[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65364-65365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30763]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36582; File No. SR-PHLX-95-78]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval to a Proposed Rule Change by the
Philadelphia Stock Exchange, Inc., Relating to an Extension of the
Automated Options Market Pilot Program
December 13, 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 December
1, 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 and II below, which Items have been prepared by the self-
regulatory organization. The Commission is approving this proposal on
an accelerated basis.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The PHLX proposes to extend the Exchange's Automated Options Market
(``AUTOM'') system for a one year period ending December 31, 1996.
The text of the proposal 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 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
AUTOM, which as operated on a pilot basis since 1988 and was most
recently extended through December 31, 1995,\1\ is the PHLX's
electronic order routing, delivery, execution and reporting system for
equity and index options. AUTOM is an online system that allows
electronic delivery of options orders from member firms directly to the
appropriate specialist on the Exchange's trading floor.
\1\ See Securities Exchange Act Release No. 35183 (December 30,
1994), 60 FR 2420 (January 9, 1995) (order approving File No. SR-
PHLX-94-41).
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Certain orders are eligible for AUTOM's automatic execution
feature, AUTO-X, which was approved as part of the AUTOM pilot program
in 1990.\2\ AUTO-X orders are executed automatically at the
disseminated quotation price on the Exchange and reported to the
Options Price Reporting Authority (``OPRA'') as well as the originating
firm. Orders that are not eligible for AUTO-X are handled manually by
the specialist and, upon execution of the order, are inputted into
exchange systems for reporting to OPRA and the delivering firm.
\2\ See Securities Exchange Act Release No. 27599 (January 9,
1990), 55 FR 1751 (January 18, 1990) (order approving File No. SR-
PHLX-89-03).
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Originally, the AUTOM pilot program was approved by the Commission
for market orders of up to five contracts for 12 PHLX near-month equity
options.\3\ Since that time, AUTOM has been extended and amended
several times.\4\
\3\ See Securities Exchange Act Release No. 25540 (March 31,
1988), 53 FR 11390 (April 6, 1988).
\4\ See Securities Exchange Act Release No. 35183, supra note 1.
See also Securities Exchange Act Release Nos. 25540 (March 31,
1988), 53 FR 11390 (April 6, 1988) (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); 29837 (October 18, 1991), 56 FR 36496 (order approving
File No. SR-PHLX-90-03, extending pilot through December 31, 1993);
and 33405 (December 30, 1993), 59 FR 790 (order approving File No.
SR-PHLX-93-57, extending pilot through December 31, 1994); 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); 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); 34920 (October 31, 1994), 59 FR 55510 (November
7, 1994) (File No. SR-PHLX-94-40, codifying use of AUTOM for index
options); 35601 (April 13, 1995), 60 FR 19616 (File No. SR-PHLX-95-
18, codifying the use of AUTOM for certain order types); 35681 (May
30, 1995), 60 FR 30131 (June 7, 1995) (File No. SR-PHLX-95-29,
increasing AUTO-X for USTOP 100 Index (``TPX'') options to 50
contracts); 35782 (May 30, 1995), 60 FR 30136 (June 7, 1995) (File
No. SR-PHLX-95-30, increasing the maximum AUTOM order size from 100
to 500 contracts); 36429 (October 27, 1995), 60 FR 55874 (November
3, 1995) (File No. SR-PHLX-95-35, allowing broker-dealer TPX option
orders to be routed through AUTOM); and 36467 (November 8, 1995), 60
FR 57615 (November 16, 1995) (order approving File No. SR-PHLX-95-
33, limiting AUTO-X for National Over-the-Counter Index options to
series where the bid is $10 or less).
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The purpose of the proposed rule change is to extend the AUTOM
pilot program for a one-year period ending December 31, 1996. The PHLX
believes that this extension of the pilot program should provide the
Exchange with additional time to study the effectiveness of AUTOM prior
to permanent approval. During this time, the Exchange intends to
monitor the implementation of certain enhancements to AUTOM and to
draft an Exchange rule codifying the entire pilot program.
Generally, the Exchange believes that, since the date of the last
Commission order extending the AUTOM pilot program, AUTOM has
functioned properly and efficiently, without any material problems
reported by PHLX members or AUTOM users, and without significant
malfunctions or operational failures.
AUTOM provides small customer option orders with the benefits of
electronic delivery and reporting, while AUTO-X provides automatic
executions as well. Accordingly, the Exchange believes that AUTOM
increases the speed and efficiency of order delivery, execution and
reporting. This, in turn, promotes both liquidity and fair and orderly
markets. For these reasons, the PHLX believes that extending the AUTOM
pilot program for a one-year period is consistent with Section 6 of the
Act, in general, and, in particular, with Section 6(b)(5), in that the
proposal is designed to promote just and equitable principles of trade,
and to protect investors and the public interest. In addition, the
Exchange believes that the proposed rule change is consistent with
Section 11A(a)(1)(B) of the Act in
[[Page 65365]]
that AUTOM is intended to improve, through the use of new data
processing and communications techniques, the efficiency with which
transactions in PHLX equity and index options are executed. Further,
the Exchange believes that AUTOM fosters competition among options
exchanges, which have similar systems in place.
(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. Commission's Findings and Order Granting Accelerated Approval
of Proposed Rule Change
The Exchange has requested that the proposed rule change be given
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
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.\5\ Specifically,
the Commission continues to believe that the development and
implementation of the AUTOM system provides for more efficient handling
and reporting of orders in PHLX options through the use of new data
processing and communications techniques, thereby improving order
processing and turnaround time. The Commission does not object to an
extension of the pilot program until December 31, 1996, in response to
the PHLX's assertion that continuation of the pilot will provide the
Exchange with a better opportunity to study its operation and
effectiveness prior to permanent approval of the program.\6\ The
Commission notes further that the Exchange has represented that from
January 1995 until the present, AUTOM has functioned properly and
efficiently, that no material problems have been reported by PHLX
members or AUTOM users, and that AUTOM has not had significant
malfunctions or operational failures.
\5\ 15 U.S.C. 78f and 78k-1 (1988).
\6\ The PHLX will submit a request for permanent approval of the
program no later than November 1, 1996. This request will be
accompanied by a report covering the period between Janaury 1, 1996,
and June 30, 1996, that will include: (1) a description of the
benefits provided by AUTOM; (2) the degree of AUTOM usage, including
the number and size of the orders routed through AUTOM and the
number and size of the orders executed automatically through the
AUTO-X system; (3) the system capacity of AUTOM and AUTO-X; and (4)
any problems the Exchange has encountered with the routing and
execution features.
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register in order to permit the
PHLX to continue the AUTOM pilot program on an uninterrupted basis.
Specifically, the Commission believes that the PHLX's proposal to
extend the AUTOM pilot program does not raise any new issues since it
merely extends the pilot program as it is currently operating. Further,
the Commission believes that the pilot is beneficial in maintaining the
quality and efficiency of the PHLX's market. In addition, the
Commission notes that there have been no adverse comments concerning
the pilot program since its implemention. Accordingly, the Commission
believes that granting accelerated approval of the proposed rule change
is appropriate and consistent with Sections 6 and 11A of the Act.
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, N.W., 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 at the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 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 January 8, 1996.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-PHLX-95-78) is approved
through December 31, 1996.
\7\ 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.\8\
\8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-30763 Filed 12-18-95; 8:45 am]
BILLING CODE 8010-01-M