[Federal Register Volume 64, Number 226 (Wednesday, November 24, 1999)]
[Notices]
[Pages 66223-66224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30585]



[[Page 66223]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42151; File No. SR-PHLX-99-38]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Philadelphia Stock Exchange, 
Inc. Relating to the Removal of Certain Printers From the Equity Floor

November 17, 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 September 10, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change. The Exchange submitted 
Amendment No. 1 to its proposal on October 22, 1999.\3\ The proposed 
rule change, as amended, is 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, 
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange designated the proposal as 
a section 19(b)(2) filing, revised its proposed language under 
Advice E-5 to better reflect its rules, and clarified that the 
amendment to Advice E-5 merely reflects its current rules. See 
Letter from Cynthia Hoekstra, Counsel, Phlx, to Nancy Sanow, Senior 
Special Counsel, Division of Market Regulation, Commission, dated 
October 21, 1999 (``Amendment No. 1'').
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to amend Equity Floor Procedure Advice E-5 
(``Advice E-5''), Clocked Tickets; Phlx Rule 206, Written Orders-Day 
Orders; and Phlx Rule 216, Records to be kept. The amendments are 
necessary to allow for the removal from the Equity Floor of certain 
printers that generate PACE-delivered order tickets because the 
printers will not be Year 2000 compliant.\4\ Therefore, the amended 
Advice E-5 would eliminate the requirement that specialists record the 
time of execution of PACE-delivered orders received on the floor from 
these printers. Corresponding amendments will be made to Phlx Rules 206 
and 216 to address similar issues.
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    \4\ PACE is the Exchange's automated order routing and execution 
system on the equity trading floor.
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    In addition, the proposed rule change to Advice E-5 would require 
specialists to record the time of receipt of hand-held orders to be 
placed on the specialist's book on the front of the ticket in 
accordance with Phlx Rule 206.\5\ Fines for violations of Advice E-5, 
which have not been updated for ten years, are also being increased to 
better reflect the seriousness of the violation.\6\ Thus the Exchange 
is also amending its minor rule plan.
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    \5\ See Amendment No. 1, supra note 3.
    \6\ The Phlx's minor rule violation enforcement and reporting 
plan, codified in Phlx Rule 970, contains floor procedure advices 
with accompanying fine schedules.
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    The text of the proposed rule language follows. New text is 
italicized and deleted text is bracketed.
E-5  Clocked Tickets
    Floor brokers are responsible for recording the time of receipt on 
the front of the ticket for each order received on the floor and the 
time of execution on the reverse side of the ticket for each order they 
are representing in the crowd at the time of execution.
    Specialists are responsible for recording time of receipt of hand-
held (non-PACE delivered) orders to be placed on the Specialists's book 
on the front of the ticket, and for recording the time of execution on 
the reverse side of the ticket for each order executed off their book 
for all hand-held (non-PACE delivered) orders.
FINE SCHEDULE (Implemented on a one year running calendar basis)

E-5

1st Occurrence $[50.00] 100.00
2nd Occurrence $[100.00] 250.00
3rd Occurrence $[200.00] 500.00
4th and thereunder Sanction is discretionary with Business Conduct 
Committee

    All hand-held (non-PACE-delivered) orders given to a specialist 
shall be in writing and shall be timed by him when received and filed 
in his book. They shall be good for the day only unless otherwise 
marked.

Rule 216

    Every specialist shall keep a legible record of all orders placed 
with him in the securities in which he is registered or trading 
securities pursuant to Rule 233 as a specialist (except PACE-delivered 
orders for which no written record is generated) and all of all 
executions, modifications and cancellations of (such) orders, and shall 
preserve such records and all memoranda relating thereto in accordance 
with Regulation 240.17a-4 of the Securities and Exchange Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
the 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

    The purpose of the amendments to Advice E-5 and Phlx Rules 206 and 
216 is to allow for the removal of the Designated Automatic Routing to 
Terminal System (``DARTS'') printers from the Equity Floor without 
causing the specialists and floor brokers to be in violation of Advice 
E-5 or Phlx Rules 206 and 216.\7\
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    \7\ This proposal affects PACE order tickets only, not telephone 
orders/manual tickets or production of hard copy reports.
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    Currently orders sent to the equity floor through the PACE System 
generate a hard copy ticket, which is printed on a DARTS printer. These 
tickets provide hard copy records of time of receipt of the order. In 
addition, specialists stamp the time of execution of the order on the 
reverse side of the ticket on all manual market and limit orders. 
However, the system that supports the DARTS printers is not, and cannot 
become, Year 2000 compliant. Therefore, the DARTS printers will be 
removed from the Equity Floor. The information that is produced by the 
DARTS printer will be maintained electronically for the appropriate 
time periods mandated by the books and records requirements of the 
Commission.
    Advice E-5 requires floor brokers to record, by time stamp, the 
time of receipt of the order on the front of the ticket and the time of 
execution of the order on the reverse side of the ticket. Specialists 
also are required to record the time of execution of orders executed 
off the specialist's book. In addition, Phlx Rule 206 requires, in 
part, that all orders given to a specialist be in writing and timed by 
him when received. Phlx Rule 216 requires, in part, that every 
specialist keep a record of all orders placed with him and all 
executions of such orders. In addition, Phlx Rule 216

[[Page 66224]]

requires the specialist to preserve such records in accordance with 
Rule 17a-4.
    With no hard copy tickets recording order receipt and execution 
time data, floor brokers and specialists on the Equity Floor could be 
in violation of Advice E-5 and Rule 206 each time an order is received 
and executed on PACE. Without the DARTS printer tickets, specialists 
would be in violation of Rule 216 if they did not retain the DARTS 
printer tickets. Therefore, as a matter of practicality, it is 
necessary to eliminate the hard copy recording and document maintenance 
requirements for trades for which no hard copy ticket is generated. As 
stated above, the information that is produced by the DARTS printer 
will be maintained electronically for the appropriate time periods 
mandated by the books and requirements of the Commission. The removal 
of the hard copy tickets will improve trade-processing efficiencies and 
reduce the amount of paper that is used on the trading floor.
    In addition, the proposed change to Advice E-5 would require 
specialists to record the time of receipt of hand-held orders to be 
placed on the specialist's book on the front of the ticket in 
accordance with Phlx Rule 206.\8\ The fine schedule for violations of 
Advice E-5 has not been updated for ten years and will be increased to 
better reflect the seriousness of the violation.
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    \8\ See Amendment No. 1, supra note 3.
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Statutory Basis
    For these reasons, the Exchange believes that the proposal to amend 
Advice E-5 and Phlx Rules 206 and 216 is consistent with Section 6 of 
the Act,\9\ in general, and with Section 6(b)(5),\10\ in particular, in 
that it is designed to remove impediments to and perfect the mechanism 
of a free and open market. In addition, these changes will eliminate 
equipment that will not be Year 2000 compliant, thereby protecting 
investors and the public interest.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule 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

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

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 self-regulatory organization 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 proposed rule 
change, as amended, 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 in the Commission's Public Reference Room in Washington, DC. 
Copies of such filing will also be available for inspection and copying 
at the principal office of the Exchange. All submissions should refer 
to File No. SR-Phlx-99-38 and should be submitted by December 15, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).

[FR Doc. 99-30585 Filed 11-23-99; 8:45 am]
BILLING CODE 8010-01-M