[Federal Register Volume 64, Number 161 (Friday, August 20, 1999)]
[Notices]
[Pages 45579-45580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21655]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41737; File No. SR-Phlx-99-25]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. to Allow the Options Committee to Adopt Policies 
Affecting Location of Members in the Trading Crowd on a Crowd-by-Crowd 
Basis

August 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 July 21, 1999, 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 
Exchange. 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.
---------------------------------------------------------------------------

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

    The Phlx proposes to adopt Commentary .17 to Phlx Rule 1014, 
Obligations and Restrictions Applicable to Specialists and Registered 
Options Traders, allowing the Options Committee to adopt policies 
affecting the location of members in the trading crowd on a crowd-by-
crowd basis in order to ensure fair and orderly markets. The text of 
the proposed Rule is provided below. The new language is italicized.
    Obligations and Restrictions Applicable to Specialists and 
Registered Options Traders Rule 1014
    Commentary .01-.16. No change.
    Commentary .17.
    In the interest of fair and orderly markets, the Options Committee 
may adopt policies affecting the location of members in the trading 
crowd on a crowd-by-crowd basis.
* * * * *

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 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.

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

1. Purpose
    According to the Exchange's By-laws, the Options Committee has the 
authority to make or recommend the adoption of, and administer such 
rules as it may deem necessary for the convenient and orderly 
transaction of business upon the equity and index options trading 
floor.\3\ The proposal will give the Options Committee express 
authority to adopt policies and implement those policies on an 
expedient basis to ensure convenient and orderly transaction of 
business upon the equity and index options trading floor. The Exchange 
also believes that this proposal provides the Options Committee and the 
trading crowd with flexibility to change member location policies in 
trading crowds to adapt to changing technological advances, which may 
call for locating members in specific areas or rethinking traditional 
arrangements.
---------------------------------------------------------------------------

    \3\ See Phlx By-law Article 10-19.
---------------------------------------------------------------------------

    The proposed rule will allow the Options Committee to adopt 
policies

[[Page 45580]]

regarding member location on a crowd-by-crowd basis, specific to the 
trading crowd in question. For example, the Options Committee may adopt 
a policy requiring floor brokers, for a specific series, to stand in 
the area where the AUTO-X \4\ screens for that series are located. 
Thus, under the proposed rule, the Options Committee may tailor a 
policy to specific market conditions and readdress the situation, 
periodically updating the policy where appropriate. The Exchange will 
give the members of the trading crowd and the options floor one day's 
notice of the Options Committee's decision prior to implementation of 
the policy in that particular trading crowd.\5\ The decision may be 
appealed to the Board of Governors pursuant to By-law Section 11-1.
---------------------------------------------------------------------------

    \4\ AUTO-X is a feature of AUTOM that automatically executes 
public customer market and marketable limit orders up to the number 
of contracts permitted by the Exchange for certain strike prices and 
expiration months in equity options and index options, unless the 
Options Committee determines otherwise. See Phlx Rule 1080.
    \5\ The Exchange will provide notice in the form of a memorandum 
to the trading floor, as well as by posting of a memorandum on an 
electronic bulletin board. Telephone conversation between Nandita 
Yagnik, Attorney, Phlx, and Joseph Morra, Attorney, Division of 
Market Regulation (``Division''), SEC, August 6, 1999. The Exchange 
notes that a specific policy adopted pursuant to this proposed 
provision would be reasonably and fairly implied by an existing 
rule, i.e., new Commentary .17 and therefore, would not be deemed to 
be a proposed rule change pursuant to Securities Exchange Act Rule 
19b-4(d).
---------------------------------------------------------------------------

    The Exchange believes that such a rule is necessary because changes 
in technology and space reconfigurations will continue to affect how 
business is conducted and where members in the trading crowds are 
situated. The Exchange also believes that adopting policies concerning 
members' personnel and the area accessing a trading crowd would be 
covered under the proposed rule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act and, in particular, with Section 6(b)(5) of 
the Act \6\ in that it promotes just and equitable principles of trade, 
facilitates transactions in securities, and removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system, and, in general, protects investors and the public interest by 
granting express authority to the Options Committee to adopt policies 
to regulate the location of members in the trading crowd to facilitate 
changes in technology and space reconfigurations occurring on the 
Options floor.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden of Competition

    The Exchange 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

    Because the foregoing rule change (1) does not significantly affect 
the protection of investors or the public interest; (2) does not impose 
any significant burden on competition; and (3) does not become 
operative for 30 days after the date of filing or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, provided that the Exchange has given 
the Commission written notice of its intent to file the proposed rule 
change at least five business days prior to the filing date of the 
proposed rule change, or such shorter time as designated by the 
Commission, it has become effective pursuant to Section 19(b)(3)(A) of 
the Act and Rule 19b-4(f)(6) thereunder. 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.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. 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 in the 
Commission's Public Reference Room. 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 number SR-Phlx-99-25, and 
should be submitted by September 10, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-21655 Filed 8-19-99; 8:45 am]
BILLING CODE 8010-01-M