Intermarket Trading System; Notice of Filing and Temporary Summary Effectiveness of the Sixteenth Amendment to the ITS Plan Relating to Decimal Pricing in Listed Securities

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Federal RegisterSep 8, 2000
65 Fed. Reg. 54571 (Sep. 8, 2000)
August 31, 2000.

Pursuant to Rule 11Aa3-2 under the Securities Exchange Act of 1934 (“Act”), notice is hereby given that on August 24, 2000, the Intermarket Trading System (“ITS”) submitted to the Securities and Exchange Commission (“Commission”) an amendment (“Sixteenth Amendment”) to the restated ITS Plan. The ITS Participants filed the amendment to: (1) Recognize the transition to decimal pricing; (2) reduce the Pre-Opening price change parameter for certain securities; and (3) expand the Pre-Opening price change parameters for certain stocks. The Commission is publishing this notice to solicit comments on the amendment from interested persons. While comment is being solicited on the proposed amendment, the Commission has determined to make the proposed amendment summarily effective upon publication of notice on a temporary basis.

17 CFR 240.11Aa3-2.

The ITS is a National Market System (“NMS”) plan approved by the Commission pursuant to Section 11A of the Act and Rule 11Aa3-1. See Securities Exchange act Release No. 19456 (January 27, 1983), 48 FR 4938. The ITS is a communications and order routing network linking eight national securities exchanges and the electronic over-the-counter (“OTC”) market operated by the National Association of Securities Dealers, Inc. (“NASD)”. The ITS was designed to facilities intermarket trading in exchange-listed equity securities based on current quotation information emanating from the linked markets.

Participants to the ITS Plan include the American Stock Exchange, Inc. (“Amex”), the Boston Stock Exchange, Inc. (“BSE”), the Chicago Board Options Exchange, Inc., the Chicago Stock Exchange, Inc., the Cincinnati Stock Exchange, Inc., the NASD, the New York Stock Exchange, Inc., the Pacific Exchange, Inc. (“PCX”), and the Philadelphia Stock Exchange, Inc. (collectively, “Participants”)

Exchange Act Rule 11Aa3-2(c)(4) allows the Commission to summarily put into effect on a temporarily basis a Plan amendment “if the Commission finds that such action is necessary or appropriate in the public interest, for the protection of investors or the maintenance of fair and orderly markets, to remove impediments to, and perfect mechanisms of, a national market system or otherwise in furtherance of the purposes of the Act.”

I. Description of the Amendment

The purpose of the proposed amendment is to: (1) Recognize the transition to decimal pricing, which began on August 28, 2000; (2) reduce the Pre-Opening price change parameter for certain Securities from 1/8 point $(0.125) to $.10; and (3) expand the Pre-Opening price change parameters for certain stocks, which are reported on Network B of the Consolidated Tape Association, similar to those stocks reported on network A.

The Commission notes that the Fifteenth Amendment to the restated ITS Plan will be published for comment on September 1, 2000. The Sixteenth Amendment contains text that is proposed to be added to the ITS Plan through the Fifteenth Amendment. Among other things, this text recognizes the operation of Remote Specialists on the BSE and PCX. See Securities Exchange Act Release No. 43240 (September 1, 2000).

II. Discussion

The Commission has made a preliminary determination that the proposed amendment is consistent with the public interest, the protection of investors, the maintenance of fair and orderly markets, and the removal of impediments to, and perfection of the mechanisms of, a national market system. While comment is being solicited on the proposed amendment, the Commission therefore will make the amendment summarily effective on a temporary basis upon publication of notice of the amendment.

See Exchange Act Rules 11Aa3-2(c)(4).

The Commission believes that temporary effectiveness of the amendment is consistent with the public interest, the protection of investors, and the maintenance of fair orderly markets because the amendment is necessary to accommodate decimal pricing, the new method of pricing for equity securities and options. The changes to the ITS Plan are necessary to accommodate this transition to decimals by providing for intermarket trading in decimals. On June 8, 2000, the Commission ordered the self-regulatory organizations (“SROs”) to submit a plan that will begin phasing in decimal pricing in equity securities and options on or before September 5, 2000, and complete this phase in no later than April 9, 2001. Since this order, the SROs have submitted a phase-in plan and rule filings necessary to implement decimal pricing. The Sixteenth Amendment to the ITS Plan is another step in the process of the market-wide conversion to decimal pricing.

See Securities Exchange Act Release No. 42914 (June 8, 2000), 65 FR 38010 (June 19, 2000).

III. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the proposed amendment, including whether the proposed Plan amendment 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 Plan amendment change that are filed with the Commission, and all written communications relating to the proposed Plan amendment 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 Room. Copies of such Plan amendment will also be available for inspection and copying at the principal office of the ITS. All submissions should refer to File No. 4-208 and should be submitted by September 29, 2000.

IV. Conclusion

The Plan amendment is hereby made summarily effective on a temporary basis not to exceed January 8, 2001, pursuant to Exchange Act Rule 11Aa3-2(c)(4).

17 CFR 240.11Aa3-2(c)(4).

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

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00-23076 Filed 9-7-00; 8:45 am]

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