[Federal Register: December 27, 2002 (Volume 67, Number 249)]
[Notices]
[Page 79187-79189]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de02-156]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-47031; File No. SR-BSE-2002-05]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment Nos. 1, 2, and 3 Thereto by the Boston Stock
Exchange, Inc. Relating to the Trading of Nasdaq Securities on the
Exchange
December 18, 2002.
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 May 13, 2002, the Boston Stock Exchange, Inc. (``BSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The BSE
amended the proposed rule change on June 13, 2002,\3\ on October 22,
2002,\4\ and on November 21, 2002.\5\ The Commission is publishing this
notice to solicit comments on the proposed rule change, as amended,
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See letter from John Boese, Assistant Vice President, Legal
and Regulatory, BSE, to Katherine England, Assistant Director,
Division of Market Regulation, Commission, dated June 12, 2002
(``Amendment No. 1'').
\4\ See File No. SR-BSE-2002-05, Amendment No. 2, dated October
18, 2002 (``Amendment No. 2'').
\5\ See File No. SR-BSE-2002-05, Amendment No. 3, dated November
20, 2002 (``Amendment No. 3'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its trading rules for securities
listed on The Nasdaq Stock Market, Inc. (``Nasdaq'') to allow for
extended hours and remote trading of Nasdaq securities. The text of the
proposed rule change, as amended, is below. Proposed new language is in
italics; proposed deletions are in brackets.
* * * * *
Chapter XXXV
Trading in Nasdaq Securities
* * * * *
Dealings on the Floor--Hours
Section 8. [Pursuant to Chapter I-B, Sec. 2, Dealings on the
Floor--Hours, no member or member organization shall make any bid,
offer or transaction upon the floor of the Exchange, issue a commitment
to trade through ITS or send an order for a Nasdaq security to a Nasdaq
System market maker other than during the hours the Exchange is open
for the transaction of business. Nasdaq securities will not be eligible
to participate in the Post Primary Session.] For the purposes of
transacting business in Nasdaq securities only, the Exchange shall be
open from 7:00 a.m. until 6:30 p.m. Only transactions in Nasdaq
securities will be permitted outside the hours of 9:30 a.m. and 4:15
p.m., in accordance with Chapter I-B, Business Hours, Section 1,
Primary Session, and Section 1(a) Post Primary Session.
Remote Trading in Nasdaq Securities
Section 31. Nasdaq trading terminals and related equipment will be
provided to remote member firm locations for specialist trading. The
remote terminals will be linked to the Exchange's Nasdaq trading system
and will provide the same functionality as is available to on-floor
specialists. There will be no remote Nasdaq floor brokerage services.
Floor broker orders will be routed to remote specialists under the same
criteria by which they are routed to on-floor specialists.
(a) All rules and policies of the Board of Governors of the
Exchange shall apply except as specifically excluded or amended under
this section.
(b) Any eligible firm may apply to the Market Performance Committee
to participate in the program. All applicants must meet the current
minimum requirements for Nasdaq specialists set forth in Chapters XV
and XXXV, including, but not limited to their background, experience,
staffing, training procedures, adequacy of
[[Page 79188]]
applicant's proposed confidentiality policy, adequacy of applicant's
contingency plans for communication or technical failures, adequacy of
applicant's offsite facilities, performance standards (as measured by
the Exchanges SPEP and Best Execution programs), and the minimum
margin, capital and equity requirements as set forth in Chapters VIII
and XXII of the Rules of the Exchange, and conform to all other
performance requirements and standards set forth in the Rules of the
Exchange.
(c) Unless the Market Performance Committee specifically authorizes
otherwise, participating member firms shall be prohibited from trading
remotely any Nasdaq securities which are currently being traded on-
floor by that individual member firm. In evaluating a member firm's
petition for changing the location of where a particular security is
traded, the Market Performance Committee shall consider the application
in light of the requirements set forth in paragraph (b) above.
Individual securities, however, may not be traded by one specialist
firm in more than one location under any circumstances.
(d) The number of Nasdaq stocks traded remotely shall not exceed
two hundred (200) per specialist account.
(e) All rule references pertaining to the trading floor of the
Exchange shall be deemed to include any trading done remotely through
the Exchange's Nasdaq trading system, and all such trades shall be
deemed to be Boston executions.
(f) A written confidentiality policy regarding the location and
access to information, terminals and equipment must be adopted by the
firm and filed with and approved by the Exchange prior to the
commencement of remote trading. Specifically, this policy must conform
to the requirements set forth in Chapter II, Section 36 (Specialist
Member Organizations Affiliated with an Approved Person), and Section
37 (ITSFEA Procedures) of the Rules of the Board of Governors of the
Boston Stock Exchange. In accordance therewith, reasonable principles
must be applied to limit access by non-specialists to Remote Specialist
facilities and information, and to limit Remote Specialist access to
and from other proprietary trading venues, including access from outcry
or visible communication, intentional or otherwise.
(g) Floor policies regarding dress code, and smoking shall not
apply. Access to the area designated as that of the Remote Specialist's
shall be restricted to the specialist, backup specialist, clerks,
designated management of the specialist, and Exchange authorized
personnel, consistent with the Rules of the Exchange, including, but
not limited to, ``Chinese Wall'' procedures set forth in Chapter II,
Section 36, (Specialist Member Organizations Affiliated with an
Approved Person), and procedures set forth in Chapter XV, Section 6
(The Specialist's Book).
(h) All Exchange correspondence, memoranda, bulletins and other
publications shall be sent to the Exchange's Nasdaq Remote Specialists
via electronic means and via U.S. mail or overnight delivery.
(i) All Exchange Nasdaq Remote specialists will have stentofon, (or
a similarly operational speakerphone), as well as dedicated telephone
access, to the physical trading floor. Any regulatory requirements
including trading halts, trading practices, policies, procedures or
rules requiring floor official involvement will be coordinated by
Exchange personnel with the remote specialist through the dedicated
telephone line.
(j) Servicing of the Exchange's Nasdaq trading system terminals and
related equipment shall be by Exchange authorized and trained personnel
only.
(k) The Exchange's examination program of non-DEA floor members
would include the remote specialist operations. Every firm must submit
specific supervisory procedures relating to the Remote Specialist
operations and appropriate identification of all individuals who will
have access to the Remote Specialist operation, including all
supervisory personnel.
(l) Any arbitration or disciplinary action arising out of trading
activity pursuant to this section would be held at the physical offices
of the Exchange located in Boston.
(m) Each remote Nasdaq trading terminal assigned and registered by
the Exchange will require an ETP, and will be subject to the following:
(1) Each approved Specialist unit may be authorized to trade up to
200 issues.
(2) Each Specialist unit must have at least one registered Exchange
seat assigned to the approved specialist.
(a) A specialist may be authorized to obtain additional ETPs for
qualified registered clerks to access the Nasdaq trading system in
support of the Specialist unit.
(b) All Specialists and registered clerk ETP holders must be
approved by the Market Performance Committee and must meet the
following:
(i) file an ETP application form with the BSE Surveillance
Department;
(ii) completion of the required floor training program;
(iii) successful completion of the BSE floor examination within 90
days of application;
(iv) successful completion of the Series 63 (NASAA Uniform State
Law Exam), and registration with the Commonwealth of Massachusetts,
and;
(v) submission of fingerprint records to the BSE.
* * * * *
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 Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change, as
amended. The text of these statements may be examined at the places
specified in Item IV below. The Exchange has prepared summaries, set
forth in Sections 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 purpose of the proposed rule change is to amend one section of
Chapter XXXV of its Rules related to the trading of Nasdaq securities
on the Exchange and to add a new section to the chapter, extending the
Exchange's remote trading program to include Nasdaq securities.
The Exchange is proposing an alteration of the hours the Exchange
seeks to be open for trading Nasdaq securities. Chapter XXXV, Trading
in Nasdaq Securities, Section 8, Dealings on the Floor--Hours, limits
the hours of trading in Nasdaq securities on the Exchange to the hours
of 9:30 a.m. to 4 p.m. The Exchange will delete the present rule and
replace it with one that will permit the transaction of business, in
Nasdaq securities only, between the hours of 7 a.m. and 6:30 p.m. Such
an extension of hours will allow Exchange specialists who trade Nasdaq
securities to remain competitive with their counterparts on other
exchanges that trade Nasdaq securities pursuant to unlisted trading
privileges (``UTP''), as well as NASD member market makers who are
permitted to conduct transactions in Nasdaq securities during this
extended period. Furthermore, such extended hours are contemplated and
permitted by Article XI of the Joint Self-
[[Page 79189]]
Regulatory Organization Plan Governing the Collection, Consolidation
and Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privilege
Basis (``UTP Plan'').
The Exchange is also proposing to adopt rules based on its BEACON
Remote trading program but modified for Nasdaq securities. As such, the
Exchange will republish, in large part, its remote trading rules
located in Chapter XXXIII, BEACON, Section 9, BEACON Remote, as a new
section 31 in Chapter XXXV, Trading in Nasdaq Securities. As part of
the remote trading program, the Exchange will denote separately a rule
for the Exchange's Nasdaq trading program. In so doing, the substance
of the remote trading rule will not change. For instance, all
requirements relating to the applicability of other BSE rules,
confidentiality, ``Chinese Walls,'' communications, and Electronic
Trading Permits will still apply. The only deletions or amendments will
be those necessary to make the rule applicable to the Nasdaq program,
such as deleting references to the BEACON trading system, which is
presently designed for the trading of listed securities on the
Exchange. Such changes will be administrative and non-substantive in
nature.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) of the Act,\6\ in general, and
Section 6(b)(5) of the Act,\7\ 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 transactions in
securities, 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.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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 purposes 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 written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
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 its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) by order approve such 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, including whether the proposed rule
change is consistent with the Act. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
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 in the
Commission's Public Reference Room. 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-2002-05 and
should be submitted by January 17, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 02-32736 Filed 12-26-02; 8:45 am]
BILLING CODE 8010-01-P