[Federal Register: September 9, 2003 (Volume 68, Number 174)]
[Notices]
[Page 53210-53212]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09se03-149]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-48425; File No. SR-Phlx-2003-60]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Extending the Program To Deploy the Options Floor Broker
Management System
August 29, 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 August 29, 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, II, and III, below, which Items have been
prepared by the Phlx. The Exchange has designated the proposed rule
change as constituting a ``non-controversial'' rule change under
Section 19(b)(3)(A)(iii) of the Act,\3\ and paragraph (f)(6) of Rule
19b-4 under the Act,\4\ which renders the proposal effective upon
receipt of this filing by the Commission.\5\ The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
\5\ The Exchange has requested that the Commission waive both
the five-day pre-filing notification requirement and the 30-day
operative delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR
240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
[[Page 53211]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to extend its pilot program pertaining to the
Options Floor Broker Management System (the ``System'') until September
12, 2003.\6\ The System is a new component of the Exchange's Automated
Options Market (AUTOM) and Automatic Execution (AUTO-X) System.\7\
---------------------------------------------------------------------------
\6\ On July 31, 2003, the Exchange a filed a proposed rule
change to implement a pilot program to deploy the Exchange's new
System. This proposed rule change was noticed, and accelerated
approval was granted thereto, on July 31, 2003. See Securities
Exchange Act Release No. 48266 (July 31, 2003), 68 FR 152 (August 7,
2003) (SR-Phlx-2003-56). The pilot is currently scheduled to expire
on August 29, 2003. 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.
\7\ 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.
---------------------------------------------------------------------------
The text of the proposal rule change is set forth below. New text
is in italics; deletions are in brackets.
* * * * *
Philadelphia Stock Exchange Automated Options Market (AUTOM) and
Automatic Execution System (AUTO-X)
Rule 1080. (a)-(j)
No change.
Commentary:
.01-.05 No change.
.06 Options Floor Broker Management System. The Options Floor
Broker Management System is a component of AUTOM designed to enable
Floor Brokers and/or their employees to enter, route and report
transactions stemming from options orders received on the Exchange. The
Options Floor Broker Management System also is designed to establish an
electronic audit trail for options orders represented and executed by
Floor Brokers on the Exchange, such that the audit trail provides an
accurate, time-sequenced record of electronic and other orders,
quotations and transactions on the Exchange, beginning with the receipt
of an order by the Exchange, and further documenting the life of the
order through the process of execution, partial execution, or
cancellation of that order. The Exchange will begin deployment of the
Options Floor Broker Management System on July 31, 2003, with floor-
wide deployment to be completed not later than [August 29] September
12, 2003.
* * * * *
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 IV 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 August 29, 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 will not be in violation of
current Exchange rules regarding ticket marking requirements.
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''),\8\ as part of a roll-out of the new System floor-
wide.
---------------------------------------------------------------------------
\8\ 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 Rule 1063(e). Telephone call between Edith Hallahan, First
Vice President and Deputy General Counsel, Phlx and Jennifer
Colihan, Special Counsel, Division of Market Regulation, Commission,
on August 29, 2003.
---------------------------------------------------------------------------
All of the rules pertaining to the System adopted in July and
effective through August 29 \9\ are proposed to be extended until
September 12, 2003, including: Phlx 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. In addition
to extending the effective date of the rules, this proposal also amends
Phlx Rule 1080, Commentary .06 to state that the Exchange will complete
deployment of the System by September 12, 2003.
---------------------------------------------------------------------------
\9\ See note 6, supra.
---------------------------------------------------------------------------
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
Securities Exchange Act of 1934, Making Findings and Imposing Remedial
Sanctions.\10\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 43268 (September
11, 2000) and Administrative Proceeding File 3-10282.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \11\ in general, and furthers the objectives of Section
6(b)(5) of the Act \12\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
[[Page 53212]]
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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days (or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest) after the date of the filing, the proposed rule change has
become effective pursuant to Section 19(b)(3)(A) of the Act \13\ and
Rule 19b-4(f)(6) thereunder.\14\ At any time within 60 days of the
filing of such proposed rule change, the Commission may summarily
abrogate such rule change if it appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
The Commission has decided, consistent with the protection of
investors and the public interest, to waive the five-day pre-filing
notice and 30-day operative date to allow the System and rules to
continue on a pilot basis without interruption until September 12,
2003.\15\
---------------------------------------------------------------------------
\15\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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
Phlx. All submissions should refer to File No. SR-Phlx-2003-60 and
should be submitted by September 30, 2003.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-22857 Filed 9-8-03; 8:45 am]
BILLING CODE 8010-01-P