Federal Register / Vol. 60, No. 5 / Monday, January 9, 1995 / Notices 2423

5Orders received by 4:00 p.m. Eastern Time as

determined electronically by the PACE system are

eligible for execution during regular trading hours

(i.e., before the PPS). See Phlx Rule 229

Commentary .17.

6With respect to equities, ‘‘free’’ trading is that

which occurs after the initial opening of a security,

but not during a trading halt.

7For example, pursuant to Phlx Rule 207, a ‘‘GTC

PPS’’ (such an order is good ’til cancelled but

executable during PPS, and differs from a GTX

order in that the later is eligible for execution after

the close of the Exchange) order will be eligible for

PPS execution, and, if not executed, will be eligible

for execution during ensuing days because of the

GTC designation.

8The Phlx is also making a few minor changes

to clarify that the Phlx may not be open for free

trading during a regulatory trading halt on the

primary market, and to reword the three-year cycle

for imposing fines (i.e., the fine schedule is

structured such that successive violations

committed during a three-year time span result in

successive increased fines).

9 15 U.S.C. § 78f(b) (1988).

10See Securities Exchange Act Release No. 29631

(August 30, 1991), 56 FR 46025 (September 9,

1991).

11See letter from Gerald O’Connell, First Vice

President, Phlx, to Amy Bilbija, Attorney,

Commission, dated December 28, 1994.

12 15 U.S.C. § 78s(b)(2) (1988).

13 17 CFR 200.30–3(a)(12) (1991).

Exchange is amending the following

Phlx rules: Rule 101—Hours of

Business; Rule 229—Philadelphia Stock

Exchange Automated Communication

and Execution System (‘‘PACE’’); Rule

232—Handling Orders When the

Primary Market is Not Open for Free

Trading (EXP, PPS, GTX Orders); and

Equity Floor Procedure Advice EF–1—

Designating Orders for Execution in

Instances Where the Primary Market is

Not Open in an Issue for which the Phlx

is Open for Free Trading.

As indicated above, Phlx Rule 101

will be amended to reflect the extension

of the hours of business. Second, the

Exchange is amending Phlx Rule 229,

governing the operation of PACE, to

designate PACE as an eligible order

routing system for PPS eligible orders.

PACE will not, however, be available as

an order execution mechanism during

PPS.5

Third, Phlx Rule 232 currently only

governs after-hours trading (crossing

session) of GTX orders. The Exchange is

amending it, however, so that it will

specify that GTX orders are executable

after the PPS close, and also encompass

(1) PPS, and (2) rules governing trading

on the Phlx when the primary market is

not open for free trading in an issue at

a time that the Phlx is open for free

trading. Rather than assigning PPS a

new rule number, the applicable PPS

provision is being added to Phlx Rule

232 in order to group into a single rule

the three Exchange provisions relating

to trading on the Phlx during periods

when the primary market is not open for

free trading.6

With respect to the PPS provision,

Rule 232 will: require that orders be

designated PPS to be eligible for

execution during the PPS; and specify

that since PPS is merely an extension of

the Exchange’s auction market, whereby

bids and offers are dynamically updated

for trading under normal auction market

principles, that Exchange rules

applicable to floor trading during the

‘‘regular’’ session will continue to

apply. In this regard, market, limit and

contingent order types currently

acceptable under Exchange rules will be

accepted for PPS if so designated.7

Finally, the GTX provisions will be

renumbered as paragraph (c) of Phlx

Rule 232.

With respect to the situation

addressed in Equity Floor Procedure

Advice EF–1—where the Phlx is open

for trading before the primary market is

open, or during a non-regulatory halt in

trading on the primary market—this will

be codified into Phlx Rule 232(a). In

addition, the use of the yellow ticket,

designating orders eligible for execution

when the Phlx is open for trading in

such a circumstance, will be replaced

with the use of the designator ‘‘EXP’’

(meaning ex-primary) to parallel the

designators ‘‘PPS’’ and ‘‘GTX’’ in Rule

232.8

The Commission finds that the

proposed rule change to extend the

Phlx’s auction market trading session to

4:15 p.m. is consistent with the

requirements of the Act and the rules

and regulations thereunder applicable to

a national securities exchange, and, in

particular, with the requirements of

Section 6(b).9 In particular, the

Commission believes the proposal is

consistent with the Section 6(b)(5)

requirements that the rules of an

exchange be designed to promote just

and equitable principles of trade, to

prevent fraudulent and manipulative

acts, and, in general, to protect investors

and the public, in that it is reasonably

designed to promote just and equitable

principles of trade, and, in general,

perfect the mechanism of a free and

open national market system.

The Commission believes that the

decision to change the Exchange’s

trading hours does not raise any new

regulatory concerns. Currently, auction

market trading after 4:00 p.m. (EST)

occurs on the Pacific Stock Exchange

(‘‘PSE’’).10 The Phlx system will operate

in a substantially similar manner and

enable the Phlx to compete with the PSE

for after hours volume. Specifically, the

Phlx PPS will continue to provide full

transparency by disseminating quotes

through the Consolidated Quotation

System and reporting trades to the

consolidated tape. In addition, there

will continue to be complete access to

the Phlx market during PPS and the

usual auction market rules will continue

to apply. Moreover, in order to preserve

the execution quality of limit orders

placed on the specialists’ books during

‘‘regular’’ trading hours, such orders

will not automatically migrate to the

PPS, but rather will do so only if the

order is so designated (i.e., with an EXP

indicator on the ticket). Finally, the

Commission has not received any

comment letters from the public or Phlx

members raising any regulatory issues

in connection with the extension of the

Phlx auction market hours to 4:15 p.m.

The Commission notes, however, that

during the proposed extension of

trading hours, the PSE is the only other

national securities exchange that will be

operating an auction market. In this

regard, the Phlx has represented to the

Commission that the Intermarket

Trading System (‘‘ITS’’) will be in

operation as a link between the two

exchanges during the PPS.11 Thus, ITS

commitments will be able to be routed

back and forth, just as during the regular

trading hours.

Although the NYSE is operating its

Off-Hours Trading (‘‘OHT’’) facility and

the Amex is operating its after-hours

trading session during this time period,

these sessions are limited to accepting

single stock orders priced at either the

NYSE or Amex closing price,

respectively, or effecting portfolio

trades. Because the PPS trading session

will not overlap the 5:00 p.m.

executions in Crossing Session I of the

NYSE’s OHT facility or the Amex’s

after-hours trading facility, the proposal

being approved today does not raise

market structure issues regarding the

interaction between the PPS and these

two after-hours systems.

Accordingly, the Commission does

not believe that an extension of the

Phlx’s auction market trading hours to

4:15 p.m. will have an adverse effect on

the maintenance of fair and orderly

markets or disadvantage public

customers.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,12 that the

proposed rule change (SR–Phlx–94–46)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–386 Filed 1–6–95; 8:45 am]

BILLING CODE 8010–01–M