[Federal Register Volume 59, Number 21 (Tuesday, February 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 92-2119]


[[Page Unknown]]

[Federal Register: February 1, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33512; File No. SR-Phlx-93-08]

 

Self-Regulatory Organizations; Order Granting Approval to a 
Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating 
to an Amendment to Floor Procedure Advice F-2 Regarding Time Stamping, 
Matching, and Access to Matched Trade Tickets

January 24, 1994.
    On March 29, 1993, the Philadelpia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(`'Commission'' or ``SEC'') pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Phlx Floor Procedure 
Advice (``Phlx Advice'') F-2, currently titled ``Responsibility for 
Time Stamping and Matching. Notice of the proposal appeared in the 
Federal Register on September 1, 1993.\3\ No comment letters were 
received on the proposed rule change. This order approves the 
Exchange's proposal.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19-4 (1992).
    \3\See Securities Exchange Act Release No. 32792 (August 24, 
1993), 58 FR 46263.
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    The Phlx has proposed the following amendments to Phlx Advice F-2: 
(1) Renaming Phlx Advice F-2, ``Time Stamping, Matching and Access to 
Matched Trades;'' (2) requiring matched tickets to be submitted to the 
specialist post immediately upon execution; (3) requiring an execution 
time stamp on the reverse side of a trade ticket; (4) adding provisions 
limiting access to matched trade tickets to participants in the 
transaciton, the specialist in that option and floor officials acting 
in that capacity; (5) requiring specialist approval to access matched 
trade tickets; and (6) requiring specialists to keep matched tickets 
for a minimum of three years.
    Phlx Advice F-2 currently spells out the responsibilities 
pertaining to time stamping and matching floor tickets, imposing this 
duty upon the largest participant of a trade, or, where there is one 
buyer and one seller, upon the seller. The Phlx is proposing to 
separate Phlx Advice into three sections. Section (a) would contain the 
current time stamping and matching responsibilities as well as two 
additions. First, trade participants would be required to submit 
matched tickets to the appropriate person at the specialist post 
immediately upon effecting a transaction in order to assure that the 
initiating party agrees with each contra-party's claim as to his or her 
level of participation as well as to ensure that the terms of the trade 
are correct. The Commission believes that immediate submissions also 
lessen the potential for losing a matched ticket before entry into 
Exchange trade comparison systems. Second, an execution time stamp 
would be required on the reverse side of the order ticket to 
distinguish the execution and order entry times for surveillance and 
audit trail purposes.
    Becuase the Phlx is proposing to add provisions relating to access 
to matched trades to Advice F-2, the Exchange proposes to rename this 
Advice ``Time Stamping, Matching and Access to Matched Trades.'' In 
this regard, the Phlx seeks to limit access to matched trade tickets to 
those with a legitimate interest: participants, the specialist in that 
option, and a floor official acting in that capacity. Intra-day, 
matched trade tickets are kept behind the specialist post on the floor 
after being electronically entered into the Exchange's trade comparison 
systems so that errors can be corrected. Thus, the Phlx is also 
proposing to require prior specialist permission before looking through 
these tickets. The Commission believes that limiting access should 
reduce the number of instances where floor personnel access trade 
tickets to discern customers' identities or to ascertain trading 
patterns. In addition, the Commission believes that supervising access 
to trade tickets should provide accountability for persons who access 
such tickets and help ensure that the trade tickets are returned to the 
specialist post in a timely manner.
    Matched trade tickets serve important surveillance and operations 
functions. Once a trade has been processed for trade dissemination and 
clearing, it is then left in the possession of the attendant 
specialist. Accordingly, the Phlx is prosing to not only limit access 
to these tickets, but also to require specialists to keep all matched 
trade tickets in their possession for a period of three years, whether 
or not the specialist participated or acted as agent in any such trade.
    Advice F-2 is applicable to both the equity options and foreign 
currency options floors. Accordingly, the Phlx proposes adding the 
notation ``OF'' after Advice F-2. This notation indicates that the 
advice is applicable to the Phlx options floor and the Phlx foreign 
currency option floor. In addition, the Phlx proposes to increase the 
fine schedule for this Advice and to apply the new fines on a three-
year cycle, such that repeat violations during the same three-year 
period would result in escalating fines.\4\
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    \4\Under the rolling three-year cycle, if there is no violation 
of Advice F-2 for three years, the next violation would be treated 
as a first occurrence. If there is a violation within three years 
after the most recent violation, the next highest fine will be 
issued. Thus, a third violation less than three years after a fine 
was issued for a second occurrence would be treated as a third 
occurrence, even though more than three years may have elapsed after 
the first occurrence.
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    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, and, in 
particular, the requirements of section 6(b)(5)\5\ in that the proposal 
is designed to prevent fraudulent acts and practices, promote just and 
equitable principles of trade, and protect investors and the public 
interest. Specifically, the Commission believes that the proposed rule 
change will help ensure prompt and accurate trade reporting, will 
increase the performance of the Exchange's audit trail and other 
surveillance-related trade comparison systems, and provide appropriate 
fines for failing to perform the duties imposed by the rule change. 
Moreover, the Commission believes that the Exchange's proposed 
supervision of access to the saved trade tickets will serve as an 
adequate measure to prevent such information from being used for 
improper purposes.
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    \5\15 U.S.C. 78f(b)(5) (1988).
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    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-Phlx-93-08) is approved.
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    \6\15 U.S.C. 78s(b)(2) 1982).

    For the commission, by the Division of Market Regulations, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 92-2119 Filed 01-31-94; 8:45 am]
BILLING CODE 8010-01-M