You are on page 1of 3

68222 Federal Register / Vol. 67, No.

217 / Friday, November 8, 2002 / Notices

must comply with three criteria to permit unfair discrimination between IV. Solicitation of Comments
maintain its status as a PTS.9 One such customers, issuers, brokers, or dealers. Interested persons are invited to
criteria is that, for each security traded Section 11A(a)(1) of the Act 16 sets forth submit written data, views, and
in the PTS, the PTS cannot trade more a finding of Congress that new data arguments concerning the foregoing,
than one percent of the average daily processing and communications including whether the proposed rule
consolidated trading volume of any techniques create opportunity for more change is consistent with the Act.
such security, during at least two of the efficient and effective market Persons making written submissions
last four consecutive calendar months. operations. should file six copies thereof with the
Nasdaq represents that Primex exceeded Nasdaq believes this proposed rule Secretary, Securities and Exchange
this threshold for many securities. change is consistent with the NASD’s Commission, 450 Fifth Street, NW,
Therefore, Nasdaq filed a proposed rule obligations under the Act, as well as the Washington, DC 20549–0609. Copies of
change seeking permanent approval of finding of Congress, because it will the submission, all subsequent
Primex.10 Nasdaq also filed a proposed allow Nasdaq to continue operating amendments, all written statements
rule change to continue operating the Primex while the Commission considers with respect to the proposed rule
System for up to six months while the permanent approval. Among other change that are filed with the
Commission considered granting things, the System provides members Commission, and all written
permanent approval.11 This six-month with an additional electronic, execution communications relating to the
period expires on October 31, 2002. The system, which is designed to provide proposed rule change between the
Commission is still considering members with flexibility in executing Commission and any person, other than
Nasdaq’s filing seeking permanent orders and the opportunity to obtain those that may be withheld from the
approval of Primex. Accordingly, price improvement. To ensure the public in accordance with the
Nasdaq is filing this proposed rule protection of investors, orders will not provisions of 5 U.S.C. 552, will be
change to continue operating Primex as be executed at prices inferior to the available for inspection and copying in
a PTS until November 30, 2002, or until National Best Bid or Offer. the Commission’s Public Reference
the Commission grants permanent Room. Copies of such filing will also be
approval, whichever period is shorter. B. Self-Regulatory Organization’s
Statement on Burden on Competition available for inspection and copying at
Primex continues to operate in the the principal office of the NASD. All
manner described in the Form PILOT Nasdaq does not believe that the submissions should refer to File No.
filing, as amended.12 proposed rule change will result in any SR–NASD–2002–156 and should be
2. Statutory Basis burden on competition that is not submitted by November 29, 2002.
necessary or appropriate in furtherance
Nasdaq believes the proposed rule For the Commission, by the Division of
of the purposes of the Act, as amended. Market Regulation, pursuant to delegated
change is consistent with the provisions
C. Self-Regulatory Organization’s authority.20
of Sections 15A(b)(6)13 and 11A(a)(1) of
the Act.14 Section 15A(b)(6) of the Act 15 Statement on Comments on the Jill M. Peterson,
requires the rules of the NASD to be Proposed Rule Change Received From Assistant Secretary.
designed to prevent fraudulent and Members, Participants, or Others [FR Doc. 02–28429 Filed 11–7–02; 8:45 am]
manipulative acts and practices, to Written comments were neither BILLING CODE 8010–01–P
promote just and equitable principles of solicited nor received.
trade, to foster cooperation and
coordination with persons engaged in III. Date of Effectiveness of the SECURITIES AND EXCHANGE
regulating, clearing, settling, processing Proposed Rule Change and Timing for COMMISSION
information with respect to, and Commission Action
[Release No. 34–46761; File No. SR–Phlx–
facilitating transactions in securities, to The foregoing rule change has become 2002–49]
remove impediments to and perfect the effective upon filing pursuant to section
mechanism of a free and open market 19(b)(3)(A)(iii) of the Act,17 and Self-Regulatory Organizations; Order
and a national market system, and, in subparagraph (f)(2) of Rule 19b–5 Approving Proposed Rule Change by
general, to protect investors and the thereunder,18 because the proposal will the Philadelphia Stock Exchange, Inc.
public interest; and not be designed to permit Nasdaq to continue operating Relating to PACE Guarantee
Primex as a PTS while the Commission Exemption
9 Pursuant to Rule 19b–5(c)(2), to qualify as a

Pilot Trading System, a system must: (1) Be in considers granting permanent approval. November 1, 2002.
operation for less than two years; (2) with respect The proposal does not modify any rule
to each security traded on such Pilot Trading or the operation of Primex. I. Introduction
System, during at least two of the last four
consecutive calendar months, has traded no more
At any time within 60 days of the On September 12, 2002, the
than one percent of the average daily trading filing of a rule change pursuant to Philadelphia Stock Exchange, Inc.
volume in the United States; and (3) with respect Section 19(b)(3)(A) of the Act,19 the (‘‘Phlx’’ or ‘‘Exchange’’) submitted to the
to all securities traded on such Pilot Trading Commission may summarily abrogate Securities and Exchange Commission
System, during at least two of the last four
consecutive calendar months, has traded no more
the rule change if it appears to the (‘‘SEC’’ or ‘‘Commission’’), pursuant to
than 20 percent of the average daily trading volume Commission that such action is Section 19(b)(1) of the Securities
of all trading systems operated by the self- necessary or appropriate in the public Exchange Act of 1934 (‘‘Act’’),1 and
regulatory organization. interest, for the protection of investors, Rule 19b–4 thereunder,2 a proposed rule
10 Securities Exchange Act Release No. 45983
or otherwise in furtherance of the change to exempt specialists from the
(May 23, 2002) 67 FR 38152 (May 31, 2002).
11 Securities Exchange Act Release No. 45982 purposes of the Act. requirement to execute certain orders
(May 23, 2002) 67 FR 38163 (May 31, 2002). that are traded-through by another
12 Form PILOT–NASD–2001–01. 16 15 U.S.C. 78k–1(a)(1).
13 15 U.S.C. 78o–3(b)(6). 17 15 U.S.C. 78s(b)(3)(A)(iii). 20 17 CFR 200.30–3(a)(12).
14 15 U.S.C. 78k–1(a)(1). 18 17 CFR 240.19b–4(f)(5). 1 15 U.S.C. 78s(b)(1).
15 15 U.S.C. 78o–3(b)(6). 19 15 U.S.C. 78s(b)(3)(A). 2 17 CFR 240.19b–4.

VerDate 0ct<31>2002 16:24 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 E:\FR\FM\08NON1.SGM 08NON1
Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Notices 68223

market if those orders are for the Exchange, including the Phlx,8 has to transactions in the QQQs,
exchange-traded funds (‘‘ETFs’’) adopted and obtained Commission DIAMONDs and SPDRs that are effected
tracking the Nasdaq-100 Index approval of a ‘‘trade-through rule,’’ at a price no more than three cents away
(‘‘QQQs’’), the Dow Jones Industrial which is substantively the same as that from the best bid and offer quoted in the
Average (‘‘DIAMONDs’’), and the provided in the ITS Plan. Consolidated Quote System (‘‘CQS’’).
Standard & Poor’s 500 Index In a recent Order, the Commission This exemption, which went into effect
(‘‘SPDRs’’).3 recognized that the ITS trade-through on September 4, 2002 and will remain
The proposed rule change was provisions were designed to encourage in effect until June 4, 2003, allows
published for comment in the Federal market participants to display their Participants to execute transactions,
Register on October 2, 2002.4 No trading interest, and to help achieve best through automatic execution or
comments were received on the execution for customer orders in otherwise, without attempting to access
proposal. This order approves the exchange-listed securities.9 The the quotes of other Participants when
proposal. Commission also acknowledged, the expected price improvement would
however, that these rules were designed not be significant.14
II. Description of the Proposal
at a time when ‘‘the order routing and
A. Background execution facilities of markets were B. Applicability to the Phlx
The Phlx is a participant in the much slower, intermarket competition Phlx Rule 229.10(a)(iii) requires a
Intermarket Trading System (‘‘ITS’’). was less keen, and the minimum quote Phlx specialist to execute certain orders
The ITS is an order routing network increment for exchange-listed securities that are traded-through by another
designed to facilitate intermarket was 1⁄8 of a dollar ($ 0.125).’’10 The market center.15 Although the Exchange
trading in exchange-listed equity Commission noted that with the Rule imposes this obligation on the
securities among participating self- introduction of decimal pricing and specialist, the specialist is entitled to
regulatory organizations (‘‘SROs’’) based technology changes that greatly reduced satisfaction of those orders pursuant to
on current quotation information execution times, the trade-through Section 8(d) of the ITS Plan. However,
emanating from their markets. The provisions of the ITS Plan have limited for trade-throughs that are enumerated
terms of the linkage are governed by the the ability of a Participant to provide an in the ITS Exemption Order and
ITS Plan, a national market system plan automated execution when a better therefore are no longer prohibited by the
approved by the Commission pursuant price is displayed by another Participant ITS Plan, the specialist does not have
to Section 11A of the Act and Rule that does not offer automated recourse to seek satisfaction for these
11Aa3–2 thereunder.5 executions.11 In support of this orders and is alone responsible for those
Section 8(d)(i) of the ITS Plan conclusion, the Commission explained executions. Therefore, the Phlx believes
provides that absent reasonable that certain electronic systems are able that its provision guaranteeing an
justification or excuse, a member of a to deliver executions in a fraction of a execution no longer makes sense, and
Participant Exchange should not effect second, while ITS participants have, at further believes that the provision now
trade-throughs.6 If, however, a trade- a minimum, thirty seconds to respond unduly burdens specialists by requiring
through does occur and a complaint is to a commitment to trade. Because of a specialist to execute orders in
received through ITS from the party this, ‘‘an ITS Participant seeking to situations where the specialist does not
whose bid or offer was traded through, execute a transaction at a price inferior have access to trading at that price.
the party who initiated the trade- to the price quoted by another ITS Thus, the Exchange is proposing to
through may be required to satisfy the Participant must generally either (i) amend Phlx Rule 229 Supplementary
bid or offer traded through or take other attempt to access the other Participant’s Material Section 10(a)(iii) to state that
remedial action.7 Each Participant quote, which could delay the customer’s the obligations described therein shall
transaction by thirty seconds or more, or not apply to the ETFs that are the
3 The Exchange does not currently trade (ii) become potentially liable to the subject of the ITS Exemption Order for
DIAMONDs or SPDRs but may determine to do so other Participant for the amount by so long as the exemption granted in the
in the future. The Exchange does trade QQQs. which its quote was traded through.’’12 order remains in effect.
4 See Securities Exchange Act Release No. 46545
In its Order, the Commission stated
(September 24, 2002), 67 FR 61944. The proposed that the ITS trade-through provisions III. Discussion
rule change is currently in effect as a pilot. See
Securities Exchange Act Release Nos. 46481 were particularly restrictive in the case After careful review, the Commission
(September 10, 2002), 67 FR 58669 (September 17, of the QQQs, DIAMONDs and SPDRs, as finds that the proposed rule change is
2002)(notice of immediate effectiveness of pilot for these ETFs are highly liquid securities, consistent with the requirements of the
the period September 4, 2002 to October 4, 2002); and their value is derived from the Act and the rules and regulations
46615 (October 8, 2002), 67 FR 63723 (October 15,
2002)(notice of immediate effectiveness of
values of the underlying shares. The thereunder applicable to a national
extension of pilot to November 3, 2002.) Commission noted that immediate securities exchange. 16 In particular, the
5 See Securities Exchange Act Release No. 19456 execution of these securities might be
(January 27, 1983), 48 FR 4938 (February 3, 1983). more important than the opportunity to 14 Id. at 56608.
The SROs participating in ITS include the obtain a better price to certain 15 Specifically, this Rule provides that if 100 or
American Stock Exchange LLC (‘‘Amex’’), the more shares print through the limit price on any
Boston Stock Exchange, Inc. (‘‘BSE’’), the Chicago investors.13 To address this issue, the exchange(s) eligible to compose the PACE Quote,
Board Options Exchange, Inc. (‘‘CBOE’’), the Commission granted a de minimis which is the best bid/ask quote among the Amex,
Chicago Stock Exchange, Inc. (‘‘CSE’’), the exemption from the trade-through BSE, Cincinnati, CSE, NYSE, PCX, Phlx, and the
Cincinnati Stock Exchange, Inc. (‘‘Cincinnati’’), the provisions of the ITS Plan with respect Intermarket Trading System/Computer Assisted
National Association of Securities Dealers, Inc. Execution System (‘‘ITS/CAES’’), after the time of
(‘‘NASD’’), the New York Stock Exchange, Inc. entry of any such order into PACE, the specialist
8 See Phlx Rule 2001A.
(‘‘NYSE’’), the Pacific Stock Exchange, Inc. (‘‘PCX’’), shall execute all such orders at the limit price
9 See Securities Exchange Act Release No. 46428
and the Phlx (collectively ‘‘Participant Exchanges’’). without waiting for an accumulation of 1000 shares
6 A trade-through results when a member (August 28, 2002), 67 FR 56607 (September 4, 2002) to price at the limit price on the NYSE. See also
purchases (or sells) a security at a price that is at 56607 (‘‘ITS Exemption Order’’). Phlx Rule 229, Supplementary Material Section
10 Id.
higher (lower) than the price offered in one or more .10(a)(ii).
11 Id.
of the other ITS participant’s markets. See ITS Plan, 16 In approving this rule proposal, the
Section 8(d)(i). 12 Id. at 56607–8.
Commission notes that it has also considered the
7 See ITS Plan, Exhibit B. 13 Id. Continued

VerDate 0ct<31>2002 16:24 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 E:\FR\FM\08NON1.SGM 08NON1
68224 Federal Register / Vol. 67, No. 217 / Friday, November 8, 2002 / Notices

Commission finds that the proposed seq.), Delegation of Authority No. 234 of ADDRESSES: Comments on this
rule is consistent with the requirements October 1, 1999, and Delegation of application may be mailed or delivered
of Section 6(b)(5) of the Act 17 because Authority No. 236 of October 19, 1999, in triplicate to the FAA at the following
it is designed to facilitate transactions in as amended, I hereby determine that the address: FAA, New York Airports
securities; to remove impediments to object to be included in the exhibition District Office, 600 Old Country Road,
and perfect the mechanism of a free and ‘‘Old Master Galleries,’’ imported from Suite 446, Garden City, NY 11530.
open market and a national market abroad for temporary exhibition within In addition, one copy of any
system; and, in general, to protect the United States, is of cultural comments submitted to the FAA must
investors and the public interest; and is significance. The object is imported be mailed or delivered to Vito J.
not designed to permit unfair pursuant to loan agreement with the Sportelli, of the Niagara Frontier
discrimination between customers, foreign owner. I also determine that the Transportation Authority at the
issuers, brokers or dealers. exhibition or display of the exhibit following address: 181 Ellicott Street,
By adopting the proposed exemption, object at The Metropolitan Museum of Buffalo, New York 14203.
the Exchange removes the specialist’s Art, New York, NY, from on or about Air carriers and foreign air carriers
obligation to provide trade-through November 17, 2002, to on or about may submit copies of written comments
protection in situations where it will not November 17, 2004, and at possible previously provided to the Niagara
be permitted to seek satisfaction through additional venues yet to be determined, Frontier Transportation Authority under
ITS from the primary market. This is in the national interest. Public Notice § 158.23 of part 158.
obligation was one the Phlx assumed of these Determinations is ordered to be FOR FURTHER INFORMATION CONTACT:
voluntarily in order to make its market published in the Federal Register. Eleanor Schifflin, PFC Program
more attractive to sources of order flow, FOR FURTHER INFORMATION CONTACT: For Manager, Regional Office, 1 Aviation
not an obligation the Act imposes on a further information, including a list of Plaza, Jamaica, New York 11434–4848 at
market. The Commission believes that the exhibit object, contact Julianne (718) 553–3354. The application may be
the business decision to potentially Simpson, Attorney-Adviser, Office of reviewed in person at this same
forego order flow by no longer providing the Legal Adviser, U.S. Department of location.
print protection is a judgment the Act State, (telephone: 202/619–6529). The
allows the Phlx to make.18 SUPPLEMENTARY INFORMATION: The FAA
address is U.S. Department of State, SA–
proposes to rule and invites public
IV. Conclusion 44, 301 4th Street, S.W., Room 700,
comment on the application to impose
Washington, D.C. 20547–0001.
It is therefore ordered, pursuant to and use the revenue from a PFC at
Dated: November 4, 2002. Buffalo Niagara International Airport
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–Phlx–2002– Patricia S. Harrison, and use at Niagara Falls International
49) is approved. Assistant Secretary for Educational and Airport under the provisions of the
Cultural Affairs, Department of State. Aviation Safety and Capacity Expansion
For the Commission, by the Division of
Market Regulation, pursuant to delegated
[FR Doc. 02–28513 Filed 11–7–02; 8:45 am] Act of 1990 (Title IX of the Omnibus
authority.20 BILLING CODE 4710–08–P Budget Reconciliation Act of 1990)
Jill M. Peterson, (Pub. L. 101–508) and part 158 of the
Federal Aviation Regulations (14 CFR
Assistant Secretary.
DEPARTMENT OF TRANSPORTATION part 158).
[FR Doc. 02–28427 Filed 11–7–02; 8:45 am]
On October 9, 2002, the FAA
BILLING CODE 8010–01–P Federal Aviation Administration determined that the application to
impose and use the revenue from a PFC
Notice of Intent To Rule on Application submitted by Niagara Frontier
DEPARTMENT OF STATE 02–04–C–00–BUF To Impose and Use Transportation Authority was
the Revenue From a Passenger Facility substantially complete within the
[Public Notice 4202] Charge (PFC) at Buffalo Niagara requirements of § 158.25 of part 158.
Culturally Significant Objects Imported International Airport, and Use Only at The FAA will approve or disapprove the
for Exhibition Determinations: ‘‘Old Niagara Falls International Airport, application, in whole or in part, no later
Master Galleries’’ New York than January 18, 2003.
AGENCY: Federal Aviation The following is a brief overview of
ACTION: Notice. Administration (FAA), DOT. the application.
PFC Application No.: 02–04–C–00–
SUMMARY: Notice is hereby given of the ACTION: Notice of intent to rule on
BUF.
following determinations: Pursuant to application.
Level of the proposed PFC: $3.00.
the authority vested in me by the Act of Proposed charge effective date: May 1,
SUMMARY: The FAA proposes to rule and
October 19, 1965 (79 Stat. 985; 22 U.S.C. 2006.
2459), Executive Order 12047 of March invites public comment on the
application to impose and use the Proposed charge expiration date:
27, 1978, the Foreign Affairs Reform and January 1, 2010.
Restructuring Act of 1998 (112 Stat. revenue from a PFC at Buffalo Niagara
International Airport and use only at Total estimated PFC revenue:
2681, et seq.; 22 U.S.C. 6501 note, et
Niagara Falls International Airport $24,561,653.
under the provisions of the Aviation Brief description of proposed
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f). Safety and Capacity Expansion Act of project(s) at Buffalo Niagara
17 15 U.S.C. 78f(b)(5). 1990 (Title IX of the Omnibus Budget International Airport:
18 The Commission notes that the Phlx’s proposed Reconciliation Act of 1990) (Pub. L. —Relocation of Security Checkpoints.
rule change will remain in effect only until the 101–508) and part 158 of the Federal
expiration of the Commission’s ITS Exemption
—Perform Runway 14–32 Safety Area
Order on June 4, 2003.
Aviation Regulations (14 CFR part 158). Improvements.
19 15 U.S.C. 78f(b)(2). DATES: Comments must be received on —Purchase Safety Equipment—Air
20 17 CFR 200.30–3(a)(12). or before December 9, 2002. Rescue Fire Fighting Vehicles.

VerDate 0ct<31>2002 16:24 Nov 07, 2002 Jkt 200001 PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 E:\FR\FM\08NON1.SGM 08NON1