[Federal Register Volume 68, Number 180 (Wednesday, September 17, 2003)]
[Notices]
[Pages 54513-54516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-23739]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48472; File No. SR-PHLX-2002-86]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change and Amendments No. 1, 
2, and 3 Thereto and Notice of Filing and Order Granting Accelerated 
Approval of Amendments No. 4 and 5 Thereto Relating to the Automatic 
Execution of Booked Customer Limit Orders

September 10, 2003.
    On December 20, 2002, the Philadelphia Stock Exchange (``PHLX'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission'' or ``SEC''), 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 relating to automatic execution 
of booked customer limited orders. On February 27, 2003, the Exchange 
filed Amendment No. 1 to the proposed rule change.\3\ On March 28, 
2003, the Exchange filed Amendment No. 2 to the proposed rule 
change.\4\ On April 9, 2003, the Exchange filed Amendment No. 3 to the 
proposed rule change.\5\ The proposed rule change, as modified by 
Amendments No. 1, 2, and 3, was published in the Federal Register on 
April 16, 2003.\6\ The Commission received one comment letter with 
respect to the proposal.\7\ The Exchange submitted a letter in response 
to ISE Letter on May 20, 2003.\8\ On July 9, 2003 and August 15, 2003, 
the Exchange submitted Amendments No. 4 \9\ and 5 \10\ to the proposed 
rule change, respectively. This order approves the proposed rule change 
and Amendments No. 1, 2, and 3, accelerates approval of Amendments No. 
4 and 5, and solicits comments from interested persons on Amendments 
No. 4 and 5.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Richard S. Rudolph, Director and Counsel, 
PHLX to Deborah Lassman Flynn, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated February 26, 
2003 (``Amendment No. 1''). In Amendment No. 1, the PHLX replaces in 
its entirety the original proposed rule change.
    \4\ See Letter from Richard S. Rudolph, Director and Counsel, 
PHLX to Deborah Lassman Flynn, Assistant Director, Division, 
Commission, dated March 27, 2003 (``Amendment No. 2''). In Amendment 
No. 2, the PHLX replaces in its entirety Amendment No. 1.
    \5\ See Letter from Richard S. Rudolph, Director and Counsel, 
PHLX to Deborah Lassman Flynn, Assistant Director, Division, 
Commission, dated April 9, 2003 (``Amendment No. 3''). In Amendment 
No. 3, the PHLX incorporates changes to the text of the PHLX Rule 
1080 that have been made in separate proposed rule change filings 
since the time the current proposed rule change was submitted.
    \6\ See Securities Exchange Act Release No. 47657 (April 10, 
2003), 68 FR 18717.
    \7\ See Letter from Michael J. Simon, Senior Vice President and 
Secretary, International Securities Exchange, Inc. (``ISE'') to 
Jonathan G. Katz, Secretary, Commission, dated May 7, 2003 (``ISE 
Letter'').
    \8\ See Letter from Richard S. Rudolph, Director and Counsel, 
PHLX to Jonathan G. Katz, Secretary, Commission, dated May 20, 2003 
(``PHLX Letter'').
    \9\ See Letter from Richard S. Rudolph, Director and Counsel, 
PHLX to Deborah Lassman Flynn, Assistant Director, Division, 
Commission, dated July 8, 2003 (``Amendment No. 4''). In Amendment 
No. 4, the Exchange propose to adopt new rule texts to clarify the 
scope of the application of the exposure requirement, and provides 
clarifying language to the proposal relating to the definition of 
the term ``off-floor broker-dealers'' and the internalization of 
orders delivered to the Exchange.
    \10\ See Letter from Richard S. Rudolph, Director and Counsel, 
PHLX to Deborah Lassman Flynn, Assistant Director, Division, 
Commission, dated August 15, 2003 (``Amendment No. 5''). In 
Amendment No. 5, the Exchange proposes deleting the 10-second timer 
provision and implementing Book Match, on an issue-by-issue basis, 
no later than October 1, 2003.
---------------------------------------------------------------------------

I. Description of the Proposed Rule Change

    The PHLX proposes to amend PHLX Rule 1080, Philadelphia Stock 
Exchange Automated Options Market (``AUTOM'') and Automatic Execution 
System (``AUTO-X''),\11\ to provide for the automatic execution of 
eligible inbound customer and off-floor broker-dealer limit orders \12\ 
against booked customer limit orders at the Exchange's disseminated 
price. Specifically, the Exchange is proposing to amend PHLX Rule 
1080(g) to reflect that the contra-side of an eligible inbound customer 
or off-floor broker-dealer limit order executed via AUTO-X may be a 
booked customer limit order.
---------------------------------------------------------------------------

    \11\ AUTOM is the Exchange's electronic order delivery, routing, 
execution and reporting system, which provides for the automatic 
entry and routing of equity option and index option orders to the 
Exchange trading floor. Orders delivered through AUTOM may be 
executed manually, or certain orders are eligible for AUTOM's 
automatic execution feature, AUTO-X. Equity option and index option 
specialists are required by the Exchange to participate in AUTOM and 
its features and enhancements. Option orders entered by Exchange 
members into AUTOM are routed to the appropriate specialist unit on 
the Exchange trading floor. See PHLX Rule 1080.
    \12\ In April of 2002, the Commission approved, on a six-month 
pilot basis, the Exchange's proposal to allow off-floor broker-
dealers to submit proprietary limit orders directly onto the limit 
order book via AUTOM (the ``pilot''). See Securities Exchange Act 
Release No. 45758 (April 15, 2002), 67 FR 19610 (April 22, 2002) 
(SR-PHLX-2001-40). In the pilot, the Exchange defined ``off-floor 
broker-dealer'' as (a) a broker-dealer that delivers orders from 
``upstairs'' for the proprietary account(s) of such broker-dealer, 
or (b) a market maker located on an exchange or trading floor other 
than the Exchange's trading floor who elects to deliver orders via 
AUTOM for the proprietary account(s) of such broker-dealer. The 
Commission approved the pilot on a permanent basis in October 2002. 
See Securities Exchange Act Release No. 46660 (October 15, 2002), 67 
FR 64951 (October 22, 2002) (SR-PHLX-2002-50).
---------------------------------------------------------------------------

    The purpose of the proposal is to increase automated options order 
handling by enabling the Exchange to automatically execute eligible 
inbound customer and off-floor broker-dealer limit orders delivered via 
AUTOM against customer limit orders on the specialist's limit order 
book.\13\ The proposal represents the first phase (``Phase I'') of the 
Exchange's ``Book Match'' system, which the Exchange anticipates will 
eventually automatically match all eligible inbound order types against 
orders resting on the limit order book (``booked limit orders'').\14\
---------------------------------------------------------------------------

    \13\ The electronic ``limit order book'' is the Exchange's 
automated specialist limit order book, which automatically routes 
all unexecuted AUTOM orders to the book and displays orders real-
time in order of price-time priority. Orders not delivered through 
AUTOM may also be entered onto the limit order book. See PHLX Rule 
1080, Commentary .02.
    \14\ The Exchange notes that it was required by the Commission 
to commit to the automatic execution of eligible inbound orders 
against specialist and Registered Options Trader (``ROT'') limit 
orders entered onto the limit order book through an electronic 
interface system known as ``ROT Access'' under the Order Instituting 
Public Administrative Proceedings Pursuant to Section 19(h)(1) of 
the Securities Exchange Act of 1934, Making Findings and Imposing 
Remedial Sanctions. See Securities Exchange Act Release No. 43268 
(September 11, 2000), Administrative Proceeding File 3-10282 (the 
``Order''). See also Securities Exchange Act Release No. 46763 
(November 1, 2002), 67 FR 68898 (November 13, 2002) (SR-PHLX-2002-
04). The Exchange has committed to roll out the system for the 
automatic execution of orders placed on the limit order book through 
ROT Access beginning in January 2004. The instant proposal 
represents the first phase in the eventual rollout of that system.
---------------------------------------------------------------------------

    Currently, the Exchange's AUTOM System and its automatic execution 
feature, AUTO-X, do not automatically execute otherwise eligible 
inbound orders if all or part of the Exchange's disseminated size at 
the disseminated

[[Page 54514]]

price consists of a booked limit order. In that situation, inbound 
orders that would otherwise be eligible for automatic execution are 
matched manually by the specialist.\15\
---------------------------------------------------------------------------

    \15\ PHLX Rule 1080(c)(iv) sets forth the various situations in 
which orders otherwise eligible for automatic execution via AUTO-X 
are handled manually by the specialist, including this situation, 
where there is a booked limit order. See Securities Exchange Act 
Release No. 45927 (May 15, 2002), 67 FR 36289 (May 23, 2002) (SR-
PHLX-2001-24).
---------------------------------------------------------------------------

    The Exchange proposes, pursuant to proposed PHLX Rule 1080(g)(ii), 
that when the Exchange's disseminated price is equal to the National 
Best Bid or Offer (``NBBO''), and all or part of the Exchange's 
disseminated size at the NBBO disseminated price includes a customer 
limit order on the book, eligible inbound customer and off-floor 
broker-dealer limit orders would be automatically executed against 
booked customer limit orders at the NBBO, up to the size of the booked 
customer limit orders at the NBBO.\16\ If the inbound customer or off-
floor broker-dealer limit order is for a greater size than the 
Exchange's disseminated size, the remaining portion of the order would 
be executed manually or placed on the limit order book by the 
specialist.\17\ The Exchange proposes to deploy Book Match, on an 
issue-by-issue basis, no later than October 1, 2003.\18\
---------------------------------------------------------------------------

    \16\ The disseminated price consisting of a booked limit order 
at which the eligible inbound order would be executed must be the 
NBBO. For instance, if the PHLX bid is the National Best Bid, but 
the PHLX offer is not the National Best Offer, an inbound buy order 
would not be subject to Book Match, but would instead be handled 
manually.
    \17\ In Amendment No. 5, the Exchange proposes to delete the 10-
second timer initially proposed. See Amendment No. 5, supra note 10.
    \18\ See Amendment No. 5, supra note 10.
---------------------------------------------------------------------------

a. Order Entry Firm Orders Delivered by Such Order Entry Firm, an 
Affiliated Firm, or a Solicited Party

    The Exchange believes that the Book Match proposal could create an 
opportunity for off-floor member organizations to internalize orders 
(i.e., submit a proprietary order as contra-side to their customers' 
limit orders on the book) without providing the specialist and trading 
crowd with a sufficient time period to determine to execute the 
customer limit order.
    To address this potential issue, the Exchange originally proposed 
requiring member organizations that seek to submit a related 
proprietary contra-side order (i.e., their own order or that of an 
affiliate) via AUTOM in conjunction with a customer limit order they 
deliver to the limit order book, to designate such orders with a 
special indicator (``K'' for the customer limit order, and ``L'' for 
the proprietary order). Such orders would not be eligible for AUTO-X or 
Book Match, and the customer limit order labeled ``K'' must be exposed 
to the crowd for a period of 30 seconds before it would be eligible to 
be executed against the proprietary order labeled ``L.'' The proposal 
would provide that the customer limit order on the book may be executed 
by the specialist or crowd prior to the expiration of 30 seconds.
    In Amendment No. 4, the Exchange amended this aspect of its 
proposed rule change to broaden the application of the above exposure 
requirement to solicited party orders. As amended, the Exchange would 
require that member organizations that seek to submit a customer limit 
order and a related proprietary contra-side order (i.e., their own 
order, an affiliate order, or a solicited party order as defined in 
PHLX Rule 1064(c)(ii)) delivered via AUTOM, to designate such orders 
with a special indicator (``K'' for the customer limit order, and ``L'' 
for the proprietary order).\19\ Such orders would not be eligible for 
AUTO-X or Book Match, and the customer limit order labeled ``K'' must 
be exposed to the crowd for a period of 30- seconds before it would be 
eligible to be executed, in whole or in part, against proprietary 
orders with labeled ``L'' indicator. The proposal would also provide 
that the customer limit order on the book may be executed by the 
specialist or crowd at anytime.
---------------------------------------------------------------------------

    \19\ See Amendment No. 4, supra note 9.
---------------------------------------------------------------------------

    The Exchange also amended the proposed rule change, pursuant to 
Amendment No. 4, to prohibit an Exchange member or member organization 
from being a party to any arrangement designed to circumvent the 
crossing procedures discussed above, by providing an opportunity for a 
customer, member, member organization, or non-member broker-dealer, to 
execute immediately against agency orders delivered to the Exchange, 
whether such orders are delivered via AUTOM or represented in the 
trading crowd by a member or member organization.\20\
---------------------------------------------------------------------------

    \20\ Id.
---------------------------------------------------------------------------

b. Linkage Orders

    The Exchange further believes that the Book Match function will 
enable the Exchange to promptly execute orders delivered to the 
Exchange pursuant to the Plan for the Purpose of Creating and Operating 
an Intermarket Options Linkage (the ``Plan'') \21\ and PHLX Rules 1083-
1087 adopted to implement the Plan,\22\ by matching eligible inbound 
linkage orders in a timely fashion. The Exchange represents that its 
systems are capable of recognizing inbound Linkage Principal Acting as 
Agent Orders (``P/A Orders'')\23\ and Principal Orders (``P 
Orders''),\24\ and that Book Match would execute eligible linkage 
orders at the Firm Customer Quote Size \25\ in the case of P/A Orders, 
and at the Firm Principal Quote Size \26\ in the case of P Orders.
---------------------------------------------------------------------------

    \21\ See Securities Exchange Act Release Nos. 44482 (June 27, 
2001), 66 FR 35470 (July 5, 2001); 43573 (November 16, 2000), 65 FR 
70851 (November 28, 2000) (Notice of PHLX Joining the Plan); and 
43086 (July 28, 2000), 65 FR 48023 (August 4, 2000) (Approval of the 
Plan).
    \22\ See Securities Exchange Act Release No. 47296 (January 31, 
2003), 68 FR 6528 (February 7, 2003) (SR-PHLX-2002-67).
    \23\ PHLX Rule 1083(j)(i) defines a ``P/A Order'' as an order 
for the principal account of a specialist (or equivalent entity on 
another exchange that is authorized to represent Public Customer 
orders), reflecting the terms of a related unexecuted Public 
Customer order for which the specialist is acting as agent.
    \24\ PHLX Rule 1083(j)(ii) defines a ``P Order'' as an order for 
the principal account of an eligible market maker and is not a P/A 
Order.
    \25\ ``Firm Customer Quote Size'' with respect to a P/A Order 
means the lesser of (a) the number of option contracts that the 
exchange sending a P/A Order guarantees it will automatically 
execute at its disseminated price in a series of an eligible option 
class for public customer orders entered directly for execution in 
that market; or (b) the number of option contracts that the exchange 
receiving a P/A Order guarantees it will automatically execute at 
its disseminated price in a series of an eligible option class for 
public customer orders entered directly for execution in that 
market. This number shall be at least 10. See PHLX Rule 1083(g).
    \26\ ``Firm Principal Quote Size'' means the number of options 
contracts that an exchange guarantees it will execute at its 
disseminated price for incoming Principal Orders in an eligible 
option class. This number shall be at least 10. See PHLX Rule 
1083(h).
---------------------------------------------------------------------------

c. Yielding Requirements

    The Exchange also proposed to match both inbound marketable 
customer and off-floor broker-dealer limit orders with customer limit 
orders on the book at the NBBO. In the case of inbound non-marketable 
limit orders, the Exchange's rules concerning the establishment of a 
bid or offer, and yielding requirements in parity situations would 
apply. Currently, PHLX Rule 1080, Commentary .05(ii) provides that off-
floor broker-dealer limit orders entered via AUTOM establishing a bid 
or offer may establish priority, and the specialist and crowd may match 
such a bid or offer and be at parity, subject to the yield provisions 
set forth in PHLX Rule 1014, which require ``controlled accounts''\27\ 
to yield priority to customer orders when bidding or

[[Page 54515]]

offering at the same price for the same series.
---------------------------------------------------------------------------

    \27\ PHLX Rule 1014(g)(i)(A) provides that an account type is 
either a controlled account or a customer account. A controlled 
account includes any account controlled by or under common control 
with a broker-dealer (specialist accounts of PHLX option 
specialists, however, are not subject to yielding requirements 
placed upon controlled accounts by this rule). Customer accounts are 
all other accounts.
---------------------------------------------------------------------------

    Orders of controlled accounts must yield priority to customer 
orders.\28\ Off-floor broker-dealer accounts, a subset of ``controlled 
accounts,'' must also yield priority to customer orders at the same 
price. Therefore, if an off-floor broker-dealer limit order is placed 
on the limit order book, followed by a customer limit order placed on 
the limit order book at the same price, the off-floor broker-dealer 
limit order must yield priority to the customer limit order, even 
though the customer limit order was placed on the limit order book 
after the off-floor broker-dealer order.\29\
---------------------------------------------------------------------------

    \28\ The Commission recently approved PHLX's proposal to require 
orders of controlled accounts to yield priority to customer orders 
in all circumstances. See Securities Exchange Act Release No. 47739 
(April 25, 2003), 68 FR 23354 (May 1, 2003). Previously, PHLX ROTs 
closing in-person were not required to yield priority to orders of 
customer accounts. Id.
    \29\ At the request of the Exchange, the discussion under this 
section has been modified slightly to reflect recent changes to the 
PHLX rules. Telephone conversation between Richard S. Rudolph, 
Director and Counsel, PHLX and Hong-Anh Tran, Special Counsel, 
Division, Commission, on September 5, 2003.
---------------------------------------------------------------------------

II. Comment Summary

    The Commission received one comment letter on the proposed rule 
change that generally opposed the Exchange's proposal relating to its 
crossing procedures pursuant to Rule 1080(ii).\30\
---------------------------------------------------------------------------

    \30\ See ISE Letter, supra note 7.
---------------------------------------------------------------------------

    Specifically, ISE stated that the Exchange's proposed term ``off-
floor broker-dealer,'' which included two alternative definitions of 
the same term, appeared to be redundant. The term ``off-floor broker-
dealer'' would involve either: (1) A broker-dealer that delivers orders 
from off the floor of the Exchange for the proprietary account(s) of 
such broker-dealers; or (2) a market maker located on an exchange or 
trading floor other than the Exchange's trading floor who elects to 
deliver orders via AUTOM for the proprietary account(s) of such market 
maker. ISE argued that the Exchange does not need the second clause 
above, since orders of market makers from other exchanges are also 
proprietary orders of a broker-dealer.
    Furthermore, ISE believed that the exposure requirement does not 
appear sufficiently broad because the Exchange stated that the exposure 
requirement would apply to customer limit order submitted ``in 
conjunction'' with a proprietary contra-side order via AUTOM. ISE 
stated that if this were the case, then the exposure requirement would 
be too narrow, as it would allow broker-dealers to enter two orders 
separately, but within a few seconds of each other, to avoid the 30-
second exposure requirement altogether.
    ISE also believed that the Exchange should include an exposure 
requirement (i.e., 30 seconds) for solicited transactions.
    In addition, ISE argued that the Exchange should adopt provisions: 
(1) To prohibit Exchange members from entering into arrangements with 
other broker-dealers to do crossing transactions without applying the 
same exposure requirement; and (2) to prohibit Exchange members from 
violating the exposure requirement for solicited orders.
    On July 8, 2003, the Exchange submitted Amendment No. 4 in response 
to ISE's comments. In particular, the Exchange amended the proposed 
rule text relating to the term ``off-floor broker-dealer,'' to clarify 
that off-broker-dealer orders include orders of market makers from 
other exchanges.\31\ The Exchange also amended the proposed rule text 
to clarify that the exposure requirement would also apply to solicited 
transactions.\32\ Furthermore, the Exchange proposed to add new rule 
text, pursuant to PHLX Rules 1080(b)(ii)(B), to prevent any Exchange 
member or member organization from being a party to any arrangement to 
circumvent the proposed crossing procedures, pursuant to PHLX Rule 
1080(b)(ii)(A), by providing an opportunity for a customer, member, 
member organization, or non-member broker-dealer to execute against an 
agency order immediately, whether delivered via AUTOM or represented in 
the trading crowd by a member or a member organization.\33\
---------------------------------------------------------------------------

    \31\ See Amendment No. 4, supra note 9.
    \32\ Id.
    \33\ Id.
---------------------------------------------------------------------------

III. Discussion

    The Commission has reviewed carefully the proposed rule change, the 
comment letter, the Exchange's response to the comments, and all the 
amendments and finds that the proposed rule change, as amended, is 
consistent with the requirements of Section 6(b)(5)\34\ of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\35\ In particular, the Commission believes that 
the proposed rule change, as amended by Amendments No. 4 and 5, is 
consistent with Section 6(b)(5) of the Act,\36\ which requires, among 
other things, that the rules of an exchange be designed to promote just 
and equitable principles of trade, to facilitate transactions in 
securities, 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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b)(5).
    \35\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission anticipates that the Book Match should help to 
provide faster execution of certain eligible inbound customer and off-
floor broker-dealer options orders, while reducing the burden on the 
Exchange's specialists to manually execute these orders. The Commission 
believes that the Book Match proposal should benefit customers using 
the AUTO-X system, as well as customers whose orders are residing in 
the Exchange's customer limit order book that are at the NBBO.
    Moreover, the PHLX represents that the Book Match function would 
operate consistent with the Plan and PHLX Rules 1083 through 1087 
adopted to implement the Plan, and that Book Match would execute 
eligible linkage orders at the Firm Customer Quote Size in the case of 
P/A Orders (i.e., the inbound customer orders), and at the Firm 
Principal Quote Size (i.e., the inbound off-floor broker-dealer orders) 
in the case of P Orders.
    The SEC notes that the Exchange has specifically clarified that 
off-floor broker-dealer orders are subject to the priority-yielding 
provision of PHLX Rule 1014(g)(i). The Commission believes that this 
requirement of the proposal should ensure that retail customers are not 
adversely affected and should promote investor protection by retaining 
customer orders' priority on the book.
    Moreover, the SEC finds that the proposed rules relating to 
internalization of orders delivered via AUTOM should address the 
commenter's concern that the proposed exposure requirement should be 
applied to any pre-arranged proprietary or solicited crosses.\37\ 
Specifically, by requiring an Exchange member or member organization to 
expose to the trading crowd for at least 30 seconds an agency order 
before executing any part of the order as principal, or before such 
order may be executed by any order solicited by the originating broker-
dealer, these rules should potentially ensure that the crossing and 
facilitation

[[Page 54516]]

procedures described above are not circumvented.
---------------------------------------------------------------------------

    \37\ The Commission previously approved similar provisions as 
part of ISE's rules and CBOEDirect's rules. See ISE Rules 717(d) and 
(e), Supplemental Materials .01 and .02; and CBOE Rule 43.12C.
---------------------------------------------------------------------------

    The Commission believes that the prohibition on such arrangements 
is important to prevent members or member organizations and a third 
party from having their orders executed against each other, without 
exposing these orders to other trading interest. The SEC expects the 
Exchange to develop a surveillance procedure to identify patterns in 
which a firm places an order on the book and then shortly thereafter 
submits a contra side order executing against the prior related order. 
The SEC expects PHLX surveillance to address the SEC's concern that 
firms may potentially game the internalization aspect of Book Match by 
mismarking orders.
    The Commission finds good cause for approving Amendments No. 4 and 
5 prior to the thirtieth day after the date of publication of notice of 
filing thereof in the Federal Register. Amendment No. 4 should clarify 
the scope of the application of the exposure requirement, and the 
proposed language relating to the internalization of orders delivered 
via AUTOM and responds to the comment letter. Moreover, Amendment No. 5 
is similar to proposed rule changes that were previously approved by 
the Commission.\38\ Thus, Amendment No. 5 concerns issues that 
previously have been the subject of a full comment period pursuant to 
Section 19(b) of the Act,\39\ and thus raises no novel issues.\40\ The 
SEC notes that Book Match will be deployed, on an issue-by-issue basis, 
no later than October 1, 2003. Accordingly, the Commission believes 
that there is good cause, consistent with Section 19(b) of the Act,\41\ 
to approve Amendments No. 4 and 5 to the proposal on an accelerated 
basis.
---------------------------------------------------------------------------

    \38\ See Securities Exchange Release Nos. 44462 (June 21, 2001), 
66 FR 34495 (June 28, 2001) (order approving the Chicago Board 
Options Exchange's (``CBOE'') proposal relating to automatic 
execution of certain orders on the CBOE's electronic limit order 
book); and 42652 (April 7, 2000), 65 FR 20235 (April 14, 2000) 
(order approving the American Stock Exchange's (``AMEX'') proposal 
relating to Auto-Match).
    \39\ 15 U.S.C. 78s(b).
    \40\ See supra note 10.
    \41\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written date, views and 
arguments concerning Amendments No. 4 and 5, including whether 
Amendments No. 4 and 5 are 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 Amendments No. 4 and 5 that are 
filed with the Commission, and all written communications relating to 
Amendments No. 4 and 5 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-2002-86 and should be submitted by October 8, 2003.

V. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Act,\42\ that the proposed rule change (SR-PHLX-2002-86), as amended by 
Amendments No. 4 and 5 be, and hereby is, approved, and that Amendments 
No. 4 and 5 to the proposed rule change be, and hereby are, approved on 
an accelerated basis.
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78s(b)(2).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\43\
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-23739 Filed 9-16-03; 8:45 am]
BILLING CODE 8010-01-P