform the language of Phlx Rule 229 to prior filings. The following is the text of the proposed rule change. Additions are in italics. Deletions are in brackets.
PACE provides a system for the automatic execution of orders on the Exchange equity floor under predetermined conditions. Orders accepted under the system may be executed on a fully automated or manual basis in accordance with the provisions of this Rule. Securities admitted to dealings on the equity floor are eligible for trading on the PACE System in which equity specialists and member organizations may choose to participate. The conditions under which orders will be accepted and executed are set forth below. When used in the Rule, PRL means a combined round-lot and odd-lot order, and PACE Quote means the best bid/ask quote among the American, Boston, Cincinnati, Chicago, New York, Pacific or Philadelphia Stock Exchange, or the Intermarket Trading System/Computer Assisted Execution System (“ITS/CAES”) quote, as appropriate. The PACE rules, conditions and guidelines do not apply to orders not on the system, and existing rules governing orders not on the system are not affected hereby.
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(c) Price Improvement for PACE Orders
(i) Automatic Price Improvement—Where the specialist voluntarily agrees to provide automatic price improvement to all customers and all eligible market orders in a security, automatically executable market and marketable limit orders in New York Stock Exchange and American Stock Exchange listed securities received through PACE for 599 shares or less shall be provided with automatic price improvement from the PACE Quote when received of
(A) a buy order would be improved to a price less than the last sale or a sell order would be improved to a price higher than the last sale (except as provided in (E) below); or
(B) a buy order would be improved to the last sale price which is a downtick or a sell order would be improved to the last sale price which is an uptick (except as provided in (E) below). The PACE System will determine whether the last sale price is a downtick or an uptick. The PACE System does not recognize changes from the previous day's close. In these situations, the order is not eligible for automatic price improvement, and is, instead, automatically executed at the PACE Quote.
A specialist may voluntarily agree to provide automatic price improvement to larger orders in a particular security to all customers under this provision.
A specialist may choose to provide automatic price improvement
In its filing with the Commission, the Exchange 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 Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Phlx proposes to extend, through November 5, 2001, the Phlx's pilot program that incorporates automatic price improvement for equities trading in decimals based on a percentage of the spread between the bid and offer.
The Exchange believes that the proposed rule change is consistent with section 6 of the Act
The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition.
No written comments were either solicited or received.
Because the foregoing proposed rule change does not:
(i) significantly affect the protection of investors or the public interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission finds good cause to waive the pre-filing notice requirement, and to designate the proposal to be both effective and operative upon filing because such designation is consistent with the protection of investors and the public interest. Waiver of these requirements will allow the pilot program to continue uninterrupted through November 5, 2001. For these reasons, the Commission finds good cause to designate that the proposal is both effective and operative upon filing with the Commission.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. 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 in the Commission's Public Reference Room. 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 number SR–Phlx–2001–67, and should be submitted by September 7, 2001.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.