[Federal Register Volume 62, Number 10 (Wednesday, January 15, 1997)]
[Notices]
[Pages 2202-2204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-901]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38138; File No. SR-BSE-96-12]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Boston Stock Exchange, Inc. Relating to Amendments to 
Chapter 11, Section 34A (``Trading Halts Due to Extraordinary Market 
Volatility'')

January 8, 1997.
    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 December 31, 1996, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the self-
regulatory organization. The Exchange submitted to the Commission 
Amendment No. 1 to its proposal on January 7, 1997,\3\ The Commission 
is

[[Page 2203]]

publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Karen A. Aluise, Assistant Vice President, 
BSE, to Holly Smith, Associate Director, Division of Market 
Regulation, SEC, dated January 7, 1997 (``Amendment No. 1''). For a 
description of Amendment No. 1, see infra note 5 and accompanying 
text.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Rule--Chapter 11, Section 34A 
(Trading Halts Due to Extraordinary Market Volatility ``circuit 
breakers'')--to increase the trigger levels for its circuit breakers. 
The existing circuit breakers would be triggered if the Dow Jones 
Industrial Average (``DJIA'') \4\ declines by 250 and 400 points, 
respectively, from its previous day's close. The Exchange proposes 
establishing new thresholds of 350 and 550 points decline in the DJIA 
before the respective one-half hour and one hour circuit breakers are 
triggered.\5\
---------------------------------------------------------------------------

    \4\ ``Dow Jones Industrial Average'' is a service mark of Dow 
Jones & Company, Inc.
    \5\ In Amendment No. 1, the BSE corrected a typographical error 
which would have left the existing second circuit breaker level at 
400 points. Amendment No. 1 clarifies the BSE's proposal that, if 
the DJIA declines by 550 or more points from its previous trading 
day's closing value, trading on the Exchange will halt for one hour.
---------------------------------------------------------------------------

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 of the most significant aspects of such 
statements set forth in Sections A, B, and C below.

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 raise the circuit 
breaker levels from 250 points to 350 points and from 400 points to 550 
points to account for the overall rise in market values since the rules 
were first adopted on a pilot basis. These levels have not been changed 
since the inception of the pilot program in 1988. At that time, a 250 
point drop in the Dow Jones Industrial Average (``DJIA'') \6\ 
represented approximately a 12% decline, and a 400 point drop 
represented a decline of about 19%. Today, these values represent 
roughly a 3.8% and 6.2% decline respectively. The proposed 350 and 550 
points trigger levels would respectively represent around a 5.4% and 
8.5% decline in the DJIA.
---------------------------------------------------------------------------

    \6\ ``Dow Jones Industrial Average'' is a service mark of Dow 
Jones and Company, Inc.
---------------------------------------------------------------------------

    Chapter II, Section 34A currently provide that if the DJIA falls 
250 or more points below its previous trading day's closing value, 
trading in all stocks on the Exchange will halt for one-half hour. It 
further provides that, if on the same day the DJIA drops 400 or more 
points from its previous trading day's close, trading on the Exchange 
will halt for one hour. The Exchange seeks to amend this section to 
provide that if the DJIA falls 350 points or more below its previous 
trading day's closing value, trading in all stocks on the Exchange will 
halt for one-half hour; and, if on that same day, the DJIA drops 550 
points or more from its previous trading day's close, trading on the 
Exchange will halt for one hour.
    The circuit breaker rules are a coordinated effort by the equities 
and futures markets to halt trading in all stocks, stock options, stock 
index options, stock futures, and options on stock futures when the 
DJIA reaches certain established trigger values. As such, these changes 
are intended to mirror the rules of the New York Stock Exchange 
(``NYSE'') that would become applicable during periods of extraordinary 
market conditions.
    The Exchanges's circuit breaker rules were originally approved by 
the Commission for a one-year pilot on December 14, 1988,\7\ and were 
extended for a two year pilot on October 23, 1989,\8\ October 28, 
1991,\9\ October 29, 1993,\10\ and October 25, 1995.\11\ The 1995 pilot 
program is due to expire on October 31, 1997, and the Exchange seeks to 
adopt these amendments to coincide with the current pilot program.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 26357 (December 14, 
1988), 53 FR 51182.
    \8\ See Securities Exchange Act Release No. 27370 (October 23, 
1989), 54 FR 43881.
    \9\ See Securities Exchange Act Release No. 29868 (October 28, 
1991), 56 FR 56535.
    \10\ See Securities Exchange Act Release No. 33120 (October 29, 
1993), 58 FR 59503.
    \11\ See Securities Exchange Act Release No. 36414 (October 25, 
1995), 60 FR 55630.
---------------------------------------------------------------------------

2. Statutory Basis
    The statutory basis for the proposed rule change is the requirement 
under Section 6(b)(5) that an exchange have rules that are 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 and, in general, to protect investors and the public 
interest. The Exchange believes that the proposed amendments to Chapter 
II, Section 34A are consistent with these objectives in that the 
proposed trading halt requirement during periods of significant market 
stress can be expected to provide market participants with a reasonable 
opportunity to become aware of and respond to significant price 
movements, thereby facilitating in an orderly manner the maintenance of 
an equilibrium between buying and selling interest.

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 that is not necessary or appropriate 
in furtherance of the purpose of the Act.

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 any comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing of 
Commission Action

    Within 35 days of the date of 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 it 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, N.W., Washington, D.C. 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

[[Page 2204]]

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, N.W., Washington, D.C. 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-BSE-96-12 and the submitted by February 5, 1997.

    For the Commission, by the Divisions of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-901 Filed 1-14-97; 8:45 am]
BILLING CODE 8010-01-M