[Federal Register Volume 67, Number 137 (Wednesday, July 17, 2002)]
[Notices]
[Pages 47016-47017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-17980]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46170; File No. SR-Phlx-2001-111]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., Relating to Termination of Broker-Dealer Agreements on 
PACE

July 8, 2002.
    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 May 30, 2002,\3\ the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
proposed rule change has been filed by the Phlx as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) of the Act.\4\ 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\ The Commission notes that although Phlx officially filed 
this proposed rule change in 2002, Phlx had submitted a pre-filing 
in December 2001, at which time it assigned the file number SR-Phlx-
2001-111.
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx proposes to specify that the signing and termination of 
specialist agreements to execute broker-dealer orders on the 
Philadelphia Stock Exchange Automated Communication and Execution 
(``PACE'') system \5\ shall be in accordance with the procedures set 
forth by the Exchange. The text of the proposed rule change is 
available at the Phlx and at the Commission.
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    \5\ PACE is the electronic order routing, delivery, execution 
and reporting system used to access the Phlx Equity Floor.
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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 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
    According to the Phlx, the purpose of the proposed rule change is 
to expressly provide for the signing and termination of Specialist 
Agreements accepting broker-dealer orders on the PACE system pursuant 
to the procedures set forth by the Exchange. Phlx equity specialists 
may choose to participate in PACE with respect to specialty securities. 
Further, specialists, once on PACE, may choose to accept only agency 
orders,\6\ subject to the appropriate PACE execution parameters, or may 
choose, in addition, to accept non-agency orders. Phlx Rule 229, 
describes the minimum PACE execution parameters the specialist is 
required to

[[Page 47017]]

provide to agency orders received through the system.
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    \6\ For purposes of the PACE system, an agency order is any 
order entered on behalf of a public customer, and does not include 
any order entered for the account of a broker-dealer, or any account 
in which a broker-dealer or an associated person of a broker-dealer 
has any direct or indirect interest. See Supplementary Material .02 
to Phlx Rule 229.
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    Previously, the Commission approved an amendment to Phlx Rule 229 
allowing specialists, subject to certain parameters, to accept non-
agency orders over the PACE system.\7\ In order to accept non-agency 
orders, the specialist must, among other things, enter into a 
Specialist Agreement with the broker-dealer and file such agreement 
with the Exchange. Supplementary Material .02 to Phlx Rule 229 
describes some of the terms that the Specialist Agreement must contain, 
however, there is no mention made of the mechanics the specialist must 
use to secure such an agreement or what additional terms such an 
agreement may contain. In addition, no explicit mechanism or conditions 
for terminating such agreements were discussed in Supplementary 
Material .02 of Phlx Rule 229 or the approval of the earlier proposed 
rule change.
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    \7\ See Securities Exchange Act Release No. 36442 (October 31, 
1995) 60 FR 56084 (November 6, 1995) (File No. SR-Phlx-95-32) 
(``[A]ny specialist who has agreed to facilitate broker-dealer 
orders on PACE must provide all broker-dealers with the opportunity 
to submit non-agency orders for execution through PACE on equal 
terms.'').
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    With this proposed rule change, the Exchange proposes to add 
language to Supplementary Material .02 of Phlx Rule 229 to clarify that 
the Exchange has implemented procedures for the signing and termination 
of Specialist Agreements.\8\ Naturally, while the Exchange will change 
these procedures from time to time, such procedures will not conflict 
with the then existing requirements in Supplementary Material .02 of 
Phlx Rule 229.
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    \8\ Currently, the Exchange requires that terminations of these 
agreements be in writing and submitted to the Exchange at least 24 
hours before the effectiveness of the termination.
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2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with section 6(b) of the Act,\9\ in general, and furthers 
the objectives of section 6(b)(5),\10\ in particular, because it should 
promote just and equitable principles of trade, prevent fraudulent and 
manipulative acts and protect investors and the public interest by more 
specifically delineating the procedures to be followed by specialists 
entering into and terminating Specialist Agreements.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    Written comments were neither solicited nor 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) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate, if consistent with the protection of investors and the 
public interest, provided that the self-regulatory organization has 
given the Commission 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 filing of 
the proposed rule change, or such shorter time as the Commission may 
designate, it has become effective pursuant to section 19(b)(3)(A) of 
the Act \11\ and Rule 19b-4(f)(6) \12\ thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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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 
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 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 at the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Phlx-2001-111 and 
should be submitted by August 7, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-17980 Filed 7-16-02; 8:45 am]
BILLING CODE 8010-01-P