[Federal Register Volume 66, Number 28 (Friday, February 9, 2001)]
[Notices]
[Pages 9742-9744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3362]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43927; File No. SR-PHLX-01-07]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to an Interpretation of Phlx Rule 237 Governing 
the eVWAP Morning Session

February 5, 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. 
(``Exchange'' or ``Phlx'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described

[[Page 9743]]

in Items I, II, and III below, which Items have been prepared by Phlx. 
Phlx filed the proposed rule change pursuant to Section 19(b)(3)(A) of 
the Act,\3\ and Rule 19b-4(f)(1) and (5) thereunder.\4\ Pursuant to 
Rule 19b-4(f)(1) and (5), Phlx has designated this proposal as one 
constituting an interpretation of the meaning and administration of 
existing Phlx Rule 237, and as one effecting a change in an existing 
order-entry or trading system of the Phlx that does not: (1) 
Significantly affect the protection of investors or the public 
interest, (2) impose any significant burden on competition, or (3) 
significantly have the effect of limiting the access to or availability 
of the system. As such, the proposed rule change is immediately 
effective upon the Commission's receipt of this filing. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1) and (5).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    Pursuant to Rule 19b-4 of the Act, Phlx is providing an 
interpretation to Phlx Rule 237, eVWAP Morning Session,\5\ to include 
New York Stock Exchange, Inc. (``NYSE'') Rule 127 transactions in the 
eVWAP calculation. NYSE Rule 127 transactions are block trades executed 
on the NYSE floor outside of the present quote and are denoted as ``J 
trades'' by the Securities Industry Automation Corporation.
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    \5\ eVWAP was developed by Universal Trading Technologies 
Corporation (``UTTC''), and was approved by the Commission to 
operate as a facility of the Exchange. See Securities Exchange Act 
Release No. 41210 (March 24, 1999) (SR-Phlx-96-14). The Commission 
approved the facility to operate as pilot program until November 30, 
2001. See Securities Exchange Act Release No. 43477 (October 30, 
2000) (SR-Phlx-00-84).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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. Nasdaq 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 proposed rule change is to intepret Phlx Rule 
237 to include NYSE Rule 127 trades in the eVWAP price calculation. The 
eVWAP is a pre-opening order matching session for the electronic 
execution of large-sized stock orders at a standardized volume weighted 
average price (``eVWAP Price'').
    In accordance with Phlx Rule 237, the eVWAP Price is derived from 
all regular way trades (including sold sales and late sales) reported 
by the appropriate reporting authority from the opening of the regular 
trading session and printed prior to 4:15 p.m. EST. The calculation 
excludes NYSE Rule 127 trades that are block executed on the NYSE floor 
outside of the present quote. A number of eVWAP participants have 
requested of UTTC that these trades be included in the eVWAP 
calculation to the extent that such trades are regular way trades and 
are reported by the appropriate reporting authority before 4:15 p.m. 
EST. Upon review, the Exchange has interpreted Phlx Rule 237 to include 
these in the eVWAP Price calculation.\6\ The Exchange included these 
trades in the calculation methodology beginning on Tuesday, January 16, 
2001. UTTC endeavored to notify all enrolled eVWAP participants of this 
change by letter dated January 11, 2001.
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    \6\ In a telephone conversation on January 29, 2001 between John 
Dayton, Esq., Exchange, and Heidi Pilpel, Special Counsel, 
Commission, the Exchange represented that the proposed 
interpretation will conform the value weighted average price 
calculation methodology used by UTTC to the value weighted average 
price calculation methodology used by other similar services.
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    The proposed rule change is consistent with Section 6(b) of the Act 
in that it is designed to promote just and equitable principles of 
trade, prevent fraudulent and manipulative acts and practices and 
protect investors and the public interest by including NYSE Rule 127 
trades in the eVWAP Price calculation.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    Phlx does not believe that the proposed rule change will result in 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.

(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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \7\ of the Act and Rule 19b-4(f)(1) and (5) \8\ thereunder 
in that it constitutes an interpretation of the meaning and 
administration of Phlx Rule 237, an existing rule governing operation 
of eVWAP, and a change in an existing order-entry or trading system of 
Phlx that does not: (1) Significantly affect the protection of 
investors of the public interest, (2) impose any significant burden on 
competition, or (3) significantly have the effect of limiting the 
access to or availability of the system. At any time within 60 days of 
the filing of such 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(1) and (5).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
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 Phlx. All submissions 
should refer to the number in the caption above and should be submitted 
by March 2, 2001.


[[Page 9744]]


    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).
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Margared H. McFarland,
Deputy Secretary.
[FR Doc. 01-3362 Filed 2-8-01; 8:45 am]
BILLING CODE 8010-01-M