[Federal Register: June 10, 2002 (Volume 67, Number 111)]
[Notices]
[Page 39757-39758]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10jn02-124]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-46007; File No. SR-BSE-2001-08]
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order
Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to
Competing Specialists and the Execution of Directed Agency Orders
May 30, 2002.
I. Introduction
On December 21, 2001, the Boston Stock Exchange, Inc. (``BSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 related to competing specialists and the execution
of directed agency orders. On April 19, 2002, the Exchange submitted
Amendment No. 1 to the proposed rule change.\3\ The proposed rule
change, together with Amendment No. 1, was published for comment in the
Federal Register on April 26, 2002.\4\ No comments were received on the
proposal. This order approves the proposed rule change, including
Amendment No. 1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from John A. Boese, Assistant Vice President,
Legal and Regulatory, BSE, to Belinda Blaine, Associate Director,
Division of Market Regulation, Commission, dated April 18, 2002
(``Amendment No. 1'').
\4\ See Securities Exchange Act Release No. 45791 (April 19,
2002), 67 FR 20852.
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II. Description of the Proposal
The Exchange proposes to amend certain sections of its rules
related to Competing Specialist Initiative Rules (see BSE Rules,
Chapter XV, Dealer Specialists, Section 18, Procedures for Competing
Specialists) to allow, under certain conditions, for the altering of
priority of specialist/competing specialist principal quotations when
orders are directed by a customer to another specialist/competing
specialist.\5\ Specifically, the Exchange seeks to add an exception for
orders directed to a specialist/competing specialist. The exception
will allow the specialist/competing specialist who receives such an
order to elect to execute the order for his own account at the same
national best bid and offer (``NBBO'') price or better than the
quotation on the book, if the quotation on the book is for the account
of another specialist/competing specialist, or to permit the directed
order to execute against the prevailing specialist/competing
specialist's quotation.\6\
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\5\ Under this proposal, all non-directed and Intermarket
Trading System (``ITS'') orders will continue to be routed according
to existing competing specialist rules.
\6\ Where an agency order resides on the book of a specialist/
competing specialist and a specialist/competing specialist then
receives an executable order routed to him/her, the subsequent
agency orders may be price improved by the specialist/competing
specialist receiving such order, or permitted to match the resident
agency order at the limit price (without price improvement).
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Furthermore, the Exchange proposes to amend certain other
paragraphs of Chapter XV, Dealer Specialists, Section 18, Procedures
for Competing Specialists, in order to remain consistent. Namely, the
Exchange proposes to amend Paragraph 6 to reflect that all specialist/
competing specialists will be responsible for orders directed to him/
her. Likewise, the exchange seeks to amend Paragraph 9 to reflect
certain Boston Exchange Automated Communication and Order Routing
Network (``BEACON'') system changes, which will update quotations more
efficiently, removing the burden from the regular specialist.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the provisions of section 6(b) of the Act,\7\ in general, and
section 6(b)(5) of the Act,\8\ in particular, which requires, among
other things, that the rules of an exchange be designed to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and not be designed
to permit unfair discrimination between customers, issuers, brokers or
dealers.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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In today's BEACON system, an agency order is automatically routed
to the specialist quote in accordance with price/time priority amongst
competing specialists if such quote is at the NBBO. This will continue
to be the case for all customer orders. However, this rule will now
allow the specialist/competing specialist who receives such an order to
elect to execute the order for his own account at the NBBO price or
better than the quotation on the book, if the quotation is for the
account of another specialist/competing specialist, or to permit the
directed order to execute against the prevailing specialist/competing
specialist's quotation.
Implementation of the proposed rule will enable the order to be
routed to the designated specialist and will enable competing
specialists to exercise greater control over more of their firm's
orderflow and provide price improvement opportunities to their
customers over existing specialist proprietary quotations. All ITS
transactions and non-directed orders will continue to be routed
according to price/time priority, and available for price improvement
by exposure to the specialists/competing specialists.
IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-BSE-2001-08), as amended, is
hereby approved.
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\9\ Id.
[[Page 39758]]
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-2(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14434 Filed 6-7-02; 8:45 am]
BILLING CODE 8010-01-P