[Federal Register: December 29, 2003 (Volume 68, Number 248)]
[Notices]
[Page 75012-75013]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de03-109]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48947; File No. SR-Phlx-2003-81]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of a Proposed Rule Change by the
Philadelphia Stock Exchange, Inc. Relating to a Pilot Program To Deploy
the Options Floor Broker Management System
December 18, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given
that on December 17, 2003, the Philadelphia Stock Exchange, Inc.
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the Phlx. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons and to approve the
proposal, on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend its pilot program pertaining to the
Options Floor Broker Management System (the ``System'') from November
14, 2003, until February 6, 2004.\3\ The System is a new component of
the Exchange's Automated Options Market (AUTOM) and Automatic Execution
(AUTO-X) System.\4\
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\3\ On July 31, 2003, the Exchange filed a proposed rule change
to implement a pilot program to deploy the Exchange's new System.
The proposed rule change was noticed, and accelerated approval was
granted thereto, on July 31, 2003. The pilot was scheduled to expire
on August 29, 2003. See Securities Exchange Act Release No. 48266
(July 31, 2003), 68 FR 152 (August 7, 2003) (SR-Phlx-2003-56). On
August 29, the Commission extended the pilot to September 12, 2003.
See Securities Exchange Act Release No. 48425 (August 29, 2003), 68
FR 53210 (September 9, 2003) (SR-Phlx-2003-60). On September 12,
2003, the Commission extended the pilot again until November 14,
2003. See Securities Exchange Act Release No. 48490 (September 12,
2003), 68 FR 54926 (September 19, 2003). In order to avoid a lapse
in the effectiveness of this pilot, the Commission now is approving
the Exchange's proposal to extend the rule from November 14, 2003
until February 6, 2004. The Exchange has also filed for permanent
approval of the proposed rules. See Securities Exchange Act Release
No. 48265 (July 31, 2003), 68 FR 47137 (August 7, 2003) (SR-Phlx-
2003-40). The Exchange acknowledges that SR-Phlx-2003-40 and
Amendment No. 1 thereto are subject to public comment, which may
result in amendments to the proposed rules.
\4\ AUTOM is the Exchange's electronic order delivery, routing,
execution and reporting system, which provides for the automatic
entry and routing of equity option and index option orders to the
Exchange trading floor. Orders delivered through AUTOM may be
executed manually, or certain orders are eligible for AUTOM's
automatic execution feature, AUTO-X. Equity option and index option
specialists are required by the Exchange to participate in AUTOM and
its features and enhancements. Option orders entered by Exchange
members into AUTOM are routed to the appropriate specialist unit on
the Exchange trading floor. See Exchange Rule 1080.
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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 Phlx 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 III below. The Phlx 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 extend the
effectiveness of the rules governing the System beyond the current
effective date of November 14, 2003, in order to continue to have rules
in place concerning the System and to ensure that Floor Brokers using
the System during the continuing deployment would not be in violation
of current Exchange rules regarding ticket marking requirements. The
rules had previously been effective through August 29, 2003, extended
through September 12, 2003, and extended again through November 14,
2003.\5\
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\5\ See note 3, supra.
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The System is designed to enable Floor Brokers and/or their
employees to enter, route and report transactions stemming from options
orders received on the Exchange. Floor Brokers or their employees
access the System through an electronic Exchange-provided handheld
device on which they have the ability to enter the required information
as set forth in Phlx Rule 1063(e), either from their respective posts
on the options trading floor or in the trading crowd. The System will
eventually replace the Exchange's current Floor Broker Order Entry
System (``FBOE''),\6\ as part of a roll-out of the new System floor-
wide.
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\6\ See Securities Exchange Act Release No. 41524 (June 14,
1999), 64 FR 33127 (June 21, 1999) (SR-Phlx-99-11). The FBOE, a
component of AUTOM, currently provides a means for (but does not
require) Floor Brokers to route eligible orders to the specialist's
post, consistent with the order delivery criteria of the AUTOM
System set forth in Exchange Rule 1080(b). The new System would
include the same functionality as the FBOE, in addition to providing
an electronic audit trail for non-electronic orders received by
Floor Brokers by way of the entry of the required information in
proposed Phlx Rule 1063(e).
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All of the rules pertaining to the System effective November 14,
2003 are proposed to be extended until February 6, 2004, including:
Exchange Rules 1014(g), 1015, 1051, 1063, 1064, and 1080.06, as well as
Option Floor Procedure Advices (``Advice'') A-11, B-6, B-8, C-2, C-3,
F-1, F-2, and F-4.
The Exchange believes that the System will enable Floor Brokers to
handle orders they represent more efficiently, and will further enable
the Exchange to comply with the audit trail requirement for non-
electronic orders required under the Order Instituting Public
Administrative Proceedings Pursuant to section 19(h)(1) of the
[[Page 75013]]
Securities Exchange Act of 1934, Making Findings and Imposing
Sanctions.\7\
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\7\ See Securities Exchange Act Release No. 43268 (September 11,
2000) and Administrative Proceeding File 3-10282 (the ``Order'').
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with section 6(b) of the Act \8\ in general, and furthers the
objectives of section 6(b)(5) of the Act \9\ in particular, in that it
is designed to promote just and equitable principles of trade, remove
impediments to and perfect the mechanisms of a free and open market and
a national market system, and to protect investors and the public
interest, by providing a System that enables Floor Brokers to handle
orders they represent more efficiently, while enabling the Exchange to
comply with the requirement in the Order to provide an electronic audit
trail for non-electronic orders entered on the Exchange.
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\8\ 15 U.S.C. 78f(b).
\9\ 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 inappropriate burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. 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.
Comments may also be submitted electronically at the following e-mail
address: rule-comments@sec.gov. All comment letters should refer to
File No. SR-Phlx-2003-81. The file number should be included on the
subject line if e-mail is used. To help the Commission process and
review your comments more efficiently, comments should be sent in
hardcopy or by e-mail but not by both methods. 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 Phlx. All
submissions should refer to File No. SR-Phlx-2003-81 and should be
submitted by January 20, 2004.
IV. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\10\ In particular the Commission finds that the proposed rule
to extend the rules relating to the System on a pilot basis until
February 6, 2004 is consistent with section 6(b)(5) of the Act, which
requires that the rules of an exchange be designed to promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national securities System,
and protect investors and the public interest.\11\
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\10\ In approving this proposed rule change, the Commission has
also considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
\11\ 15 U.S.C. 78f(b)(5).
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of the publication of
notice thereof in the Federal Register. The Commission believes that
granting accelerated approval to the proposed rule change on a pilot
basis will allow the Exchange to have enforceable rules governing use
of the Exchange's new System in effect prior to permanent approval of
the rules, and will help ensure that members are properly trained and
familiar with the rules. In addition, Commission is granting
accelerated approval retroactively to November 14, 2003, in order to
prevent a lapse in the effectiveness of the Exchange's rules governing
operation of the System to ensure continuity of the pilot.
V. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Phlx-2003-81) is approved on
an accelerated basis and is effective retroactively from November 14,
2003, on a pilot basis until February 6, 2004.
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\12\ 15 U.S.C. 78f(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31810 Filed 12-24-03; 8:45 am]
BILLING CODE 8010-01-P