[Federal Register Volume 64, Number 20 (Monday, February 1, 1999)]
[Notices]
[Pages 4921-4922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2249]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40963; File No. SR-Phlx-98-42]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving Proposed Rule Change Increasing Maximum OTX AUTO-X 
Order Size Eligibility

January 22, 1999.

I. Introduction

    On October 6, 1998, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend Phlx Rule 1080 
increasing to 100 contracts the maximum order size for eligibility for 
public customer market and marketable limit orders for OTC Prime Index 
(``OTX'') options contracts to be executed on AUTO-X, the automatic 
execution feature of the Phlx's Automated Options Market (``AUTOM'') 
system. Notice of the proposed rule change appeared in the Federal 
Register on December 23, 1998.\3\ The Commission received no comments 
on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 40802 (December 17, 
1998), 63 FR 71183 (December 23, 1998).
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II. Description of the Proposal

    The Exchange proposed to amend Phlx Rule 1080 to increase the 
maximum order size for eligibility for public customer market and 
marketable limit orders for OTC \4\ options contracts to be executed on 
AUTO-X. AUTO-X is the automatic execution feature of AUTOM, the Phlx's 
electronic order routing, delivery, and reporting system for options. 
Orders are routed from member firms directly to the appropriate 
specialist on the Phlx's trading floor. Certain orders are eligible for 
AUTOM's automatic execution feature, AUTO-X. These AUTO-X orders are 
automatically executed at the disseminated quotation price on the 
Exchange and reported to the originating firm. Those orders not 
eligible for AUTO-X are manually handled by the specialist. The Phlx 
proposed to increase the maximum order size eligible for AUTO-X from 50 
to 100 contracts.
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    \4\ The OTC Prime Index is composed of the fifteen stocks which 
had the largest trading volume on the Nasdaq during the preceding 
year. See Securities Exchange Act Release No. 40058 (June 2, 1998), 
63 FR 31543 (June 9, 1998).
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III. Discussion

    After careful review, 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.\5\ 
The Commission believes the proposal is consistent with the 
requirements of Sections 6 and 11A of the Act \6\ in general, and in 
particular, with Sections 6(b)(5) and 11A(a)(1)(C)(i) of the Act.\7\ 
The Commission notes that the development and implementation to date of 
the AUTOM system has provided for more efficient handling and reporting 
or orders in PHLX equity and index options through the use of new data 
processing and communications techniques, thereby improving order 
processing and turnaround time. At this time, the Commission consents 
to extending the benefits available through the use of an automated 
system to larger-size customer OTX options orders of up to 100 
contracts.
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    \5\ In approving this rule, the Commission has considered the 
proposed rule's impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f and 78k-1.
    \7\ 15 U.S.C. 78f(b)(5) and 78k-1(a)(1)(C)(i).
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    Public customers may benefit from the proposal because public 
customer orders for up to 100 OTX option contracts may be executed 
automatically and guaranteed by the specialist at the displayed market 
quote. Additionally, public customers will have the benefit of 
receiving immediate executions and nearly instantaneous confirmations 
for orders of up to 100 contracts. The Commission also believes, based 
on representations by the Exchange, that expanding the order 
eligibility size of OTX AUTO-X options to 100 contracts will not expose 
the Phlx's AUTOM system to risk of failure or operational break-down. 
The Commission believes that the proposed rule change is consistent 
with section 6(b)(5) of the Act, in that it is designed to promote just 
and equitable principles of trade and to facilitate transactions in 
securities, as well as to protect investors and the public interest, by 
extending the benefits of AUTO-X to a larger number of customer orders. 
Further, the proposal is consistent with Section 11A(a)(1)(C)(i) of the 
Act because increasing the maximum OTX option order size eligible for 
automatic execution should provide for more efficient handling and 
reporting of

[[Page 4922]]

orders, thereby promoting the economically efficient execution of 
transactions.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-PHLX-98-42) is approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-2249 Filed 1-29-99; 8:45 am]
BILLING CODE 8010-01-M