Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices 16895

7The rule change is consistent with the

recommendation of the Division of Market

Regulation (the ‘‘Division’’) in its Market 2000

Study, in which the Division noted that the 1⁄8

minimum variation can cause artificially wide

spreads and hinder quote competition by

preventing offers to buy or sell at prices inside the

prevailing quote. See Division of Market Regulation,

SEC, Market 2000: An Examination of Current

Equity Market Developments (January 1994), at 18.

8The Amex estimates that the rule change will

increase the number of securities traded in

sixteenths from 362 securities (approximately 37%

of Amex-listed securities) to 589 securities

(approximately 60% of Amex-listed securities).

These estimates were made by the Exchange as of

February 3, 1995.

9 15 U.S.C. 78s(b)(2) (1988).

10 17 CFR 200.30–3(a)(12) (1994).

1 15 U.S.C. 78s(b)(1) (1988).

2 17 CFR 240.19b–4 (1994).

3The Commission notes that the CBOE currently

does not trade any securities pursuant to Chapter

30 of the CBOE rules except for SuperShares, which

are traded in thirtyseconds. Therefore, the Rule

change will not impact any transactions presently

effected on the Exchange.

4See Securities Exchange Act Release No. 35537

(March 27, 1995) (File No. SR–Amex–95–02)

(‘‘Amex Order’’).

5 Division of Market Regulation, SEC, Market

2000: An Examination of Current Equity Market

Developments (January 1994), at 18 (‘‘Market 2000

Study’’).

6 ITS is a subsystem of the National Market

System approved by the Commission pursuant to

Section 11A of the Act, 15 U.S.C. § 78k–1 (1988).

It facilities intermaket trading in exchange-listed

equity securities based on the current quotation

information emanating from the linked markets. For

a discussion of ITS, see Market 2000 Study, supra

note 2, at App. II. Participants of ITS include the

Amex, Boston Stock Exchange, CBOE, Chicago

Stock Exchange, Cincinnati Stock Exchange, New

York Stock Exchange, Pacific Stock Exchange,

Philadelphia Stock Exchange, and the National

Association of Securities Dealers.

reduced minimum tick fluctuations, the

change could result in added benefits to

the market such as increased liquidity

in stocks priced below $10.7 The

Commission believes that decreasing

such trading variations should help to

produce more accurate pricing of such

securities and can result in tighter

quotations.

Furthermore, the Amex represents

that approximately 60% of all equity

securities presently traded on the Amex

sell for under $10 per share.8 The

Commission believes that the tighter

quotation resulting from trading these

securities in sixteenths should provide

customers with the most competitive

market and the best possible execution

of their transactions in securities priced

below $10.

In addition, the Commission believes

that the proposal should lead to

increased competition between the

exchanges pursuant to Section 11A of

the Act. As noted above, ITS

participants will have the capability to

trade in sixteenths in Amex-listed

securities. By ensuring that all ITS

participants can quote in sixteenths,

customers should be able to receive a

better, more competitive price in

securities priced below $10.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,9 that the

proposed rule change (SR–Amex–95–

02) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8089 Filed 3–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35538; File No. SR–CBOE–

95–18]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Inc. Relating to

Fractional Changes for Bids and Offers

in Stocks Priced Below $10

March 27, 1995.

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 March 6,

1995, the Chicago Board Options

Exchange, Inc. (‘‘CBOE’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I and II below, which Items have

been prepared by the self-regulatory

organization. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to amend its rule

respecting the permissible fractional

changes that may be made for bids and

offers in stocks and related instruments

that are priced below $10 per share.

The Exchange requests the

Commission to find good cause,

pursuant to section 19(b) (2) of the Act,

for approving the proposed rule change

prior to the thirtieth day after

publication in the Federal Register.

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 III below.

The self-regulatory organization has

prepared summaries, set forth in Section

A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

change

1. Purpose

The proposed rule change increases

from $1 to $10 the price level below

which stocks or other designated

instruments may be traded in

sixteenths, i.e., 1/16 of $1 ($.0625).

CBOE Rule 30.33, Fractional Changes

for Bids and Offers, currently requires

bids and offers in stocks (and other

instruments that may be traded on the

Exchange pursuant to Chapter 30 of the

CBOE Rules) with a price of $1 or less

to be made at a variation of at least 1⁄8

of ($.125).3 Currently, the rule only

permits variations of as little as 1⁄16 of

$1 for bids and offers in stocks and

other instruments that have a price

below $1 but above $.25 per share. Bids

and offers in stocks with prices of less

than $.25 per share may be varied by as

little as 1⁄32 of $1 per share ($.03125).

The Exchange believes that by

increasing the number of stocks and

other instruments eligible to be traded

in sixteenths, the Exchange will be

better able to compete for listings in

instruments, such as warrants. In fact,

the Exchange’s proposal is identical to

a proposal of the American Stock

Exchange (‘‘Amex’’), which recently was

approved by the Commission.4 The

Exchange believes that trading in

sixteenths will improve the market for

securities trading under $10 by

promoting greater liquidity and

providing for superior executions of

retail and professional orders. Also, the

proposal is responsible to the

recommendations of the Division of

Market Regulation in its Market 2000

Study that the exchanges convert to a

minimum variation of one-sixteenth as

soon as possible.5

In 1992, participants of the

Intermarket Trading System (ITS’’)6 met

to discuss the need to make changes to

the ITS to accommodate increased

trading of securities priced sixteenths.

The Exchange anticipates that further
16896 Federal Register / Vol. 60, No. 63 / Monday, April 3, 1995 / Notices

7At the February 1995 meeting of the ITS

Operating Committee, the ITS participants

approved enhancements to ITS to permit trading in

sixteenths for Amex-listed securities priced under

$10.

8 15 U.S.C. 78f(b) and 78k–1 (1988).

9The rule change is consistent with the

recommendation of the Division of Market

Regulation (the ‘‘Division’’) in its Market 2000

Study, in which the Division noted that the 1⁄8

minimum variation can cause artificially wide

spreads and hinder prices inside the prevailing

quote. See Division of Market Regulation, SEC,

Market 2000: An Examination of Current Equity

Market Developments (January 1994), at 18.

10See Amex Order, supra note 4.

11See Securities Exchange Act Release No. 35338

(February 7, 1995), 60 FR 8432 (February 14, 1995)

(File No. SR–Amex–95–02).

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

13 17 CFR 200.30–3(a)(12) (1994).

consultations will be held between ITS

participants to explain to each of them

the necessity of making system changes

to accommodate the trading through ITS

of CBOE instruments priced under $10.7

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) of the Act in general and with

Section 6(b)(5) in particular in that it is

designed to promote just and equitable

principles of trade, to foster cooperation

with persons engaged in facilitating and

clearing transactions in securities, and

to protect investors and public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose any

burden on competition.

C. Self-Regulatory Organization’s

Statement on Comments on the Purpose

of Rule Change Received From

Members, Participants or Others

No written comments were either

solicited or received.

III. 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

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 CBOE. All submissions

should refer to File No. SR-CBOE–95–18

and should be submitted by [insert date

21 days from date of publication].

IV. Commission’s Findings and Order

Granting Accelerated Approval of

Proposed Rule Change

The Commission finds that the

proposed rule change to increase from

$1 to $10 the price level below which

equity securities may be traded in

sixteenths, and at or above which equity

securities may be traded in eighths, 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 Sections 6(b)

and 11A.8 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 interest. Additionally,

the Commission believes that the

proposal is consistent with Section 11A,

which requires the Commission to

facilitate the establishment of a national

market system. Pursuant to Section 11A,

a national market system should assure,

among other things, fair competition

between the exchanges, economically

efficient execution of securities

transactions and the practicability of

brokers executing investors’ orders in

the best market.

Although the CBOE currently does

not trade any securities that would be

affected by the proposal, the rule change

to allow trading in sixteenths for

securities priced under $10 will make

the CBOE’s Rule consistent with the

recently approved Amex Rule, and will

allow the Exchange to trade any future

equity listings in sixteenths.

The Commission generally believes

that market quality should be enhanced

by applying a minimum fractional

change of 1⁄16, rather than 1⁄8, to

securities selling below $10. The

Commission believes that decreasing

such trading variations should help to

produce more accurate pricing of such

securities and can result in tighter

quotations. In addition, if the quoted

markets are improved by the reduced

minimum tick fluctuations, the change

could result in added benefits to the

market such as increased liquidity in

stocks priced below $10.9 The

Commission believes that decreasing

such trading variations should help to

produce more accurate pricing of such

securities and can result in tighter

quotations.

In addition, the Commission believes

that the proposal could lead to

increased competition between the

exchanges pursuant to Section 11A of

the Act. As noted above, ITS

participants now have the capability to

trade securities priced below $10 in

sixteenths.10 Should the CBOE begin

trading equity securities, customers

should be able to receive a better, more

competitive price in securities priced

below $10 if they are quoted in

sixteenths.

The Commission finds good cause for

approving the proposed rule change

prior the thirtieth day after the date of

publication of notice of filing thereof in

the Federal Register. The Commission

believes that accelerated approval of the

proposal is appropriate in order to allow

the CBOE to permit equities priced

below $10 to be traded in sixteenths.

Further, the Amex proposal to allow

trading in sixteenths for Amex-listed

securities priced below $10 was noticed

previously in the Federal Register for

the full statutory period and the

Commission did not receive any

comments on it.11

It Is Therefore Ordered, pursuant to

Section 19(b)(2) 12 that the proposed

rule change is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–8090 Filed 3–31–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35544; File No. SR–MSRB–

95–02]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Municipal Securities Rulemaking

Board Relating to Interpretation of

Rule G–37 on Political Contributions

and Prohibitions on Municipal

Securities Business

March 28, 1995.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), and Rule

19b–4 thereunder, notice is hereby