[Federal Register Volume 66, Number 128 (Tuesday, July 3, 2001)]
[Notices]
[Pages 35312-35313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44480; File No. SR-Phlx-2001-02]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Codifying Formal 
Procedures for Members To Submit Proposals To List Option Classes on 
the Exchange

June 27, 2001.

I. Introduction

    On January 11, 2001, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') submitted to the Securities and Exchange 
Commission (``Commission'') pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change codifying formal procedures for 
members to submit proposals to list option classes on the Exchange. The 
Phlx filed Amendment Nos. 1 \3\ and 2 \4\ to the proposed rule change 
on February

[[Page 35313]]

21, 2001 and May 2, 2001, respectively. The Federal Register published 
the proposed rule change, as amended, for comment on May 15, 2001.\5\ 
The Commission received no comments on the proposed rule change. This 
order approves the proposal, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CRF 240.19b-4.
    \3\ See letter from Richard Rudolph, Counsel, Phlx, to Nancy 
Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission, dated February 20, 2001 (``Amendment No. 
1''). Among other things, Amendment No. 1 clarifies that the 
Exchange: (1) May consider bona fide business interests in 
determining whether to list an option; (ii) must send letters to 
members setting forth in reasonable detail the basis on which a 
decision not to list a proposed option was made; and (iii) must 
forward its written response within three business days of its 
determination to deny a proposed listing.
    \4\ See letter from Richard Rudolph, Counsel, Phlx, to Nancy 
Sanow, Assistant Director, Division, Commission, dated May 1, 2001 
(``Amendment No. 2''). Amendment No. 2 clarifies that the Exchange 
must notify the member in writing if the Exchange determines not to 
list, or to place conditions or limitations upon, a proposed 
listing. Amendment No. 2 also clarifies that the Exchange must 
maintain a record of any bona fide business interests supporting a 
decision not to list, or to place conditions or limitations upon, a 
proposed listing.
    \5\ Securities Exchange Act Release No. 44235 (May 9, 2001), 66 
FR 26901
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II. Description of Proposal

    The proposed rule change would establish procedures for Exchange 
members or member organizations to request the Exchange to list options 
not currently traded on the Exchange, and would codify the factors 
considered by the Exchange in listing option classes.\6\ The Exchange 
would be required to review a proposed option's eligibility for listing 
within three business days of receiving a listing recommendation. If 
the Exchange determines that the proposed listing does not satisfy the 
Exchange's listing standards, the Exchange would be required to send a 
written response notifying the member within three days of the 
determination.
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    \6\ As part of a settlement of an enforcement action by the 
Commission, four of the five options exchanges, including the Phlx, 
are required to adopt rules to codify listing procedures to be 
carried out when a member or member organization requests the 
exchange to list options not currently trading on the exchange. See 
Order Instituting Public Administrative Proceedings Pursuant to 
Section 19(h)(1) of the Securities Exchange Act of 1934, Making 
Findings and Imposing Remedial Sanctions. Securities Exchange Act 
Release No. 43268 (September 11, 2000).
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    If the Exchange determines that the proposed option meets the 
Exchange's listing standards, Exchange staff would be required to 
present the proposal to the Chairman of the Board of Governors or his 
designee within ten business days of the determination. If the Exchange 
decides to deny or place limitations or conditions upon the proposed 
listing, the Exchange would be required to send a written response to 
the requesting member within three business days, setting forth in 
reasonable detail the basis on which the decision not to list, or to 
place limitations or conditions upon, the proposed option was made.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\7\ 
Specifically, the Commission believes that the proposed rule change is 
consistent with the section 6(b)(5) \8\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to remove impediments to and perfect the mechanisms of a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \7\ In approving the proposal, the Commission has considered its 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change will remove 
impediments to and perfect the mechanisms of a free and open market by 
providing formal procedures for members to request the listing of 
options on the Exchange. The proposal would require the Exchange to 
respond in writing within a maximum of sixteen business days to 
requests by member to list options. The Commission believes that the 
proposed procedures and time frames set forth in the proposed rule 
change are reasonable and adequately balance the Exchange's need to 
thoroughly examine proposed listings before making its determination 
with its members' need for a prompt and specific response to its 
listing recommendation.
    In addition, the proposed rule change codifies the factors to be 
considered by the Exchange in determining whether to list a recommended 
option. The Commission believes that the proposed factors represent 
legitimate issues that the Exchange may consider when making a listing 
decision. The Commission notes that if the Exchange denies or places 
conditions or limitations upon a proposed listing, it must include its 
reasons in the letter notifying the member of its decision. The 
Commission believes that this requirement should help to ensure that 
the Exchange relies only upon the factors codified in its rules when 
making a listing decision.

IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\9\ that the proposed rule change, as amended, (SR-Phlx-2001-02) is 
approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-16674 Filed 7-2-01; 8:45 am]
BILLING CODE 8010-01-M