Self-Regulatory Organizations; Filing of Proposed Rule Change by the Pacific Stock Exchange, Inc. (``PSE'') Relating to Its Crossing Session Pilot Program.

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33799; File No. SR-PSE-94-2]

Self-Regulatory Organizations; Filing of Proposed Rule Change by

the Pacific Stock Exchange, Inc. (``PSE'') Relating to Its Crossing

Session Pilot Program.

March 22, 1994.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S. 78s(b)(1), notice is hereby given that on January 7,

1994, the Pacific Stock Exchange, Inc. (``PSE'' 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 self-regulatory organization. The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.\1\

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\1\Concurrently with this notice, the Commission is also

publishing for comment proposals submitted by the Chicago Stock

Exchange, Inc., the American Stock Exchange Inc., the Boston Stock

Exchange, Inc., the Philadelphia Stock Exchange, Inc. and the New

York Stock Exchange, Inc., to request permanent approval for their

respective programs which provide for executions of securities after

regular trading hours. See File Nos. SR-CHX-93-23; BSE-93-24; SR

Amex-93-15; SR-Phlx-94-8; and SR-NYSE-93-50.

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I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The PSE requests permanent approval of its Crossing Session pilot

program, under which certain designated limit orders on the PSE

specialists' books are afforded price protection based on the primary

market.\2\ On February 1, 1994, the PSE's pilot program was extended

until April 30, 1994.\3\

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\2\On June 13, 1991, the Commission approved, on a pilot basis,

File No. SR-PSE-91-21, which adopted the PSE Crossing Session

Program. See Securities Exchange Act Release No. 29305 (June 13,

1991), 56 FR 28208 (June 19, 1991) (order approving File No. SR-PSE-

91-21) (PSE Approval Order). The Exchange's procedures provide

primary market protection for customer GTX orders (good until

canceled, executable in the afternoon session) in securities listed

on the NYSE and on the Amex and traded during the after-hours

sessions of those Exchanges. The New York Stock Exchange (``NYSE'')

initiated its Off-Hours trading (``OHT'') sessions in June 1991. See

Securities Exchange Act Release No. 29237 (May 24, 1991), 56 FR

24853 (May 31, 1991) (approving File Nos. SR-NYSE-90-52 and NYSE-90-

53). The American Stock Exchange, Inc. (``Amex'') established an

after-hours trading facility in August 1991. See Securities Exchange

Act Release No. 29515 (August 2, 1991), 56 FR 37736 (August 8, 1991)

(approving File No. SR-Amex-91-15). The Commission approved

extensions of the NYSE. Amex and PSE pilots, as well as pilots by

other regional exchanges until January 31, 1994 and further extended

the pilots until April 30, 1994. See Securities Exchange Act Release

Nos. 32367 (May 25, 1993), 58 FR 31570 (June 3, 1993), and 33562

(February 8, 1994), 59 FR 5792 (February 8, 1994).

\3\See Securities Exchange Act Release No. 33562, supra note 2.

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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 IV below. The self-regulatory organization

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 request permanent

approval of the Exchange's price protection of limit orders based on

after-hours prints in a primary market. On June 13, 1991, the

Commission approved, on a pilot basis, the PSE's proposed rule change

to provide primary market protection to orders that have been entered

with the PSE but designated to receive the execution price established

in the primary market's after-hours session.\4\ The Exchange submitted

the proposal as a competitive response to the NYSE's Off-Hours Trading

Facility.\5\ On June 13, 1991, the Commission approved similar pilot

programs by the BSE, Phlx, and CHX.\6\

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\4\See Securities Exchange Act Release No. 29305, supra note 2.

\5\See Securities Exchange Act Release No. 29237, supra note 2.

\6\See Securities Exchange Act Release No. 29305, supra note 2.

On August 30, 1991, the Commission approved the portion of File No.

SR-PSE-91-21 relating to the extension of the hours of the PSE's

auction market trading session for an additional twenty minutes to

1:50 p.m. (PT). See Securities Exchange Act Release No. 29631

(August 30, 1991), 56 FR 46025 (September 9, 1991). In addition, the

portion of File No. SR-PSE-91-21 relating to the creation and

trading on the Exchange of a new type of order, one-side (``OS'')

closing price orders, is currently under reviewed by the Commission.

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Under the Crossing Session program, Exchange specialists are

required to provide primary market protection for orders designated

``GTX'' (orders on the PSE specialists' limit order books that are good

'til cancelled and executable through the Crossing Session). Orders so

designated become eligible for migration to the PSE's 1 p.m. to 1:30

p.m. (PS) auction market trading session\7\ and to the Crossing Session

for possible execution at the primary market's closing price. The

Crossing Session, which serves as an order protection environment vis-

a-vis NYSE Crossing Session I, occurs from 1:50 p.m. to 2 p.m. (PT).

Orders that are designated as GTX but that are not filled remain on the

PSE specialist limit order books and retain their priority.

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\7\This session was later extended to 1:50 p.m. (PT). See

Securities Exchange Act Release No. 29631, supra note 6.

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The Commission approved the Crossing Session program for a

temporary period ending on May 24, 1993.\8\ The Commission subsequently

approved extensions of the program to January 31, 1994 and April 30,

1994.\9\ The Commission requested the PSE to submit a report to the

Commission describing the PSE's experience with the new program during

the approval period, particularly in regard to certain questions

designated in the Crossing Session Approval Order.\10\ In response

thereto, the Exchange has submitted reports to the Commission dated

April 30, 1993, and September 30, 1993. The Commission requested in its

order extending the pilot until April 30, 1994, that the Exchange

submit to the Commission by March 15, 1994, an updated report

concerning the pilot activity through February 28, 1994.\11\ This

updated report will assist the Commission in considering the Exchange's

request for permanent approval prior to the April 30, 1994 expiration

of the pilot program. The Exchange now seeks permanent approval of the

program.

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\8\See supra note 2.

\9\See supra note 2.

\10\See supra note 2.

\11\See supra note 2.

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2. Statutory Basis

The proposed rule change is consistent with Sections 6(b)(5) and

11A of the Act in that it is designed to promote just and equitable

principles of trade, perfect the mechanism of a free and open national

market system, and, in general, further investor protection and the

public interest in fair and orderly markets on national securities

exchanges.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange believes that no burdens will be placed on competition

as a result of the proposed rule change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed

Rule Change Received From Members, Participants or Others

No comments were received 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 self-regulatory organization consents, the Commission will:

(A) By order approve the 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. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW., Washington, DC 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, NW.,

Washington, DC 20549. Copies of such filing will also be available for

inspection and copying at the principal office of the PSE. All

submissions should refer to File No. SR-PSE-94-2 and should be

submitted by April 19, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-7283 Filed 3-28-94; 8:45 am]

BILLING CODE 8010-01-M