[Federal Register Volume 66, Number 52 (Friday, March 16, 2001)]
[Notices]
[Pages 15314-15315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6543]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44054; 
File No. SR-Phlx-01-31]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Increasing the AUTO-X Guarantee for Orders 
in Options Overlying the NASDAQ 100 Index Tracking Stock (``QQQ'') to 
100 Contracts

March 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 March 5, 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 in Items I, 
II, and III below, which Items have been prepared by the Phlx. The 
proposed rule change has been filed by the Phlx as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) under the Act.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to increase its automatic execution guarantee for 
options overlying the NASDAQ 100 Index Tracking Stock (``QQQ'') to 100 
contracts.

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
    AUTOM is the Exchange's electronic order routing, delivery, 
execution, and reporting system for options.\4\ Orders are routed from 
member firms directly to the appropriate specialist on the trading 
floor. Certain orders are eligible for AUTOM's automatic executive 
feature, AUTO-X. These orders, generally for up to a maximum of 
seventy-five contracts, \5\ are automatically executed at the 
disseminated quotation price on the Exchange and reported back to the 
originating firm.\6\ The Exchange proposes to establish a 100 contract 
AUTO-X guarantee for eligible orders in options delivered via AUTOM 
overlying the QQQ.
---------------------------------------------------------------------------

    \4\ See Exchange Rule 1080(a).
    \5\ See Exchange Rule 1080(b)(i).
    \6\ See Exchange Rule 1080(c).
---------------------------------------------------------------------------

    Exchange Rule 1080(c) provides that the Options Committee may, in 
its discretion, increase the size of orders in one or more classes of 
multiply-traded equity options eligible for AUTO-X execution to the 
extent necessary to match the size of orders in the same options 
eligible for entry into the automated execution system of any other 
options exchange, provided that the effectiveness of any such increase 
shall be conditioned upon its having been filed with the Commission 
pursuant to section 19(b)(3)(A) of the Act.\7\
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

    The Exchange notes that the American Stock Exchange LLC (``Amex'') 
recently increased its AUTO-X guarantee for options overlying the QQQ 
to 100 contracts.\8\ The Phlx certified the same options on February 
26, 2001 and is filing this proposed rule change to match the size of 
orders in options overlying QQQ on the Amex.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 43887 (January 25, 
2001), 66 FR 8831 (February 2, 2001) (File Nos. SR-PCX-00-18 and SR-
Amex-00-57) (joint approval order increasing to 100 contracts the 
maximum size for options orders that may be automatically executed); 
and see Amex Information Circular #01-0183 (February 27, 2001) 
(indicating that, as of February 28, 2001, the maximum order size 
eligible for automatic execution for QQQ options in Auto-Ex was 
being increased from 75 to 100 contracts).
---------------------------------------------------------------------------

    The Exchange believes that the increase should provide customers 
with quicker executions for a larger number of orders in QQQ options by 
providing automatic rather than manual executions, thereby reducing the 
number of orders subject to manual processing. The Exchange also 
believes that increasing the AUTO-X maximum order size in QQQ options 
should not impose a significant burden on operation or capacity of the 
AUTOM System.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \9\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \10\ in particular, because it is designed 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating 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 by providing automatic

[[Page 15315]]

executions to a larger number of options orders.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change will not 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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
Phlx has given written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filling the 
rule change, or such shorter time as designated by the Commission, the 
proposed rule change has become effective pursuant to Section 
19(b)(3)(A) \11\ of the Act and Rule 19b-4(f)(6) \12\ thereunder.\13\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ The Exchange has requested and the Commission has agreed to 
waive the five day pre-filing notice requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) may not become 
operative prior to 30 days after the date of filing. However, Rule 19b-
4(f)(6)(iii) permits the Commission to designate a shorter time if such 
action is consistent with the protection of investors and the public 
interest. The Phlx seeks to have the proposed rule change become 
operative immediately to allow the Phlx to begin automatically 
executing up to 100 contracts for the QQQ options.
    The Commission believes that it is consistent with the protection 
of investors and the public interest that the proposed rule change 
become operative as of March 8, 2001, because investors will have 
access to automatic execution for a larger number of options 
orders.\14\ At any time within 60 days of the filing of the 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.
---------------------------------------------------------------------------

    \14\ For purposes only for accelerating the operative date of 
third proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the forgoing, including whether the proposed rule 
change is consistent with the Act. Persons making writing 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-01-31 and should 
be submitted by April 6, 2001.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6543 Filed 3-15-01; 8:45 am]
BILLING CODE 8010-01-M