[Federal Register Volume 66, Number 18 (Friday, January 26, 2001)]
[Notices]
[Pages 7947-7949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2380]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43864; International Series Release No. 1245; File No. 
SR-Phlx-01-06]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. To Amend Rule 1063(a) 
and Options Floor Procedure Advices A-10 and C-1, Relating to Trading 
in Foreign Currency Options

January 19, 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 11, 2001, the Philadelphia Stock Exchange, Inc. (``Phlx'') 
filed with the Securities and Exchange Commission (``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 proposes to amend Phlx Rule 1063(a), Phlx Options Floor 
Procedure Advice A-10, and Phlx Options Floor Procedure Advice C-1. The 
proposed amendments would provide an exception, limited only to foreign 
currency options (``FCOs''), from the requirement that a Registered 
Options Trader (``ROT'') be present at the trading post in certain 
circumstances. The proposal would also make certain non-substantive 
stylistic changes to Floor Procedure Advices A-10 and C-1. The text of 
the proposed rule change is available at the principal offices of the 
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 had received on the proposal. 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.

[[Page 7948]]

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

1. Purpose
    The Phlx is seeking approval of amendments of Phlx Rule 1063(a) 
(``Responsibilities of Floor Brokers''), Phlx Options Floor Procedure 
Advice A-10 (``Specialist Trading With Book''), and Phlx Options Floor 
Procedure Advice C-1 (``Ascertaining the Presence of ROTs in a Trading 
Crowd''), as discussed below. Phlx Rule 1063(a) provides that Options 
Floor Brokers shall ascertain that at least one Registered Options 
Trading (``ROT'') is present at the trading post before representing an 
order for execution. Phlx Options Floor Procedure Advice A-10 provides 
that in any instance where a Specialist wishes to participate as 
principal in a trade with an order placed on that Specialist's book, 
the Specialist must ensure that at least one ROT is present in the 
trading crowd and is aware of the Specialist's intention to trade with 
the book both at the time of and immediately before the execution. Phlx 
Options Floor Procedure Advice C-1 provides that a Floor Broker 
representing an order in options shall, before executing the order, 
ascertain that at least one ROT is present in the trading crowd at the 
post where the order is executed.
    Each of these rules currently contains a temporary exception that 
is limited only to FCO transactions. Pursuant to the temporary 
exception, which expires on March 31, 2001, an FCO Specialist may trade 
as principal with an order on the book and an FCO Floor Broker may 
represent an order or execute a trade when no ROT registered in the FCO 
is present on the Phlx's FCO trading floor.\3\
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    \3\ The Phlx's FCO trading floor is located in the same building 
as its equity options trading floor, but is in a different room.
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    The Commission approved the temporary exception on January 3, 2001, 
on an accelerated basis.\4\ The Phlx requested accelerated approval of 
the temporary exception after it learned that, as of January 3, 2001, 
no ROTs would be doing business on a regular basis on the Phlx's FCO 
floor. The Phlx anticipated that there very likely would be periods of 
time when FCO Specialists and FCO Floor Brokers would be on the FCO 
floor with no FCO ROTs present, and that compliance with Phlx Rule 
1063(a) and Phlx Options Floor Procedure Advices A-10 and C-1 would not 
be possible under those circumstances. In the Phlx's view, the 
amendments were necessary in order to enable the Phlx to continue to 
provide fair and orderly markets in FCOs in the absence of FCO ROTs on 
the FCO floor.
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    \4\ Securities Exchange Act Release No. 43799 (January 3, 2001), 
66 FR 2469 (January 11, 2001) (File No. SR-Phlx-00-111).
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    The Phlx now proposes a rule change that would permanently exempt 
FCO Specialists and FCO Floor Brokers from the requirements in Phlx 
Rule 1063(a) and Phlx Options Floor Procedure Advices A-10 and C-1. 
Specifically, the Phlx proposes to amend Rule 1063(a) and Phlx Options 
Floor Procedure Advices A-10 and C-1 by deleting from each rule the 
words ``until March 31, 2001,'' thereby making permanent the temporary 
exceptions that those rules currently provide.\5\ The Phlx represents 
that, like the temporary rule change, the permanent exception would 
apply only if no ROT is present on the FCO floor when an FCO Specialist 
trades as principal with an order on the book, or when an FCO Floor 
Broker represents an order or executes a trade. The Phlx believes that 
the proposed rule change would enable it to provide fair and orderly 
markets in FCOs in the event that FCO ROTs are absent from the FCO 
floor after the current temporary rule change expires on March 31, 
2001.
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    \5\ The proposed rule change also makes non-substantive changes 
to Phlx Rule 1063(a) and Phlx Options Floor Procedure Advices A-10 
and C-1 by replacing the shorthand term ``ROT'' with the term 
``Registered Options Trader.'' The temporary rule change 
incorporated those same changes.
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2. Statutory Basis
    The Phlx believes that the proposed rule change is consistent with 
Section 6(b) of the Act in general, and furthers the objectives of 
Section 6(b)(5) in particular, in that it is designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
and processing information with respect to transactions in securities, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. Moreover, the Phlx believes that the 
proposed rule change is not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers. In the Phlx's view, 
the proposed rule change will permit Phlx Specialists to continue to 
trade as principal with orders on the book, and will allow Phlx Floor 
Brokers to continue to represent and execute orders in FCOs in the 
event that no ROTs are present on the FCO floor.

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

    The Phlx 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

    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 Phlx consents, the Commission will:
    A. by order approve such 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-01-06 and should 
be submitted by February 16, 2001.


[[Page 7949]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-2380 Filed 1-25-01; 8:45 am]
BILLING CODE 8010-01-M