[Federal Register Volume 60, Number 218 (Monday, November 13, 1995)]
[Notices]
[Pages 57031-57032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27881]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36456; File No. SR-Phlx-95-67]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 to the Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc., Relating to Increasing the Maximum 
Size of Placer Dome Options Orders Eligible for Automatic Execution

November 3, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on 
September 22, 1995, 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 self-
regulatory organization.\1\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.

    \1\ On October 30, 1995, the Phlx amended its proposal to 
request that the proposal be implemented on a six-month pilot basis. 
See Letter from Gerald D. O'Connell, First Vice President, Market 
Regulation and Trading Operations, Phlx, to Michael Walinskas, 
Branch Chief, Office of Market Supervision, Division of Market 
Regulation, Commission, dated October 30, 1995 (``Amendment No. 
1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Generally, public customer market and marketable limit orders for 
up to 25 option contracts are eligible for execution through the 
automatic execution (``AUTO-X'') feature of the Phlx's Automated 
Options Market (``AUTOM'') system.\2\ The Phlx proposes to implement a 
six-month pilot program that increases the maximum AUTO-X order size 
eligibility for public customer market and marketable limit orders for 
Placer Dome, Inc. (``PDG'') options from 25 contracts to 50 contracts.

    \2\ For USTOP 100 Index (``TPX'') options, public customer 
market and marketable limit orders for up to 50 contracts are 
eligible for AUTO-X. See Securities Exchange Act Release No. 35781 
(May 30, 1995), 60 FR 30131 (June 7, 1995) (File No. SR-Phlx-95-29).
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    The text of the proposed rule change is available at the Office of 
the Secretary, 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 self-regulatory organization 
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 self-regulatory organization 
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 purpose of the proposal is to implement a six-month pilot 
program that increases the maximum AUTO-X order size eligibility for 
PDG options from 25 to 50 contracts.\3\ The Phlx has traded PDG options 
since 1987. According to the Exchange, PDG, which is traded on the New 
York Stocks Exchange, has moved in price from 18\3/8\ in January 1995 
to 27\5/8\ in September 1995. This, in turn, has caused increased 
volatility in the overlying options. In addition, the Phlx notes that 
PDG options have consistently been one of the most active equity 
options traded on the Phlx. According to the Phlx, the daily trading 
volume in PDG options has averaged 1,641 contracts per day throughout 
1995, and open interest was 69,425 contracts on September 8, 1995.

    \3\ See Amendment No. 1, supra note 1.
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    Because of this recent activity, the Phlx proposes to implement a 
six-month pilot program allowing up to 50 PDG contracts to be executed 
automatically by AUTO-X. Generally, a maximum of 25 equity option 
contracts are eligible for AUTO-X, although USTOP 100 Index options are 
subject to a 50 contract AUTO-X maximum.\4\ In addition, the Phlx 
recently filed a proposal with the Commission to increase the maximum 
AUTO-X order size to 50 contracts for all equity and index options.\5\ 
Accordingly, the purpose of the proposal at hand is to afford expedited 
treatment to PDG options to provide a sample, which can be reviewed 
while consideration is given to File No. SR-Phlx-95-39.

    \4\ See Securities Exchange Act Release No. 35871, supra note 1.
    \5\ See File No. SR-Phlx-95-39.
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    The Phlx notes that the proposed 50 contracts for PDG options 
represents the maximum size of a permissible AUTO-X order in PDG 
options, which is determined by the specialist in PDG options. Under 
the 10-up rule,\6\ the maximum size of the Exchange's AUTO-X guarantee 
is 10 contracts.

    \6\ See Phlx Rule 1033(a), ``Size of Bid/Offer and 10-up 
Guarantee.''
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    AUTOM, which has operated on a pilot basis since 1988 and was most 
recently extended through December 31, 1995,\7\ is the Phlx's 
electronic order 

[[Page 57032]]
routing, delivery, execution and reporting system for equity and index 
options. AUTOM 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.

    \7\ See Securities and 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); 29837 (October 18, 1991), 56 FR 36496 
(order approving File No. SR-Phlx-91-33, increasing size of AUTO-X 
orders from 10 contracts to 20 contracts); 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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    Certain orders are eligible for AUTOM's automatic execution 
feature, AUTO-X.\8\ 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.

    \8\ Orders for up to 500 contracts are eligible for AUTOM and 
public customer orders for up to 25 contracts, in general, are 
eligible for AUTO-X. See Securities Exchange Act Release Nos. 35782 
(May 30, 1995), 60 FR 30136 (June 7, 1995) (order approving File No. 
SR-Phlx-95-30); and 32000 (March 15, 1993), 58 FR 15168 (March 19, 
1994) (order approving File No. SR-Phlx-92-38). As noted above, 
public customer orders for up to 50 contracts in TPX options are 
eligible for AUTO-X. See Securities Exchange Act Release No. 35781, 
supra note 1.
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    The Commission approved the use of AUTO-X as part of the AUTOM 
pilot program in 1990.\9\ In 1991, the Commission approved a Phlx 
proposal to extend AUTO-X to all equity options.\10\ As noted earlier, 
orders for up to 500 contracts are eligible for AUTOM and orders for up 
to 25 contracts, in general, are eligible for AUTO-X.

    \9\ See Securities Exchange Act Release No. 27599 (January 9, 
1990), 55 FR 1751 (January 18, 1990) (order approving File No. SR-
Phlx-89-03).
    \10\ See Securities Exchange Act Release No. 28978 (March 15, 
1991), 56 FR 12050 (March 21, 1991) (order approving File No. SR-
Phlx-90-34).
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    The Phlx believes that the proposed expanded AUTO-X parameter for 
PDG options should improve the AUTOM system by offering the benefits of 
AUTO-X, including prompt and efficient automatic executions at the 
displayed price, to additional customer orders. The Exchange states 
that the proposed AUTO-X increase for PDG options from a maximum of 25 
to 50 contracts is in line with prior changes. For examples, the Phlx 
notes that the Commission previously has approved an AUTO-X increase 
from 10 to 20 contracts.\11\ In addition, the Commission has previously 
approved the expansion of AUTO-X with respect to a specific equity 
option.\12\

    \11\ See Securities Exchange Act Release No. 29837, supra note 
5.
    \12\ See Securities Exchange Act Release No. 29662, supra note 5 
(permitting AUTO-X orders up to 20 contracts in Duracell options 
only).
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    The Exchange represents that the specialist unit currently assigned 
in PDG, which requested this change, presently is in compliance with 
Exchange financial requirements and possesses adequate capital to 
fulfill its proposed AUTO-X responsibilities respecting 50 contracts in 
PDG. In addition, the Exchange notes that although AUTO-X orders are by 
definition executed automatically, there are opportunities for price 
improvement in accordance with a post-execution price change. For 
example, in the event of an error in the displayed price, the AUTO-X 
price can be adjusted.
    The Exchange notes that the proposed expansion of the maximum AUTO-
X order size in PDG options should not impose significant burdens on 
the operation and capacity of the AUTOM system. Instead, the Phlx 
believes that the proposal may enhance AUTOM's effectiveness by 
increasing the number of orders eligible for automatic execution, 
thereby reducing manual processing.
    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 prevent fraudulent and manipulative acts and practices, as well 
as to protect investors and the public interest, by extending the 
benefits of AUTO-X to a larger number of customer orders.

(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 either solicited or received.

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 reason 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, DC 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 at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by December 4, 
1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27881 Filed 11-9-95; 8:45 am]
BILLING CODE 8010-01-M