[Federal Register Volume 65, Number 250 (Thursday, December 28, 2000)]
[Notices]
[Pages 82440-82441]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-33128]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43739; File No. SR-Phlx-00-94]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Prohibition 
of Harassment and Other Improper Behavior Because of Listing or 
Competitive Practices

December 19, 2000.
    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 November 13, 2000, 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 and II 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to add new Commentary .01 (``Prohibition Against 
Harassment'') to the Exchange's Rule 707 (``Just and Equitable 
Principles of Trade''), to prohibit members, member organizations, or 
persons associated with or employed by members or member organization 
from engaging in harassment and other improper behavior because of 
listing or competitive practices.
    Specifically, proposed new Commentary .01 to Rule 707 would state 
that it is conduct inconsistent with just and equitable principles of 
trade for any member, member organization, or person associated with or 
employed by a member or member organization to directly or indirectly 
threaten, harass, intimidate, refuse to deal with, or retaliate against 
any member, member organization, person associated with or employed by 
a member or member organization, or other market participant because 
such member, member organization, person associated with or employed by 
a member or member organization, or other market participant has: (i) 
Made a proposal to any exchange or other market to list or trade any 
option class; (ii) advocated or proposed to list or trade an option 
class on any exchange or other market; (iii) commenced making a market 
in or trading any option class on any exchange or other market; (iv) 
sought to increase the capacity of any options exchange or the options 
industry to disseminate quote or trade data; (v) sought to introduce 
new option products; or (vi) acted, or sought to act, competitively.

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
    The purpose of the proposed rule change is to codify the Exchange's 
existing policy prohibiting harassment and intimidation on its trading 
floors and certain other similar improper trading practices. While the 
Exchange has no rule that specifically prohibits conduct such as 
harassment or intimidation because of listing or competitive practices, 
the Phlx has long taken the position that harassing or intimidating 
behavior on its trading floors is inconsistent with just and equitable 
principles of trade, in violation of Exchange Rule 707 and is 
detrimental to the interest and welfare of the Exchange, in violation 
of Exchange Rule 708. Accordingly, members, member organizations or 
persons associated with or employed by members or member organizations 
engaging in such activities are subject to disciplinary action by the 
Phlx. In fact, the Exchange has successfully brought several 
disciplinary actions, in furtherance of its obligations as a self-
regulatory organization, involving violations of Exchange Rules 707 and 
708.
    While harassing or intimidating behavior on the trading floors is 
already prohibited, and the Phlx will continue to bring disciplinary 
actions, as appropriate, against members pursuant to Exchange Rules 707 
and 708, the Exchange has determined to codify, in Commentary .01 to 
Phlx Rule 707, the prohibition against harassment, intimidation, or 
retaliation because of listing or competitive practices in order to 
emphasize the importance to Phlx members and reinforce the Exchange's 
prohibition of any such anti-competitive conduct.\3\
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    \3\ The Exchange notes that the Commission has directed that the 
options markets adopt rules to specifically prohibit the type of 
conduct described herein. See Exchange Act Release No. 43268 
(September 11, 2000).
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    New Commentary .01 to Phlx Rule 707 would thus prohibit a 
Registered Options Trader (``ROT'') from refusing to deal with another 
ROT as a retaliatory measure against such ROT who sought to list an 
option according to Phlx

[[Page 82441]]

rules.\4\ The Phlx notes that the language of new Commentary .01, 
however, is not intended to require a ROT to trade with another ROT at 
a price at which the ROT is unwilling to trade, unless otherwise 
required by Phlx rule(s).
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    \4\ Listing procedures are in Exchange Rules 500 et seq. for 
options and Exchange Rules 800 et seq. for equities. The Exchange 
intends to amend or adopt rules regarding the listing of options. 
See Exchange Act Release No. 43268 (September 11, 2000).
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    The Phlx believes that the conduct prohibited in proposed new 
Commentary .01 to Rule 707 is fundamentally inconsistent with the 
obligations of members to their customers and each other, and is 
contrary to the public interest in fair and efficient options 
markets.\5\
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    \5\ New Commentary .01 to Phlx Rule 707 will apply only to 
members, member organizations, their employees, and associated 
persons. The Exchange intends to incorporate into its codes of 
conduct applicable to employees, board members, and members of 
Exchange committees, rules that are similar in import to new 
Commentary .01. The Exchange expects to file with the Commission a 
proposed rule change covering these additional individuals in the 
near future. Telephone conversation between Jurij Trypupenko, 
Director of Litigation and Operations, Phlx, and Deborah Flynn, 
Senior Special Counsel, Division of Market Regulation, SEC (December 
13, 2000).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \6\ in general, and furthers the 
objectives of Section 6(b)(5) \7\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices and to 
promote just and equitable principles of trade by prohibiting members, 
member organizations, or persons associated with or employed by members 
or member organizations from engaging in harassment and other improper 
behavior because of listing or competitive practices.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 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 nor 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 it reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. by order approve the 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 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 will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Phlx-00-94 and 
should be submitted by January 18, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-33128 Filed 12-27-00; 8:45 am]
BILLING CODE 8010-01-M