[Federal Register Volume 60, Number 218 (Monday, November 13, 1995)]
[Notices]
[Pages 57031-57032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27881]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36456; File No. SR-Phlx-95-67]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 to the Proposed Rule Change by the
Philadelphia Stock Exchange, Inc., Relating to Increasing the Maximum
Size of Placer Dome Options Orders Eligible for Automatic Execution
November 3, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on
September 22, 1995, 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 self-
regulatory organization.\1\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
\1\ On October 30, 1995, the Phlx amended its proposal to
request that the proposal be implemented on a six-month pilot basis.
See Letter from Gerald D. O'Connell, First Vice President, Market
Regulation and Trading Operations, Phlx, to Michael Walinskas,
Branch Chief, Office of Market Supervision, Division of Market
Regulation, Commission, dated October 30, 1995 (``Amendment No.
1'').
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Generally, public customer market and marketable limit orders for
up to 25 option contracts are eligible for execution through the
automatic execution (``AUTO-X'') feature of the Phlx's Automated
Options Market (``AUTOM'') system.\2\ The Phlx proposes to implement a
six-month pilot program that increases the maximum AUTO-X order size
eligibility for public customer market and marketable limit orders for
Placer Dome, Inc. (``PDG'') options from 25 contracts to 50 contracts.
\2\ For USTOP 100 Index (``TPX'') options, public customer
market and marketable limit orders for up to 50 contracts are
eligible for AUTO-X. See Securities Exchange Act Release No. 35781
(May 30, 1995), 60 FR 30131 (June 7, 1995) (File No. SR-Phlx-95-29).
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The text of the proposed rule change is available at the Office of
the Secretary, Phlx, and at the Commission.
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 self-regulatory organization
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 self-regulatory organization
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
The purpose of the proposal is to implement a six-month pilot
program that increases the maximum AUTO-X order size eligibility for
PDG options from 25 to 50 contracts.\3\ The Phlx has traded PDG options
since 1987. According to the Exchange, PDG, which is traded on the New
York Stocks Exchange, has moved in price from 18\3/8\ in January 1995
to 27\5/8\ in September 1995. This, in turn, has caused increased
volatility in the overlying options. In addition, the Phlx notes that
PDG options have consistently been one of the most active equity
options traded on the Phlx. According to the Phlx, the daily trading
volume in PDG options has averaged 1,641 contracts per day throughout
1995, and open interest was 69,425 contracts on September 8, 1995.
\3\ See Amendment No. 1, supra note 1.
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Because of this recent activity, the Phlx proposes to implement a
six-month pilot program allowing up to 50 PDG contracts to be executed
automatically by AUTO-X. Generally, a maximum of 25 equity option
contracts are eligible for AUTO-X, although USTOP 100 Index options are
subject to a 50 contract AUTO-X maximum.\4\ In addition, the Phlx
recently filed a proposal with the Commission to increase the maximum
AUTO-X order size to 50 contracts for all equity and index options.\5\
Accordingly, the purpose of the proposal at hand is to afford expedited
treatment to PDG options to provide a sample, which can be reviewed
while consideration is given to File No. SR-Phlx-95-39.
\4\ See Securities Exchange Act Release No. 35871, supra note 1.
\5\ See File No. SR-Phlx-95-39.
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The Phlx notes that the proposed 50 contracts for PDG options
represents the maximum size of a permissible AUTO-X order in PDG
options, which is determined by the specialist in PDG options. Under
the 10-up rule,\6\ the maximum size of the Exchange's AUTO-X guarantee
is 10 contracts.
\6\ See Phlx Rule 1033(a), ``Size of Bid/Offer and 10-up
Guarantee.''
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AUTOM, which has operated on a pilot basis since 1988 and was most
recently extended through December 31, 1995,\7\ is the Phlx's
electronic order
[[Page 57032]]
routing, delivery, execution and reporting system for equity and index
options. AUTOM is an on-line system that allows electronic delivery of
options orders from member firms directly to the appropriate specialist
on the Exchange's trading floor.
\7\ See Securities and Exchange Act Release No. 35183 (December
30, 1994), 60 FR 2420 (January 9, 1995) (order approving File No.
SR-Phlx-94-41). See also Securities Exchange Act Release Nos. 25540
(March 31, 1988), 53 FR 11390 (order approving AUTOM on a pilot
basis); 25868 (June 30, 1988), 53 FR 25563 (order approving File No.
SR-Phlx-88-22, extending pilot through December 31, 1988); 26354
(December 13, 1988), 53 FR 51185 (order approving File No. SR-Phlx-
88-33, extending pilot program through June 30, 1989); 26522
(February 3, 1989), 54 FR 6465 (order approving File No. SR-Phlx-89-
1, extending pilot through December 31, 1989); 27599 (January 9,
1990), 55 FR 1751 (order approving File No. SR-Phlx-89-03, extending
pilot through June 30, 1990); 28625 (July 26, 1990), 55 FR 31274
(order approving File No. SR-Phlx-90-16, extending pilot through
December 31, 1990); 28978 (March 15, 1991), 56 FR 12050 (order
approving File No. SR-Phlx-90-34), extending pilot through December
31, 1991); 29662 (September 9, 1991), 56 FR 46816 (order approving
File No. SR-Phlx-91-31, permitting AUTO-X orders up to 20 contracts
in Duracell options only); 29837 (October 18, 1991), 56 FR 36496
(order approving File No. SR-Phlx-91-33, increasing size of AUTO-X
orders from 10 contracts to 20 contracts); 32906 (September 15,
1993), 58 FR 15168 (order approving File No. SR-Phlx-92-38,
permitting AUTO-X orders up to 25 contracts in all options); and
33405 (December 30, 1993), 59 FR 790 (order approving File No. SR-
Phlx-93-57, extending pilot through December 31, 1994).
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Certain orders are eligible for AUTOM's automatic execution
feature, AUTO-X.\8\ AUTO-X orders are executed automatically at the
disseminated quotation price on the Exchange and reported to the
originating firm. Orders that are not eligible for AUTO-X are handled
manually by the specialist.
\8\ Orders for up to 500 contracts are eligible for AUTOM and
public customer orders for up to 25 contracts, in general, are
eligible for AUTO-X. See Securities Exchange Act Release Nos. 35782
(May 30, 1995), 60 FR 30136 (June 7, 1995) (order approving File No.
SR-Phlx-95-30); and 32000 (March 15, 1993), 58 FR 15168 (March 19,
1994) (order approving File No. SR-Phlx-92-38). As noted above,
public customer orders for up to 50 contracts in TPX options are
eligible for AUTO-X. See Securities Exchange Act Release No. 35781,
supra note 1.
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The Commission approved the use of AUTO-X as part of the AUTOM
pilot program in 1990.\9\ In 1991, the Commission approved a Phlx
proposal to extend AUTO-X to all equity options.\10\ As noted earlier,
orders for up to 500 contracts are eligible for AUTOM and orders for up
to 25 contracts, in general, are eligible for AUTO-X.
\9\ See Securities Exchange Act Release No. 27599 (January 9,
1990), 55 FR 1751 (January 18, 1990) (order approving File No. SR-
Phlx-89-03).
\10\ See Securities Exchange Act Release No. 28978 (March 15,
1991), 56 FR 12050 (March 21, 1991) (order approving File No. SR-
Phlx-90-34).
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The Phlx believes that the proposed expanded AUTO-X parameter for
PDG options should improve the AUTOM system by offering the benefits of
AUTO-X, including prompt and efficient automatic executions at the
displayed price, to additional customer orders. The Exchange states
that the proposed AUTO-X increase for PDG options from a maximum of 25
to 50 contracts is in line with prior changes. For examples, the Phlx
notes that the Commission previously has approved an AUTO-X increase
from 10 to 20 contracts.\11\ In addition, the Commission has previously
approved the expansion of AUTO-X with respect to a specific equity
option.\12\
\11\ See Securities Exchange Act Release No. 29837, supra note
5.
\12\ See Securities Exchange Act Release No. 29662, supra note 5
(permitting AUTO-X orders up to 20 contracts in Duracell options
only).
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The Exchange represents that the specialist unit currently assigned
in PDG, which requested this change, presently is in compliance with
Exchange financial requirements and possesses adequate capital to
fulfill its proposed AUTO-X responsibilities respecting 50 contracts in
PDG. In addition, the Exchange notes that although AUTO-X orders are by
definition executed automatically, there are opportunities for price
improvement in accordance with a post-execution price change. For
example, in the event of an error in the displayed price, the AUTO-X
price can be adjusted.
The Exchange notes that the proposed expansion of the maximum AUTO-
X order size in PDG options should not impose significant burdens on
the operation and capacity of the AUTOM system. Instead, the Phlx
believes that the proposal may enhance AUTOM's effectiveness by
increasing the number of orders eligible for automatic execution,
thereby reducing manual processing.
The Phlx believes that the proposal is consistent with Section 6(b)
of the Act, in general, and, in particular, with Section 6(b)(5), in
that it is designed to promote just and equitable principles of trade
and to prevent fraudulent and manipulative acts and practices, as well
as to protect investors and the public interest, by extending the
benefits of AUTO-X to a larger number of customer orders.
(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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reason for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(a) By order approve such proposed rule change, or
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 Section, 450 Fifth Street, NW.,
Washington, DC Copies of such filing will also be available for
inspection and copying at the principal office of the above-mentioned
self-regulatory organization. All submissions should refer to the file
number in the caption above and should be submitted by December 4,
1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
\13\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27881 Filed 11-9-95; 8:45 am]
BILLING CODE 8010-01-M
