[Federal Register Volume 68, Number 182 (Friday, September 19, 2003)]
[Notices]
[Pages 54926-54927]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-23950]



[[Page 54926]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48490; File No. SR-Phlx-2003-64]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Extending the Program to Deploy the Options Floor Broker 
Management System

September 12, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\-thereunder, notice is hereby given 
that on September 12, 2003, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III, below, which Items have been 
prepared by the Phlx. The Exchange has designated the proposed rule 
change as constituting a ``non-controversial'' rule change under 
Section 19(b)(3)(A)(iii) of the Act,\3\ and paragraph (f)(6) of Rule 
19b-4 under the Act,\4\ which renders the proposal effective upon 
receipt of this filing by the Commission.\5\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
    \5\ The Exchange has requested that the Commission waive both 
the five-day pre-filing notification requirement and the 30-day 
operative delay, as specified in Rule 19b-4(f)(6)(iii). 17 CFR 
240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to extend its pilot program pertaining to the 
Options Floor Broker Management System (the ``System'') until November 
14, 2003.\6\ The System is a new component of the Exchange's Automated 
Options Market (AUTOM) and Automatic Execution (AUTO-X) System.\7\
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    \6\ On July 31, 2003, the Exchange filed a proposed rule change 
to implement a pilot program to deploy the Exchange's new System. 
The proposed rule change was noticed, and accelerated approval was 
granted thereto, on July 31, 2003. The pilot was scheduled to expire 
on August 29, 2003. See Securities Exchange Act Release No. 48266 
(July 31, 2003), 68 FR 152 (August 7, 2003) (SR-Phlx-2003-56). On 
August 29, the Commission extended the pilot. The pilot is currently 
scheduled to expire on September 12, 2003. See Securities Exchange 
Act Release No. 48425 (August 29, 2003), FR 68 53210 (September 9, 
2003) (SR-Phlx-2003-60). The Exchange has also filed for permanent 
approval of the proposed rules. See Securities Exchange Act Release 
No. 48265 (July 31, 2003), 68 FR 47137 (August 7, 2003) (SR-Phlx-
2003-40). The Exchange acknowledges that SR-Phlx-2003-40 and 
Amendment No. 1 thereto are subject to public comment, which may 
result in amendments to the proposed rules.
    \7\ 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 Exchange Rule 1080.
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    The text of the proposal rule change is set forth below. New text 
is in italics; deletions are in brackets.
* * * * *

Philadelphia Stock Exchange Automated Options Market (AUTOM) and 
Automatic Execution System (AUTO-X)

Rule 1080. (a)-(j) No change.
    Commentary:
    .01--.05 No change.
    .06 Options Floor Broker Management System. The Options Floor 
Broker Management System is a component of AUTOM designed to enable 
Floor Brokers and/or their employees to enter, route and report 
transactions stemming from options orders received on the Exchange. The 
Options Floor Broker Management System also is designed to establish an 
electronic audit trail for options orders represented and executed by 
Floor Brokers on the Exchange, such that the audit trail provides an 
accurate, time-sequenced record of electronic and other orders, 
quotations and transactions on the Exchange, beginning with the receipt 
of an order by the Exchange, and further documenting the life of the 
order through the process of execution, partial execution, or 
cancellation of that order. The Exchange will begin deployment of the 
Options Floor Broker Management System on July 31, 2003, with floor-
wide deployment to be completed not later than [September 12] November 
14, 2003.
* * * * *

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
    The purpose of the proposed rule change is to extend the 
effectiveness of the rules governing the System beyond the current 
effective date of September 12, 2003,\8\ in order to continue to have 
rules in place concerning the System and to ensure that Floor Brokers 
using the System during the continuing deployment will not be in 
violation of current Exchange rules regarding ticket marking 
requirements.
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    \8\ Telephone conversation between Rick Rudolph, Director and 
Counsel, Phlx, and Jennifer Colihan, Special Counsel, Division of 
Market Regulation (``Division''), Commission on September 12, 2003. 
During this conversation, the Exchange clarified the current 
effective date of the pilot.
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    The System is designed to enable Floor Brokers and/or their 
employees to enter, route and report transactions stemming from options 
orders received on the Exchange. Floor Brokers or their employees 
access the System through an electronic Exchange-provided handheld 
device on which they have the ability to enter the required information 
as set forth in Phlx Rule 1063(e), either from their respective posts 
on the options trading floor or in the trading crowd. The System will 
eventually replace the Exchange's current Floor Broker Order Entry 
System (``FBOE''),\9\ as part of a roll-out of the new System floor-
wide.
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    \9\ See Securities Exchange Act Release No. 41524 (June 14, 
1999), 64 FR 33127 (June 21, 1999) (SR-Phlx-99-11). The FBOE, a 
component of AUTOM, currently provides a means for (but does not 
require) Floor Brokers to route eligible orders to the specialist's 
post, consistent with the order delivery criteria of the AUTOM 
System set forth in Exchange Rule 1080(b). The new System would 
include the same functionality as the FBOE, in addition to providing 
an electronic audit trail for non-electronic orders received by 
Floor Brokers by way of the entry of the required information in 
proposed Rule 1063(e).
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    All of the rules pertaining to the System adopted in July and 
effective through September 12 \10\ are proposed to be extended until 
November 14, 2003, including: Phlx Rules 1014(g), 1015, 1051, 1063, 
1064, and 1080.06, as well as Option Floor Procedure Advices 
(``Advice'') A-11, B-6, B-8, C-2, C-3, F-1, F-2, and F-4. In addition 
to extending the effective date of the rules, this proposal also amends 
Phlx Rule 1080, Commentary .06 to state that the

[[Page 54927]]

Exchange will complete deployment of the System by November 14, 
2003.\11\
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    \10\ See note 6, supra.
    \11\ Telephone conversation between Rick Rudolph, Director and 
Counsel, Phlx, and Jennifer Colihan, Special Counsel, Division, 
Commission on September 12, 2003. During this conversation, the 
Exchange clarified the current effective date of the pilot, the date 
for the proposed extension of the pilot, and the date on which 
deployment of the system will be completed.
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    The Exchange believes that the System will enable Floor Brokers to 
handle orders they represent more efficiently, and will further enable 
the Exchange to comply with the audit trail requirement for non-
electronic orders required 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.\12\
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    \12\ See Securities Exchange Act Release No. 43268 (September 
11, 2000) and Administrative Proceeding File 3-10282.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \14\ in particular, in that it is designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanisms of a free and open market and a national 
market system, and to protect investors and the public interest, by 
providing a System that enables Floor Brokers to handle orders they 
represent more efficiently, while enabling the Exchange to comply with 
the requirement in the Order to provide an electronic audit trail for 
non-electronic orders entered on the Exchange.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change: (i) does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days (or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest) after the date of the filing, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \15\ and 
Rule 19b-4(f)(6) thereunder.\16\ At any time within 60 days of the 
filing of such proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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    The Commission believes that it is consistent with the protection 
of investors and the public interest to waive the five-day pre-filing 
notice and 30-day operative date to allow the System and rules to 
continue on a pilot basis without interruption until November 14, 
2003.\17\
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    \17\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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 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-2003-64 and 
should be submitted by October 10, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).


Jill M. Peterson,
Assistant Secretary.
[FR Doc. 03-23950 Filed 9-18-03; 8:45 am]
BILLING CODE 8010-01-P