[Federal Register Volume 59, Number 21 (Tuesday, February 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 92-2119]
[[Page Unknown]]
[Federal Register: February 1, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33512; File No. SR-Phlx-93-08]
Self-Regulatory Organizations; Order Granting Approval to a
Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating
to an Amendment to Floor Procedure Advice F-2 Regarding Time Stamping,
Matching, and Access to Matched Trade Tickets
January 24, 1994.
On March 29, 1993, the Philadelpia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') filed with 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 to amend Phlx Floor Procedure
Advice (``Phlx Advice'') F-2, currently titled ``Responsibility for
Time Stamping and Matching. Notice of the proposal appeared in the
Federal Register on September 1, 1993.\3\ No comment letters were
received on the proposed rule change. This order approves the
Exchange's proposal.
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\1\15 U.S.C. 78s(b)(1) (1988).
\2\17 CFR 240.19-4 (1992).
\3\See Securities Exchange Act Release No. 32792 (August 24,
1993), 58 FR 46263.
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The Phlx has proposed the following amendments to Phlx Advice F-2:
(1) Renaming Phlx Advice F-2, ``Time Stamping, Matching and Access to
Matched Trades;'' (2) requiring matched tickets to be submitted to the
specialist post immediately upon execution; (3) requiring an execution
time stamp on the reverse side of a trade ticket; (4) adding provisions
limiting access to matched trade tickets to participants in the
transaciton, the specialist in that option and floor officials acting
in that capacity; (5) requiring specialist approval to access matched
trade tickets; and (6) requiring specialists to keep matched tickets
for a minimum of three years.
Phlx Advice F-2 currently spells out the responsibilities
pertaining to time stamping and matching floor tickets, imposing this
duty upon the largest participant of a trade, or, where there is one
buyer and one seller, upon the seller. The Phlx is proposing to
separate Phlx Advice into three sections. Section (a) would contain the
current time stamping and matching responsibilities as well as two
additions. First, trade participants would be required to submit
matched tickets to the appropriate person at the specialist post
immediately upon effecting a transaction in order to assure that the
initiating party agrees with each contra-party's claim as to his or her
level of participation as well as to ensure that the terms of the trade
are correct. The Commission believes that immediate submissions also
lessen the potential for losing a matched ticket before entry into
Exchange trade comparison systems. Second, an execution time stamp
would be required on the reverse side of the order ticket to
distinguish the execution and order entry times for surveillance and
audit trail purposes.
Becuase the Phlx is proposing to add provisions relating to access
to matched trades to Advice F-2, the Exchange proposes to rename this
Advice ``Time Stamping, Matching and Access to Matched Trades.'' In
this regard, the Phlx seeks to limit access to matched trade tickets to
those with a legitimate interest: participants, the specialist in that
option, and a floor official acting in that capacity. Intra-day,
matched trade tickets are kept behind the specialist post on the floor
after being electronically entered into the Exchange's trade comparison
systems so that errors can be corrected. Thus, the Phlx is also
proposing to require prior specialist permission before looking through
these tickets. The Commission believes that limiting access should
reduce the number of instances where floor personnel access trade
tickets to discern customers' identities or to ascertain trading
patterns. In addition, the Commission believes that supervising access
to trade tickets should provide accountability for persons who access
such tickets and help ensure that the trade tickets are returned to the
specialist post in a timely manner.
Matched trade tickets serve important surveillance and operations
functions. Once a trade has been processed for trade dissemination and
clearing, it is then left in the possession of the attendant
specialist. Accordingly, the Phlx is prosing to not only limit access
to these tickets, but also to require specialists to keep all matched
trade tickets in their possession for a period of three years, whether
or not the specialist participated or acted as agent in any such trade.
Advice F-2 is applicable to both the equity options and foreign
currency options floors. Accordingly, the Phlx proposes adding the
notation ``OF'' after Advice F-2. This notation indicates that the
advice is applicable to the Phlx options floor and the Phlx foreign
currency option floor. In addition, the Phlx proposes to increase the
fine schedule for this Advice and to apply the new fines on a three-
year cycle, such that repeat violations during the same three-year
period would result in escalating fines.\4\
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\4\Under the rolling three-year cycle, if there is no violation
of Advice F-2 for three years, the next violation would be treated
as a first occurrence. If there is a violation within three years
after the most recent violation, the next highest fine will be
issued. Thus, a third violation less than three years after a fine
was issued for a second occurrence would be treated as a third
occurrence, even though more than three years may have elapsed after
the first occurrence.
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The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of section 6(b)(5)\5\ in that the proposal
is designed to prevent fraudulent acts and practices, promote just and
equitable principles of trade, and protect investors and the public
interest. Specifically, the Commission believes that the proposed rule
change will help ensure prompt and accurate trade reporting, will
increase the performance of the Exchange's audit trail and other
surveillance-related trade comparison systems, and provide appropriate
fines for failing to perform the duties imposed by the rule change.
Moreover, the Commission believes that the Exchange's proposed
supervision of access to the saved trade tickets will serve as an
adequate measure to prevent such information from being used for
improper purposes.
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\5\15 U.S.C. 78f(b)(5) (1988).
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It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\6\ that the proposed rule change (SR-Phlx-93-08) is approved.
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\6\15 U.S.C. 78s(b)(2) 1982).
For the commission, by the Division of Market Regulations,
pursuant to delegated authority.\7\
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\7\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 92-2119 Filed 01-31-94; 8:45 am]
BILLING CODE 8010-01-M
