[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Notices]
[Pages 54717-54719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26159]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41939; File No. SR-Phlx-99-16]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Relating to the Deletion of Obsolete Procedural
Provisions within Phlx Rules 500, 501, 508, and 523 Applicable to the
Allocation, Evaluation and Securities Committee
September 28, 1999.
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 July 15, 1999, as amended on September 21, 1999,\3\ 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 Exchange. 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\ See Letter from Richard Rudolph, Counsel, Phlx, to Joshua
Kans, Special Counsel, Division of Market Regulation (``Division''),
Commission, dated September 20, 1999. Although the Exchange
originally filed the proposal on July 15, 1999, the Phlx failed to
provide the SEC with a 5-day written notice of its intent to file
the proposal, and the July 15th proposal did not indicate that the
proposed rule change would not become operative for 30 days after
the date of the filing or for such shorter time as the Commission
may designate. Both requirements must be satisfied before a ``non-
controversial'' rule can become immediately effective under 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
The Exchange proposes to amend obsolete procedural provisions
applicable to the Allocation, Evaluation and Securities Committee
(``Allocation Committee'') and other committees. Specifically, the
Exchange proposes to modify certain provisions governing when the
Allocation Committee is required to consult with the Floor Procedure
Committee (regarding equities specialist units), the Options Committee
(regarding options specialist units) and the Foreign Currency Options
Committee (regarding currency options specialist units). The Exchange
also proposes to modify the notice requirement relating to the transfer
of equity books or options classes among specialists.
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 Exchange 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 Exchange 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Phlx represents that the purpose of the proposed rule change is
to update Exchange Rules 500, 501, 508, and 523 to reflect the time
intensity associated with the specialist appointment, transfer, and
reallocation process. In particular, the proposed amendments are
intended to eradicate obsolete procedural provisions to reflect actual
practice, and to eliminate the Committee's frequent need to invoke the
exemptive provision found in Exchange Rule 525.\4\
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\4\ Phlx Rule 525 provides that the Allocation Committee shall
have the authority to grant any exemption from any provision in Phlx
Rules 500 through 599 (governing, among other things, allocations,
reallocations and transfers of options classes and equity books)
where necessary due to extraordinary circumstances, or impose any
condition on any applicant or registrant that the Allocation
Committee deems necessary or appropriate in
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[[Page 54718]]
The rules governing the Allocation Committee were adopted in 1982
as a pilot program \5\ and were subsequently approved on a permanent
basis on June 26, 1991.\6\ Before then, the Floor Procedure Committee,
and the Options Committee allocated and reallocated equity, and options
books, respectively. Because the Allocation Committee was a new concept
when it was formed, the Exchange deemed it necessary that the
Allocation Committee consult with the respective floor committees.
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\5\ See Securities Exchange Act Release No. 18975 (August 17,
1982), 47 FR 37019 (August 24, 1982) (SR-Phlx-81-1). On February 23,
1988, the pilot program was extended indefinitely until further
action was taken by the Commission. See Securities Exchange Act
Release No. 25388 (February 23, 1988), 53 FR 6725 (March 2, 1988)
(SR-Phlx 87-42).
\6\ See Securities Exchange Act Release No. 29369 (June 26,
1991), 56 FR 30604 (July 3, 1991) (SR-Phlx-87-42).
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Due to time constraints in the transfer and reallocation of equity
and options books to specialist units, the Phlx now believes that it is
often impractical for the Allocation Committee to consult with the
respective floor committees. The Allocation Committee finds it
necessary to meet often, with short notice, to expedite the transfer or
reallocation of various equity issues and options to allow the new
specialist units promptly to commence trading the transferred or
reallocated security. The rules governing new specialist unit
appointments, transfers and reallocations contain procedural guidelines
that are time-consuming and cumbersome given the realities of today's
securities markets.
The proposed rule change would amend Phlx Rule 501(a) and (c) to
eliminate the requirement that the Allocation Committee consult with
the respective floor committees prior to appointing a specialist unit
or requiring a specialist unit to obtain additional staff. The proposed
rule change would also amend Phlx Rule 501(d) to eliminate the
requirement that a specialist unit report certain staffing or capital
changes to the respective floor committees, while continuing to require
that specialist units report such changes to the Allocation Committee.
The proposed rule change would also amend Phlx Rule 508, governing
reallocations, in several ways. Although the proposed rule change would
continue to require that proposed agreements among specialists to
reallocate equities books or options cases be identified to the
Allocation Committee prior to the proposed transfer, it eliminates the
provision requiring 12 days advance notice. The proposed rule change
would also eliminate the requirement that such agreements be provided
in advance to the floor committees governing equities and foreign
currency options. Because the Options Committee has requested that it
be consulted prior to any such transfer, Rule 508 would retain the
requirement that agreements to reallocate options classes be provided
in advance to the Options Committee (although the 12 day advance notice
requirement is also eliminated in this instance, as well).\7\
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\7\ Commentary .01 to Phlx Rule 508 will continue to provide
that a physical options book may not be transferred to a different
location until 45 calendar days after the Options Committee
disseminates its approval (although the Options Committee may
shorten that time). Consistent with this commentary, the Options
Committee needs to be consulted prior to any transfer of options
classes among or between specialists on the Phlx options floor so
that the Options Committee may ensure that different options classes
are physically located in a manner that would not impose an
unreasonable burden on the Phlx floor options traders who may
participate in multiple trading crowds. Telephone conversation
between Richard Rudolph, Counsel, Phlx, and Hong-anh Tran, Attorney,
and Joshua Kans, Special Counsel, Division, Commission, dated
September 27, 1999.
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The Committee intends to seek input from the various other
committees as warranted. Thus, the proposal would add a new paragraph
``(b)'' added to Phlx Rule 500 to allow the Committee to consult with
the various committees on certain issues as warranted, consistent with
the exchange by-laws.\8\
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\8\ Article X, Section 10-7(d) of the Exchange by-laws requires
the Committee to consult with the various other committees as
necessary to perform its functions.
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Finally, the Exchange proposes to amend Phlx Rule 523 to eliminate
the requirement that the Allocation Committee consult with the Floor
Procedures Committee with respect to the Allocation Committee's ability
to reallocate equity securities not traded on the Philadelphia Stock
Exchange Automated Communication and Execution (``PACE'') system.
2. Statutory Basis
The proposed rule change is consistent with Section 6 of the Act
\9\ in general, and further the objectives of Section 6(b)(5) \10\ in
particular in that it is designed to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
as well as to protect investors and the public interest. In particular,
the proposed rule change is consistent with section 6(b)(5) because it
provides for the expeditious continuity of trading in securities that
are allocated to specialist units or reallocated or transferred from on
specialist unit to another.
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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
No written comments were either solicited or received by the
Exchange.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
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) Does not become
operative for 30 days from September 21, 1999, the date that the filing
was amended, and because the July 15, 1999 proposal satisfied the
requirement that the Exchange give the Commission five business days
written notice of the Exchange's intent to file the proposed rule
change, it has become effective pursuant to Section 19(b)(3)(A) of the
Act and Rule 19b-4(f)(6) thereunder.\11\ At any time within 60 days of
the filing of the proposed rule change, the Commission may summarily
abrogate such rule change if its appears to the Commission that such
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in the furtherance of the
purposes of the Act.\12\
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\11\ 17 CFR 240.19b-4(f)(6) (1999).
\12\ 15 U.S.C. 78s(b)(3)(C).
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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.\13\ 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
[[Page 54719]]
Commission, and all written communications relating to the proposed
rule change between the Commission and any persons, 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 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-99-16 and should be
submitted by October 28, 1999.
\13\ In approving the proposal, the Commission has considered
the rule's impact on efficiency, competition and capital formation.
15 U.S.C. 78c(f).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 99-26159 Filed 10-6-99; 8:45 am]
BILLING CODE 8010-01-M
