[Federal Register Volume 60, Number 213 (Friday, November 3, 1995)]
[Notices]
[Pages 55874-55875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27277]
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SECURITIES AND EXCHANGE COMMISSION
[ Release No. 34-36429; File No. SR-PHLX-95-35]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by the Philadelphia Stock Exchange, Inc., Relating to the
Routing and Delivery of Broker-Dealer Orders in USTOP 100 Index Options
Through the Automated Options Market System
October 27, 1995.
On May 22, 1995, the Philadelphia Stock Exchange, Inc. (``PHLX'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposal to amend its rules to allow the orders of
PHLX member and non-member broker-dealers in USTOP 100 Index (``TPX'')
options to be routed and delivered through the Exchange's Automated
Options Market (``AUTOM'') system and executed manually. The broker-
dealer TPX option orders will not be eligible for AUTO-X, the automatic
execution feature of AUTOM.
\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19b-4 (1994).
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Notice of the proposal appeared in the Federal Register on July 11,
1995.\3\ No comments were received on the proposed rule change.\4\
\3\See Securities Exchange Act Release No. 35925 (June 30,
1995), 60 FR 35771.
\4\On September 26, 1995, the PHLX represented that the
Exchange's AUTOM system has sufficient capacity to accommodate the
additional message traffic that will result from routing broker-
dealer TPX orders through AUTOM. See Letter from William H. Morgan,
Vice President, Trading Systems, PHLX, to Michael Walinskas, Office
of Market Supervision, Commission, dated September 26, 1995
(``September 26 Letter'').
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Currently, only public customer orders for up to 500 options
contracts are eligible for AUTOM\5\ and public customer orders for up
to 25 contracts, in general, are eligible for AUTO-X,\6\ the automatic
execution feature of AUTOM.\7\ AUTOM, which has operated on a pilot
basis since 1988 and was most recently extended through December 31,
1995,\8\ is an on-line system that allows electronic Delivery of
options orders from member firms directly to the appropriate specialist
on the Exchange's trading floor. AUTO-X orders are executed
automatically at the disseminated quotation price on the Exchange and
reported to the originating firm. Orders that are not eligible for
AUTO-X are handled manually by the specialist.
\5\See Securities Exchange Act Release No. 35782 (May 30, 1995),
60 FR 30136 (File No. SR-PHLX-95-30).
\6\Recently, the Commission approved a proposal increasing the
maximum number of public customer orders in USTOP 100 Index options
that are eligible for AUTO-X from 25 to 50 contracts. See Securities
Exchange Act Release No. 35781 (May 30, 1995) (order approving File
No. SR-PHLX-95-29).
\7\The Commission has approved a PHLX proposal to codify the use
of AUTOM and AUTO-X for index options. See Securities Exchange Act
Release No. 34920 (October 31, 1994), 59 FR 5510 (November 7, 1994)
(order approving File No. SR-PHLX-94-40). In addition, the
Commission has approved a PHLX proposal to codify the Exchange's
practice of accepting certain orders for AUTOM and AUTO-X. See
Securities Exchange Act Release No. 35601 (April 13, 1995), 60 FR
19616 (April 19, 1995) (order approving File No. SR-PHLX-95-18).
See Securities Exchange Act Release No. 35183 (December 30,
1994), 60 FR 2420 (January 9, 1995) (order approving File No. SR-
PHLX-94-41). See also Securities Exchange Act Release Nos. 25540
(March 31, 1988), 53 FR 11390 (order approving AUTOM on a pilot
basis); 25868 (June 30, 1988), 53 FR 25563 (order approving File No.
SR-PHLX-88-22, extending pilot through December 31, 1988); 26354
(December 13, 1988), 53 FR 51185 (order approving File No. SR-PHLX-
88-33, extending pilot program through June 30, 1989); 26522
(February 3, 1989), 54 FR 6465 (order approving File No. SR-PHLX-89-
1, extending pilot through December 31, 1989); 27599 (January 9,
1990), 55 FR 1751 (order approving File No. SR-PHLX-89-03, extending
pilot through June 30, 1990); 28625 (July 26, 1990), 55 FR 31274
(order approving File No. SR-PHLX-90-16, extending pilot through
December 31, 1990); 28978 (March 15, 1991), 56 FR 12050 (order
approving File No. SR-PHLX-90-34), extending pilot through December
31, 1991); 29662 (September 9, 1991), 56 FR 46816 (order approving
File No. SR-PHLX-91-31, permitting AUTO-X orders up to 20 contracts
in Duracell options only); 29782 (October 3, 1991), 56 FR 55146
(order approving File No. SR-PHLX-91-33, permitting AUTO-X for all
strike prices and expiration months); 29837 (October 18, 1991), 56
FR 36496 (order approving File No. SR-PHLX-90-03, extending pilot
through December 31, 1993); 32906 (September 15, 1993), 58 FR 15168
(order approving File No. SR-PHLX-92-38, permitting AUTO-X orders up
to 25 contracts in all options); and 33405 (December 30, 1993), 59
FR 790 (order approving File No. SR-PHLX-93-57, extending pilot
through December 31, 1994).
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The purpose of the proposal is to permit TPX orders for the
accounts of broker-dealers to be delivered through AUTOM. Although
broker-dealer TPX option orders will be delivered through AUTOM, they
will not be eligible for AUTO-X.
The PHLX believes that extending AUTOM to broker-dealer TPX option
orders will allow additional orders to benefit from AUTOM's prompt and
efficient electronic order delivery and reporting. This, in turn,
should add liquidity to the PHLX's marketplace for TPX options buy
encouraging broker-dealer orders who seek such automated order routing
treatment. As noted above, AUTO-X will not be available for broker-
dealer TPX Orders; all such broker-dealer TPX orders will be handled
manually by the specialist.
The PHLX believes that the proposal is consistent with Section 6(b)
of the Act, in general, and, in particular, with Section 6(b)(5), in
that it is designed to promote just and equitable principles of trade
and to protect investors and the public interest.
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 Sections 6 and 11A.\9\ Specifically,
the Commission believes that allowing broker-dealers to use AUTOM for
TPX options orders will facilitate the efficient handling and reporting
of broker-dealer orders in TPX options, thereby improving TPX order
processing and turnaround time. In addition, by providing increased
order routing efficiencies for broker-dealer TPX orders, the proposal
may help to attract broker-dealer TPX orders, and thus help to improve
the depth and liquidity of the market for TPX options.
\9\15 U.S.C. 78f and 78k-1 (1988).
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Under the proposal, broker-dealer TPX orders will not be eligible
for AUTO-X; thus, only public customer orders will continue to receive
the benefits of AUTO-X, including immediate executions at the displayed
market quote and nearly instantaneous confirmations. The Commission
notes that limiting AUTO-X to public customer orders is consistent with
the Exchange's current practice.
In addition, based upon representations by the PHLX, the Commission
believes that the AUTOM system has sufficient capacity to handle
broker-dealer TPX orders and, therefore, that the proposal will not
expose the PHLX's options markets to the risk of failure or operational
break-down.\10\
\10\See September 26 Letter, supra note 4.
[[Page 55875]]
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It Is Therefore Ordered, pursuant to section 19(b)(2) of the
Act,.\11\ that the proposed rule change (SR-PHLX-95-35) is approved.
\11\15 U.S.C. 78s(b)(2) (1982).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\12\
\12\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27277 Filed 11-2-95; 8:45 am]
BILLING CODE 8010-01-M