[Federal Register Volume 60, Number 5 (Monday, January 9, 1995)]
[Notices]
[Pages 2422-2423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-386]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35188; File No. SR-Phlx-94-46]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Regarding a Post 
Primary Trading Session

January 3, 1995.

I. Introduction

    On October 3, 1994 the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to extend the close of trading on 
the Exchange's equity trading floor from 4:00 to 4:15 p.m., creating a 
new Post Primary Session (``PPS''). On November 25, 1994, the Phlx 
submitted Amendment No. 1 to the proposed rule change.\3\

    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1991).
    \3\See letter from Gerald D. O'Connell, Vice President, Market 
Surveillance, Phlx, to Glen Barrentine, Senior Counsel, Commission, 
dated November 23, 1994.
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    The proposed rule change, as amended, was published for comment in 
Securities Exchange Act Release No. 35007 (November 25, 1994), 59 FR 
61915 (December 2, 1994). No comments were received on the proposal.
    Pursuant to the current Phlx Rule 101 (Hours of Business), trading 
in any equity security on the Exchange's equity floor ends at 4:00 p.m. 
The PPS, however, will extend these hours for an additional fifteen 
minutes. Thus, the hours of the Phlx's auction trading market will be 
extended from the current hours of 9:30 a.m. to 4:00 p.m. to the new 
hours of 9:30 a.m. to 4:15 p.m.
    Under the Phlx's proposal to extend its trading hours, all Exchange 
rules applicable to floor trading during the Exchange's regular 
hours\4\ will continue to apply to floor trading during the PPS, except 
that during the PPS, (1) orders that are designated ``PPS'' are 
eligible for execution, and (2) GTX orders are executable after the 
close of the PPS (i.e., GTX orders are executable after 4:15 p.m. 
instead of 4:00 p.m.). In order to facilitate the extension of trading, 
the [[Page 2423]] 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.

    \4\``Regular'' hours of trading excludes the after hours trading 
facility for GTX orders permissible pursuant to Phlx Rule 232(c). 
This Rule defines a ``GTX'' order as one that is good until 
cancelled, eligible for primary market protection based on volume 
that prints on the New York Stock Exchange (``NYSE'') or American 
Stock Exchange (``Amex'') after-hours trading session.
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    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\

    \5\Orders 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.
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    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\

    \6\With respect to equities, ``free'' trading is that which 
occurs after the initial opening of a security, but not during a 
trading halt.
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    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.

    \7\For 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.
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    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\

    \8\The 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).
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    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.

    \9\15 U.S.C. Sec. 78f(b) (1988).
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    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.

    \10\See Securities Exchange Act Release No. 29631 (August 30, 
1991), 56 FR 46025 (September 9, 1991).
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    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.

    \11\See letter from Gerald O'Connell, First Vice President, 
Phlx, to Amy Bilbija, Attorney, Commission, dated December 28, 1994.
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    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.

    \12\15 U.S.C. Sec. 78s(b)(2) (1988).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-386 Filed 1-6-95; 8:45 am]
BILLING CODE 8010-01-M