[Federal Register Volume 59, Number 126 (Friday, July 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16009]


[[Page Unknown]]

[Federal Register: July 1, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34255; File No. SR-Phlx-92-03]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1, 2, and 3 to the Proposed Rule Change by 
the Philadelphia Stock Exchange, Inc., Amending Options Floor Procedure 
Advice A-2 and Rule 1066

June 24, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 26, 1992, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
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 Phlx. On January 
6, 1993,\3\ June 19, 1993,\4\ and June 23, 1994,\5\ the Exchange filed 
Amendment Nos. 1, 2, and 3, respectively, to the proposed rule change. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\15 U.S.C. 78s(b)(1) (1982).
    \2\17 CFR 240.19b-4 (1993).
    \3\Amendment No. 1 is intended to clarify that an Exchange 
specialist may accept or refuse contingency orders for placement on 
the Exchange order book, except that Exchange floor official 
approval is required to refuse to accept a customer contingency 
order. See Letter from Gerald D. O'Connell, Vice President, Market 
Surveillance, Phlx, to Sharon Lawson, Assistant Director, Division 
of Market Regulation, Commission, dated January 5, 1993.
    \4\In Amendment No. 2, the Exchange notified the Commission of 
its intention to withdraw File No. SR-Phlx-92-37, because proposed 
changes to Phlx Rule 1066(c) contained therein, which would clarify 
the definitions of stop-limit and stop (stop-loss) orders and add 
definitions of all-or-none, opening-only-market, market-on-close, 
and cancel-replacement orders, would have duplicated the changes 
proposed by the Exchange in this File No. SR-Phlx-92-03. See 
Securities Exchange Act Release No. 32380 (May 28, 1993), 58 FR 
31765 (June 4, 1993). Also in Amendment No. 2, the Exchange proposed 
that Exchange specialists be permitted to accept spread, straddle, 
and combination orders, in addition to contingency orders, without 
the prior approval of an Exchange floor official. Amendment No. 2 
added that Exchange specialists would not be permitted to refuse to 
accept customer contingency, spread, straddle, or combination orders 
without the prior approval of two Exchange floor officials. See 
Letter from Gerald D. O'Connell, Vice President, Market 
Surveillance, Phlx, to Michael Walinskas, Staff Attorney, Division 
of Market Regulation, Commission, dated June 17, 1993.
    \5\In Amendment No. 3, the Exchange deleted from its proposal 
its request that Exchange specialists be permitted to accept spread, 
straddle, and/or combination orders without the prior approval of an 
Exchange floor official. See Letter from Gerald D. O'Connell, First 
Vice President, Phlx, to Michael Walinskas, Branch Chief, Options 
Regulation, Division of Market Regulation, Commission, dated June 
23, 1994.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Phlx Options Floor Procedure 
Advice (``OFPA'') A-2. In connection with the changes proposed to OFPA 
A-2, the Exchange proposes to amend Phlx Rule 1066 (``Rule 1066''). The 
text of the proposed rule change is available at the Office of the 
Secretary, the Phlx, and at the Commission.

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 Exchange 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

    The proposed rule change to existing Exchange OFPA A-2 relates to 
the acceptance of contingency orders by Exchange specialists 
(``Specialists''). The changes to part (ii) of OFPA A-2 would permit 
Specialists to accept contingency orders currently forwarded through 
the Automated Options Market System (also known as ``AUTOM'') without 
the requirement of approval by an Exchange floor official (``Floor 
Official''). Such contingency orders would include those currently set 
forth in Rule 1066, as well as additional types of contingency orders 
that the Exchange is proposing to add to those currently set forth in 
Rule 1066. The Exchange also is proposing to make changes to the fine 
schedule for OFPA A-2.
    Currently, a Specialist is prohibited by OFPA A-2 from accepting 
contingency orders, other than stop (stop-loss) and stop-limit orders, 
without the express approval of a Floor Official.\6\ The proposed 
changes would make permissible the acceptance of contingency orders by 
Specialists without the approval of a Floor Official. The change would 
extend this allowance beyond the currently permitted acceptance of stop 
(stop-loss) and stop-limit orders to include contingency orders as 
defined as such in paragraph (c) of Rule 1066, and will apply to both 
customer and broker-dealer accounts. Furthermore, a Specialist would be 
able to refuse to accept contingency orders, but may only refuse to 
accept contingency orders from customer accounts upon the prior 
approval of two Floor Officials.
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    \6\In addition, a Specialist may not accept option orders 
consisting of two or more option series (i.e., spread, straddle, 
and/or combination orders) without a Floor Official's approval.
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    Accordingly, the Exchange is proposing that new subparagraphs 
(c)(5)-(8) be added to Rule 1066, which sets forth types of orders. The 
new text would expand the existing list of types of contingency orders 
and specifically define each contingency order permitted. Included 
would be the following: all-or-none orders, opening-only-market orders, 
market-on-close orders, and cancel-replacement orders. The Exchange 
believes that these definitions will ensure standardization on the 
floor with respect to the handling and execution of these orders. 
Changes to the fine schedule for OFPA A-2 provide for increased 
penalties for an infraction of those guidelines applicable to 
Specialists.
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act in general, and with Section 6(b)(5)\7\ in 
particular, in that it is designed to promote just and equitable 
principles of trade.
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    \7\15 U.S.C. 78f(b)(5) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx 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 solicited or received with respect to 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 such 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, D.C. 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 in the 
commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC. Copies of such filing also will be available for 
inspection and copying at the principal office of the Phlx. All 
submissions should refer to File No. SR-Phlx-92-03 and should be 
submitted by July 22, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\17 CFR 200.30-3(a)(12) (1993).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-16009 Filed 6-30-94; 8:45 am]
BILLING CODE 8010-01-M