[Federal Register Volume 64, Number 83 (Friday, April 30, 1999)]
[Notices]
[Pages 23378-23379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10805]


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SECURITIES AND EXCHANGED COMMISSION

[Release No. 34-41323; File No. SR-PHLX-99-13]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to an Extension of a Pilot Program for a System 
Enhancement to the X.Station Electronic Book on the Options Floor

April 22, 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 April 22, 1999,\3\ the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule changed from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The filing was submitted April 14, 1999, however it was not 
accurate. Therefore, the Phlx consented to changes to the filing to 
make it accurate on April 22, 1999.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule

    Phlx proposes to extend its pilot program for a system enhancement 
to the X.Station electronic book on the options floor for an additional 
six months, until October 23, 1999.

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

    In its filing with the Commission, Phlx 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. Phlx 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

1. Purpose
    On May 7, 1998, the Commission approved, on a pilot basis, the 
implementation of the X.Station enhancement to the electronic book on 
the options floor of the Phlx.\4\ The pilot was extended for an 
additional six months, until April 23, 1999.\5\ As described in Rule 
1080, Commentary .02, the electronic order book is automated mechanism 
for specialists to hold and display orders based on price/priority 
time. The X.Station \6\ provides certain improvements such as expedited 
non-AUTO-X order execution and expedited cancel replacement processing.
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    \4\ Securities Exchange Act Release No. 39972 (May 7, 1998), 63 
FR 26666 (May 13, 1998).
    \5\ Securities Exchange Act Release No. 40625 (November 2, 
1998), 63 FR 60435 (November 9, 1998).
    \6\ The X.Station has been deployed floor wide.
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    AUTO-X is the automatic execution feature of the Automated Options 
Market (``AUTOM'') System, the electronic order delivery and routing 
system for options orders. Previously, AUTO-X orders were executed 
against a ``shadow account'' for which the specialist was ultimately 
responsible. The execution was immediately reported back to the sending 
firm, and then, specialist manually input the contra-side interest 
representing the booked order that became due as a result of the AUTO-X 
trade.
    At this time, the Exchange proposes to extend the X.Station pilot 
for an additional six months, until October 23, 1999. The pilot program 
is a system enhancement to the X.Station electronic book that match 
incoming AUTO-X orders with booked orders. The enhancement allows the 
specialist to match two participants directly, without the specialist 
participating in the trade, by dropping the order to manual status. The 
match is not automatic, as the specialist must ensure that crowd 
participation under current parity/priority rules in not due before 
executing the trade; thus, the specialist must ``select'' the orders to 
execute the trade. Because the AUTO-X order has dropped to manual, the 
sending firm will not receive and execution report until the specialist 
selects and executes the trade.
    The enhancement affords specialists relief from the manual burden 
of inserting trade participant and clearing information by writing an 
order ticket for the booked order. An extension of the proposed 
enhancement should continue to reduce the amount of paper processed on 
the options floor; this in turn, should continue to reduce handling and 
processing time, including the likelihood of errors, thereby 
facilitating more prompt and accurate trade reporting.

[[Page 23379]]

2. Statutory Basis
    Phlx believes that the proposed rule change is consistent with 
Section 6(b) \7\ of the Act in general and furthers the objectives of 
Section 6(b)(5) \8\ in particular, because it fosters cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, as well as to 
protect investors and the public interest by enhancing efficiency 
through automation in the options market.\9\
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ In reviewing the proposed rule change, the Commission 
considered its impact on efficiency, competition, and capital 
formation. 15 U.S.C. 78c(f).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(5) thereunder.\11\ The 
proposal effects a change in an existing order-entry or trading system 
of a self-regulatory organization that (i) does not significantly 
affect the protection of investors or the public interest; (ii) does 
not impose any significant burden on competition; and (iii) does not 
have the effect of limiting the access to or availability of the 
system. At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 20549-0609. 
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 Room. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Phlx. All submissions should refer to File No. SR-PHLX-99-13 and should 
be submitted by May 21, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-10805 Filed 4-29-99; 8:45 am]
BILLING CODE 8010-01-M