[Federal Register Volume 66, Number 12 (Thursday, January 18, 2001)]
[Notices]
[Pages 4884-4885]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1406]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43822; File No. SR-PHLX-01-01]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to the 
Dissemination of Options Quotations With Size

January 8, 2001.
    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 January 8, 2001, 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 Phlx. 
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, pursuant to Rule 19b-4 of the Act, proposes to amend, on 
a temporary basis, Exchange Options Floor Procedure Advice (``OFPA'') 
F-7, Bids and Offers, to state that the size of any bid or offer in a 
quotation disseminated by the Exchange shall be equal to the AUTO-X 
guarantee for the quoted option and shall be firm, except that the 
disseminated size of bids and offers of customer limit orders shall be 
ten (10) contracts and shall be firm, regardless of the actual size of 
such orders.
    The complete text of the proposed rule change is available at the 
Office of the Secretary, Phlx and at the Commission.

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 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. The 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
    The purpose of the proposed rule change is to codify the Exchange's 
initial program for the dissemination of options quotations with size. 
It is anticipated that, on or about January 22, 2001, the Option Price 
Reporting Authority (``OPRA'') will begin to support the dissemination 
of options quotations that include the size, or the number of 
contracts, represented in disseminated bids and offers on the Exchange.
    On November 17, 2000, the Commission amended the Quote Rule \3\ to 
require options exchanges and options market makers to publish firm 
quotes. The amended Quote Rule will require options exchanges to 
either: (1) Comply with the Quote Rule as it applies in the equity 
markets and collect from their members and make available to vendors 
the size associated with each quotation; or (2) establish by rule and 
periodically publish the quotation size for which their members' 
quotations are firm. The compliance date for the amendments to the 
Quote Rule is April 1, 2000.
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    \3\ Exchange Act Rule 11Ac1-1; 17 CFR 240.11Ac1-1; see 
Securities Exchange Act Release No. 43591 (November 17, 2000), 65 FR 
75439 (December 1, 2000) (File No. S7-17-00).
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    While it is anticipated that OPRA will have the necessary systems 
capacity to accept and disseminate quotations with size by late January 
2001, and that one or more options exchanges will be in a position to 
disseminate actual quotation size at that time, the Phlx will not have 
completed its application of the systems changes necessary to permit it 
to disseminate actual quotation size for a number of months.
    Therefore, until the Exchange's systems disseminate actual 
quotation size on a quote-by-quote basis, the Phlx seeks herein to 
establish by rule and

[[Page 4885]]

periodically publish, on its web site and through regulatory circulars 
to Exchange members and member organizations, the quotation size for 
which its members' quotations are firm as required by Rule 11Ac1-
1(d)(1)(i) under the Act.\4\
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    \4\ Exchange Act Rule 11Ac1-1(d)(1)(i), 17 CFR 240.11Ac1-
1(d)(1)(i).
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    In addition, the Exchange proposes to voluntarily disseminate to 
OPRA the applicable automatic execution size guarantee for each quoted 
option, except that with respect to customer limit orders the Phlx 
would disseminate a size of 10 contracts, regardless of the actual size 
of the customer order. In all cases, the Phlx would be firm for its 
disseminated quotation size (without regard to whether the given order 
would be eligible for automatic execution via the Exchange's automatic 
execution feature, AUTO-X).\5\
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    \5\ In the event that certain Phlx specialist firms are able to 
develop and implement proprietary systems (called ``Specialized 
Quote Feeds'' or ``SQFs'') that are able to disseminate actual size 
prior to the Exchange's systems disseminating quotations with actual 
size on a floor-wide basis, the Phlx would undertake to file a 
further proposed rule change with the Commission requesting approval 
to disseminate actual size for those options classes assigned to 
such specialist firms.
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    Until the Phlx has completed its application of the systems changes 
necessary to automatically update its quotation size on a continuous 
basis, the Phlx believes that the instant proposal represents a vast 
improvement over the current system, by increasing transparency and 
providing the market place with considerably more information upon 
which to base order routing decisions.
    Finally, the Phlx expects to begin providing quotations with actual 
size on a floor-wide basis within one year. The Exchange will undertake 
to submit a further proposed rule change when the Exchange is able to 
disseminate actual size associated with its options quotes and customer 
limit orders.
    The instant proposed rule change does not affect in any respect the 
Exchange's obligations concerning non-public customer orders.\6\ Prior 
to the April 1, 2001 mandatory compliance date of the amended Quote 
Rule, the Exchange will establish firm quote requirements with respect 
to broker-dealers, as required by the amended Quote Rule.
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    \6\ See Exchange Rule 1015(b) and Options Floor Procedure Advice 
A-11.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act \7\ in general, and in particular, with 
Section 6(b)(5),\8\ in that it is designed to perfect the mechanism of 
a free and open market and a national market system, protect investors 
and the public interest and promote just and equitable principles of 
trade by increasing transparency and providing the market place with 
considerably more information upon which to base order routing 
decisions.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    Finally, after consultation with Commission staff, the Phlx 
believes that the proposed rule change described in this filing, 
including permitting SQF users to disseminate actual size when they are 
able to do so (as described in Footnote No. 5) is consistent with the 
amended Quote Rule.

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

    The Phlx 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

    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 or such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Phlx 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 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. 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 No. SR-Phlx-01-01 and should 
be submitted by February 8, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-1406 Filed 1-17-01; 8:45 am]
BILLING CODE 8010-01-M