[Federal Register Volume 66, Number 194 (Friday, October 5, 2001)]
[Notices]
[Pages 51085-51087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24977]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44887; File No. SR-Phlx-2001-91]


Self-Regulatory Organizations, Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. To Facilitate the Orderly Resumption 
of Trading of Non-Phlx Amex Options on the Amex Facility in New York

September 28, 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 September 28, 2001, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Phlx. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons and to grant accelerated approval to the 
proposed rule exchange.
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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 and Substance 
of the Proposed Rule Change

    As part of the process to return American Stock Exchange LLC 
(``Amex'') option products to its facility in New York,\3\ and in order 
to facilitate the orderly transition of non-Phlx Amex options \4\ back 
to the Amex, the Exchange proposes to adopt two temporary rules. First 
Phlx proposes to allow Exchange customers \5\ to cancel limit orders 
currently residing on Exchange's electronic limit order book after the 
close of trading on the Phlx on the trading day before the non-Phlx 
Amex options return to the Amex trading floor. Second, Phlx proposes a 
temporary rule that would require that trading in certain securities 
(i.e., non-Phlx Amex options) be terminated at the time that the 
Temporary Arrangement is terminated (the ``Termination Time'').
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    \3\ On September 11, 2001, the Amex suffered physical damage to 
its New York facility following the terrorist attack on the World 
Trade Center. In addition, the large area surrounding the Amex was 
generally inaccessible due to rescue and clean-up efforts, and many 
basic services (such as electricity, water and communications lines) 
were not reestablished following the collapse of various buildings 
and ensuing fires. As an accommodation to the Amex, the Phlx listed 
certain ``non-Phlx Amex options'' as defined below, and offered to 
provide access to its options trading facilities, operations, 
technology and personnel to the Amex and Amex members, on a 
temporary basis, in order to facilitate an orderly return to 
national market system trading in listed equity options and index 
options by Amex members (``Temporary Arrangement''). The Commission 
approved the Temporary Arrangement on September 17, 2001. See 
Securities Exchange Act Release No. 44802 (September 17, 2001) (File 
Nos. SR-Amex-2001-80, SR-Phlx-2001-86) (``Order'').
    \4\ Non-Phlx Amex options are defined, as of the close of 
trading on September 10, 2001, as (a) equity options trading only on 
the Amex, (b) equity options traded on the Amex and another options 
exchange, but not the Phlx, and (c) index options traded only on the 
Amex.
    \5\ For purposes of this proposal, ``Exchange customers'' means 
those Phlx and/or Amex members that have represented limit orders in 
non-Phlx Amex options currently residing on the Exchange's 
electronic limit order book.
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    Finally, the Phlx proposes to clarity that the temporary rules 
describe din the Order will no longer be effective and Amex Temporary 
Access Persons (``TAPs'') \6\ will no longer have access to the Phlx 
options trading facilities, operations, technology and personnel, as of 
the Termination Time. In this regard, Amex must submit written 
notification to the Exchange's Membership Services Department de-
registering the Amex TAPs and clerks.
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    \6\ See Order, note 3, supra. Certain provisions in the 
agreement between the Phlx and the Amex concerning the Temporary 
Arrangement, such as limitation of liability, delegation of 
regulatory and enforcement jurisdiction, payment of transaction 
fees, and arbitration provisions, will continue to be in effect 
after the Termination Time.
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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, 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 III 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
    According to the Phlx, the purpose of the proposed rule change is 
to facilitate the orderly resumption of trading of non-Phlx Amex 
options of the Amex facility in New York following their temporary 
listing on the Phlx facility, which was necessitated by the September 
11, 2001 terrorist attacks on the World Trade Center.
    Specifically, pursuant to the Order, the Phlx temporarily certified 
and listed, and certain Phlx specialists were granted temporary trading 
privileges, in non-Phlx Amex options. Upon the

[[Page 51086]]

Termination Time, non-Phlx Amex options will no longer be listed or 
traded on the Phlx. Therefore, the Phlx proposes a temporary rule to 
allow Exchange customers to cancel, after the close of trading, as 
described below, electronic limit orders in non-Phlx Amex options 
residing on the Phlx limit order book as of the Termination Time. Upon 
notification by the Amex that non-Phlx Amex options will resume trading 
on the Amex facility in New York, the Phlx would allow Exchange 
customers to cancel limit order residing on the Exchange's electronic 
limit order book as of the close of trading on the day of Termination 
Time.\7\ Such cancellations would be required to take place between the 
hours of 4:15 p.m. and 5:30 p.m. Eastern Time on the trading day 
immediately preceding the date on which the Amex resumes trading on the 
Amex facility in New York. The Exchange anticipates that the 
cancellations will take place on Friday, September 28, 2001, and that 
the Amex will resume trading on its New York facility on Monday, 
October 1, 2001. Normally, cancellations, like other order types, are 
not permitted after the close of trading.
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    \7\ Notice of the time period within which Exchange customers 
may cancel orders for non-Phlx Amex options would be provided prior 
to opening of trading on the day of the Termination Time as follows: 
(1) Via email to Exchange customers; (2) via memorandum to be 
distributed on the Exchange's Options Floor to Phlx members and to 
Amex TAPs; (3) via electronic message to Exchange customers over the 
Exchange's Automated Options Market (``AUTOM'') System; and (4) 
posted on the Exchange's web site. Actual receipt of such notice by 
Exchange customers shall not be pre-condition to the removal of 
limit orders are not canceled at of 5:30 p.m. on the day of 
Termination Time.
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    Orders in non-Phlx Amex options that are not cancelled by 5:30 p.m. 
Eastern time on the trading day immediately preceding the date on which 
the Amex resumes trading on the Amex facility in New York would be 
removed from the Phlx limit order book. This includes electronic orders 
delivered to the limit order book via the AUTOM system or via the 
Exchange's Floor Broker Order Entry System. These electronic orders 
will be removed by the Exchange. In addition, manual orders placed on 
the specialist's physical ticket limit order book, if any, will be 
removed by the specialist unit.
    In addition, the Exchange proposes to adopt a temporary rule that 
would require trading in certain securities (i.e., non-Phlx Amex 
options) to be terminated at the Termination Time. The Exchange 
believes that this temporary rule would satisfy the requirements of 
Rule 12d2-2(b) under the Act,\8\ which provides that a national 
securities exchange (i.e., the Phlx) may strike a security from listing 
and registration thereon if (i) trading in such security has been 
terminated pursuant to a rule of such exchange requiring such 
termination whenever the security is admitted to trading on another 
exchange; and (ii) listing and registration of such security has become 
effective on such other exchange. The Phlx's certification of the non-
Phlx Amex options was pursuant to a temporary rule that terminates at 
the Termination Time, and thus, requires termination of trading of non-
Phlx Amex options on the Exchange.
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    \8\ 17 CFR 240.12d2-2(b).
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    Finally, the Phlx proposes to clarify that the temporary rules 
described in the Order will no longer be effective, and Amex TAPs \9\ 
will no longer have access to the Phlx options trading facilities, 
operations, technology and personnel, as of the Termination Time. In 
this regard, Amex must de-register the Amex TAPs by submitting written 
notification to the Exchange's Membership Services Department.
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    \9\ See Order, note 3, supra.
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2. Basis
    For these reasons, the Phlx believes that the proposed rule change 
is consistent with Section 6 of the Act,\10\ in general, and with 
Section 6(b)(5) of the Act,\11\ specifically, because it is designed to 
promote just and equitable principles of trade, and 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 
mechanisms of a free and open market and the national market system, 
and, in general, protect investors and the public interest by 
facilitating the orderly resumption of trading of non-Phlx Amex options 
on the Amex facility in New York following their temporary listing and 
trading on the Phlx facility.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were either solicited or received.

III. 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 submissions, 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 the filing will also be 
available for inspection and copying at the principal office of Phlx. 
All submissions should refer to File No. SR-Phlx-2001-91 and should be 
submitted by October 26, 2001.

IV. Commission Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    The Commission notes that the proposed rule change was submitted in 
response to the emergency situation that resulted from the September 
11, 2001 attacks on the World Trade Center in New York City. As a 
result of the attacks, the Amex facilities were damaged and could not 
be opened when the U.S. markets reopened on September 17, 2001. To 
accommodate the opening of trading of Amex options and to accommodate 
trading by Amex members, the Phlx and Amex submitted temporary rules, 
which the Commission approved on September 17, 2001. \12\
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    \12\ See Order, note 3 supra.
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    The Commission now understands that the Amex facility has been 
substantially restored and is scheduled to be open for trading on 
October 1, 2001. Accordingly, Phlx proposes to terminate trading in 
non-Phlx Amex options as of the close of trading on the day before 
trading opens on the Amex's New York facility, which is anticipated to 
be September 28, 2001. In addition, Phlx proposes to permit Exchange 
customers to cancel orders that may be on the Phlx limit order book 
when trading closes on the trading day before trading opens on the Amex 
New York facility.

[[Page 51087]]

    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.\13\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\14\ which requires, among 
other things, that the rules of an exchange be 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.
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    \13\ In approving the proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that Exchange customers should be provided 
the opportunity to cancel orders that remain on the Phlx limit order 
book before the Exchange or Phlx specialist cancels the orders for 
them. The Commission notes that when the Amex facility reopens, non-
Phlx Amex options will not longer be traded on the Phlx. Thus, the 
Commission believes that it is appropriate to allow Exchange customers 
to decide how they want their orders that remain on the Phlx limit 
order book handled. Further, because the Exchange will no longer trade 
non-Phlx Amex options, the Commission believes that it is reasonable 
for the exchange or Phlx specialist to cancel those remaining orders 
that are not canceled by the Exchange customer.
    The Commission also finds that the Phlx proposal to terminate 
trading in non-Phlx Amex options upon the Amex's reopening to be 
consistent with the Act. As noted above, the Phlx listed the non-Phlx 
Amex options as a temporary measure to help address the emergency 
situation that arose from Amex's inability to reopen its New York 
facility following the attacks on, and resulting collapse of, the World 
Trade Center.\15\
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    \15\ The Commission notes that this temporary rule does not 
restrict Phlx's ability to list non-Phlx Amex options at any time. 
In the Commission's view, the temporary Phlx rule requiring 
termination of trading of non-Phlx Amex oiptions as of the 
Termination Time is appropriate in light of the emergency situation 
that necessitated the temporary listing of these options on the Phlx 
and, under these circumstances, is consistent with Rule 19c-5 under 
the Exchange Act. 17 CFR 240.19c-5.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of the 
notice of filing in the Federal Register. The Commission believes that 
it is necessary to approve the proposed rule change on an accelerated 
basis to further facilitate the Temporary Arrangement.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule changes (SR-Phlx-2001-91) is hereby 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-24977 Filed 10-4-01; 8:45 am]
BILLING CODE 8010-01-M