[Federal Register Volume 66, Number 54 (Tuesday, March 20, 2001)]
[Notices]
[Pages 15777-15778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6803]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44070; International Series Release No. 1248; File No. 
SR-Phlx-01-06]


Self-Regulatory Organizations; Order Approving a 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

March 13, 2001.

I. Introduction

    On January 11, 2001, pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ the 
Philadelphia Stock Exchange, Inc. (``Phlx'') filed with the Securities 
and Exchange Commission (``Commission'') a proposed rule change to 
provide an exception, limited only to foreign currency options 
(``FOCs''), from the requirement that a Registered Options Trader 
(``ROT'') be present at the trading post in certain circumstances. The 
proposed rule change was published for comment and appeared in the 
Federal Register on January 26, 2001.\3\ The Commission received no 
comments on the proposal. This order approves the Phlx's proposed rule 
change.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4
    \3\ Securities Exchange Act Release No. 43864 (January 19, 
2001), 66 FR 7947 (January 26, 2001) (SR-Phlx-01-06).
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II. Description of the Proposal

    The Phlx is seeking approval of amendments to 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''). Phlx Rule 1063(a) provides that Options Floor Brokers shall 
ascertain that at least one 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

[[Page 15778]]

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.\4\ The proposed rule change 
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\
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    \4\ The Phlx's FCO trading floor is located in the same building 
as its equity options trading floor, but is in a different room.
    \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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    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.

III. Discussion

    The Commission approved the temporary exception on January 3, 2001, 
on an accelerated basis.\6\ 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 represented 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 Commission's view, the 
exception was 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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    \6\ 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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    Like the temporary rule change, the proposed 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 
Commission believes that 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. 
In view of the foregoing, the Commission finds that the Phlx's proposal 
is designed to promote just and equitable principles of trade, to 
facilitate transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market, and to protect 
investors and the public interest, consistent with section 6(b)(5) of 
the Act.\7\
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    \7\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-Phlx-01-06) is approved.\8\
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    \8\ In approving the proposal, the Commission has considered the 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).

    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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6803 Filed 3-19-01; 8:45 am]
BILLING CODE 8010-01-M