[Federal Register Volume 64, Number 14 (Friday, January 22, 1999)]
[Notices]
[Pages 3581-3582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1397]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40936; File No. SR-Phlx-98-38]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc., Relating to the 
Assessment of a Fee on Persons Who Unsuccessfully Contest an Options 
Ruling Involving a Trading Dispute

January 12, 1999.
    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 August 26, 1998, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change. Several amendments were 
thereafter received.\3\ The proposed rule change, as amended, is 
described in Items I, II, and III below, which Items have been prepared 
primarily by Phlx. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ By letter dated August 31, 1998, the Exchange revised the 
effective date of its proposal. See letter from Linda S. Christie, 
Counsel, Phlx, to Mandy Cohen, Special Counsel, Division of Market 
Regulation (``Division''), Commission (``Amendment No. 1''). Next, 
the Exchange clarified that the fee only applied to frivolous 
appeals of option floor decisions and made conforming changes to 
Rule 124 and Options Floor Procedure Advice F-27. See letter from 
Nandita Yagnik, Attorney, Phlx, to Mandy Cohen, Special Counsel, 
Division, Commission, dated November 18, 1998 (``Amendment No. 2''). 
In its December 9, 1998 letter, the Exchange clarified that (a) the 
Options Committee approved the changes made by Amendment No. 2, and 
(b) the amendment dated November 18, 1998, is Amendment No. 2. In 
addition, the Phlx made minor technical changes to the rule 
language. See letter from Nandita Yagnik, Attorney, Phlx, to Mandy 
Cohen, Special Counsel, Division, Commission (``Amendment No. 3''). 
Finally, the Exchange made technical changes to its rule language 
and further clarified that the proposed rule change amends only 
Advice F-27 for options and not for equities. See letter from 
Nandita Yagnik, Attorney, Phlx, to Mandy Cohen, Special Counsel, 
Division, Commission, dated December 23, 1998 (``Amendment No. 4'').

---------------------------------------------------------------------------

[[Page 3582]]

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Phlx Rule 124 and Options Floor 
Procedure Advice F-27, Floor Official Rulings (``Advice F-27''), to 
assess a $250.00 fee on persons who unsuccessfully contest an options 
ruling imposed under Phlx Rule 124, upon a finding by a Rule 124(d) 
review panel (``Review Panel''), that the appeal is frivolous.\4\
---------------------------------------------------------------------------

    \4\ See Amendment No. 2, Supra note 3.
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.\5\
---------------------------------------------------------------------------

    \5\ The Commission has modified the text of the summaries 
prepared by the Exchange.
---------------------------------------------------------------------------

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Phlx Rule 124 and Advice F-27 codify procedures respecting Floor 
Officials and certain rulings issued by Floor Officials on the trading 
floor. The Exchange proposes to amend Phlx Rule 124 and Advice F-27 to 
assess a $250.00 fee on persons who frivoulsy contest an options ruling 
under Rule 124.\6\ The imposition of a fine is proposed due to the 
increased number of appeals filed by Exchange members who trade on the 
Phlx options floor. Floor Officials have expressed concern regarding 
appeals, and the Exchange believes that the possibility of paying a fee 
might discourage members from making frivolous appeals of floor 
rulings. The fee will only apply to the options floor, since trading 
disputes more frequently arise from the options floor than from the 
equity or foreign currency options floors.\7\ It should help Floor 
Officials resolve non-disciplinary trading situations promptly.\8\
---------------------------------------------------------------------------

    \6\ Pursuant to Rule 124(d), Option Floor Official rulings are 
reviewable by a minimum of three members of the Sub-Committee on 
Rules and Rulings, a sub-committee of the standing committee, which 
shall be empowered to review such rulings, or the Chairperson of the 
standing committee (or his designee) if three Sub-Committee members 
cannot be promptly convened. This constitutes a Review Panel for 
Floor Officials rulings. Floor Official rulings may be sustained, 
overturned or modified by a majority vote of the Review Panel 
members present. Decisions of the Review Panel will be considered 
final decisions of a standing floor committee and may be appealed to 
the Exchange's Board of Governors pursuant to Exchange By-Law 
Article XI. See Amendment No. 2, supra note 3.
    \7\ See Amendment No. 2, supra note 3.
    \8\ This proposal does not affect citations related to floor 
procedure advices, which are appealable under Rule 970, nor order 
and decorum violations, which are appealable under Rule 60.
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6 of the Act 
\9\ in general, and in particular, with Section 6(b)(5),\10\ in that it 
is designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices and remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system by discouraging unwarranted appeals and thereby providing 
swifter access to the appeals process. Additionally, the proposal is 
consistent with Section 6(b)(4) \11\ in that it provides for the 
equitable allocation of a reasonable fee among those persons who 
unsuccessfully contest an options ruling.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(v)(5).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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

    Written comments were neither 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 reasons for so finding or (ii) as to 
which the Phlx 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, including whether the foregoing is 
consistent with the Act. 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 in the Commission's 
Public Reference Section, 450 Fifth Street, NW, Washington, DC 20549. 
Copies of such filing will also be available for inspection and copying 
at the principal office of the Phlx. All submissions should refer to 
File No. SR-Phlx-98-38 and should be submitted by February 12, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland
Deputy Secretary.
[FR Doc. 99-1397 Filed 1-21-99 8:45 am]
BILLING CODE 8010-01-M