76816 Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 

1 15 U.S.C. 78s(b)(1)

2 17 CFR 240.19b–4.

3Amendment No. 1 replaced the original filing in 

its entirety. Amendment No. 1 clarified that 

violations of Regulation 5 would be enforced 

against members and not the guests themselves, and 

added a description for the Applicant Access Card.

4 Vilations of Regulation 5 are enforced against 

members, member organizations, and/or associated 

persons who permit their guest to have access to the 

Exchange floor without properly signing them in, 

accompanying them, and otherwise ensuring their 

compliance with the rule.

5See Securities Exchange Act Release No. 30416 

(February 26, 1992), 57 FR 7836 (March 4, 1992) 

(approving File No. SR–Phlx–91–06).

6The Applicant Access Card, an electronic 

proximity card, was an access card designed to 

permit access to the Exchange floor for a period of 

21 days. After that period expried, the applicant’s 

use of the Applicant Access Card would generate 

an alert to Exchange personnel who would then 

obtain the return of the Applicant Access Card from 

the applicant.

7 15 U.S.C. 78f(b).

8 15 U.S.C. 78f(b)(5).

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50851; File No. SR–Phlx–

2004–51] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change and 

Amendment No. 1 Thereto by the 

Philadelphia Stock Exchange, Inc. 

Relating to Phlx Regulation 5, Visitors 

and Applicants 

December 14, 2004. 

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 October 

7, 2004, the Philadelphia Stock 

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by Phlx. On December 6, 

2004, Phlx filed Amendment No. 1 to 

the proposed rule change.3 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The exchange proposes to amend Phlx 

Regulation 5, Visitors and Applicants. 

The text of the proposed rule change is 

set forth below. Additions are italicized. 

Deletions are bracketed.

* * * * *

Regulation 5—[Visitors and Applicants] 

Guests

Non-member [visitors] guests will be 

permitted on the trading floor at the 

discretion of the respective floor 

committee (Options, FCO or Floor 

Procedures). All [visitors] guests must 

be signed in by a member or Exchange 

official and accompanied at all times by 

a member, associated person of a 

member or an Exchange official. 

[As a visitor, the applicant must be 

escorted by a representative of a 

member firm at all times while on the 

trading floor, and failure to do so shall 

result in a violation of this regulation by 

such member Firm. 

Once an applicant has filed an 

application with the Office of the 

Secretary pursuant to By-Law Article 

XII, Section 12–4, the Examinations 

Department and the Office of the 

Secretary shall conduct clearance 

procedures to verify personal data and 

financial viability. The applicant may be 

admitted as a visitor for ten business 

days, after which the applicant must 

submit an Applicant Access Card/Floor 

Badge application which is subject to 

approval by the Exchange pursuant to 

satisfactory completion of personal and 

financial data verification. Twenty-one 

days after the Access Card is issued, it 

will automatically expire; an applicant 

may apply to the Chairman of the 

Admissions Committee or his designee 

for a twenty-one day extension.]

1st Occurrence Official Warning 

2st Occurrence $50.00

3st Occurrence $100.00

4st Occurrence $200.00

5st and Thereafter Sanction is 

discretionary with Business Conduct 

Committee

* * * * *

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. Phlx 

has prepared summaries, set forth in 

sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organizations’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 update Phlx Regulation 5, 

Visitors and Applicants, encated as a 

rule of order and decorum under Phlx 

Rule 60. Phlx Regulation 5 orginally 

applied generally to non-member guests’

access to the trading floor.4 It was 

amended by the Exchange in 1992 to 

create an ‘‘applicant’’ status for 

prospective Exchange members from 

whom an application for membership 

had been filed and for whom the 

personal background check had been 

completed, but whose membership 

application process would not be 

completed until a subsequent posting 

period had been completed.5 That rule 

filing (File No. SR–Phlx–91–06) stated 

that, while clearance procedures are 

being conducted, which normally take 

about ten business days to complete, the 

prospective member would remain in a 

‘‘visitor’’ status, requiring the signature 

of a member for entry on the floor and 

constant accompaniment by a member 

while on the floor. Once the clearance 

procedures were completed, the 

applicant would submit an ‘‘Applicant 

Access Card/Floor Badge Application,’’

and upon issuance of the Applicant 

Access Card 6 and Floor Badge, the 

applicant would have unescorted access 

to the floor and not have to be signed 

in by a member. According to the 

Exchange, Phlx Membership Services no 

longer uses an Applicant Access Card/

Floor Badge Application and no longer 

issues Applicant Access Cards. Instead, 

applicants for membership who desire 

access to the trading floor are required 

to register as on-floor trading personnel 

pursuant to Phlx Rule 620(b), Trading 

Floor Registration. Once registered 

under Phlx Rule 620(b), applicants are 

issued the same access card issued to 

members, members’ staff and Exchange 

staff to permit access to the Exchange 

floor.

Therefore, Phlx proposes to return 

Regulation 5 to its pre-1992 wording. As 

such, Phlx Regulation 5 would continue 

to apply to gests who do not qualify for 

registration as on-floor trading 

personnel under Phlx Rule 620(b).

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act,8

in particular, in that it would eliminate 

outdated language which no longer 

reflects current procedures at the 

Exchange regarding access to the trading 

floor by applicants for membership.

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change would impose 

any inappropriate burden on 

competition. 

Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76817

9 15 U.S.C. 78s(b)(2).

10 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3AUTOM 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 features, AUTO–X, Book Sweep and 

Book March. 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.

4An SQT is an Exchange Registered Options 

Trader (‘‘ROT’’) who has received permission from 

the Exchange to generate and submit option 

quotations electronically through an electronic 

interface with AUTOM via an Exchange approved 

proprietary electronic quoting device in eligible 

options to which such SQT is assigned. See Phlx 

Rule 1014(b)(ii)(A).

5An RSQT is a participant in the Exchange’s 

electronic trading system. ‘‘Phlx XL’’, who has 

received permission from the Exchange to trade in 

options for his own account, and to generate and 

submit option quotations electronically from off the 

floor of the Exchange through AUTOM in eligible 

options to which such RSQT has been assigned.

6See Securities Exchange Act Release No. 50100 

(July 27, 2004), 69 FR 46612 (August 3, 2004) (SR–

Phlx–2003–59).

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 reasons for so finding or 

(ii) as to which Phlx 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.9

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as amended, is consistent with 

the Act. Comments may be submitted by 

any of the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2004–51 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

450 Fifth Street, NW., Washington, DC 

20549–0609. 

All submissions should refer to File 

Number SR–Phlx–2004–51. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). 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 

Section, 450 Fifth Street, NW., 

Washington, DC 20549. Copies of this 

filing also will be available for 

inspection and copying at the principal 

office of the Phlx. All comments 

received will be posed without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–Phlx–

2004–51 and should be submitted on or 

before January 17, 2005.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

J. Lynn Taylor, 

Assistant Secretary.

[FR Doc. 04–27938 Filed 12–21–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50856; File No. SR–Phlx–

2004–91] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Notice of Filing of Proposed Rule 

Change To Establish a Directed Order 

Process for Orders Delivered to the 

Exchange Via AUTOM 

December 14, 2004. 

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 December 

9, 2004, the Philadelphia Stock 

Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Phlx. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Phlx proposes to amend Phlx 

Rule 1080, Philadelphia Stock Exchange 

Automated Options Market (AUTOM) 3

and Automatic Execution System 

(AUTO–X), and Phlx Rule 1014, 

Obligations And Restrictions Applicable 

to Specialists And Registered Options 

Traders, by adopting: (1) New Phlx Rule 

1080(l), Directed Orders, under which 

Exchange specialists, Streaming Quote 

Traders (‘‘SQTs’’) 4 and Remove 

Streaming Quote Traders (‘‘RSQTs’’) 5

trading on the Exchange’s electronic 

options trading platform, Phlx XL,6

would receive Directed Orders (as 

defined below); and (2) Phlx Rule 

1014(g)(viii), which would set forth the 

trade allocation algorithm for 

electronically executed and allocated 

trades involving Directed Orders. Below 

is the text of the proposed rule change. 

Proposed new language is in italics.

Philadephia Stock Exchange 

Automated Options Market (AUTOM) 

and Automatic Execution System 

(AUTO–X) 

Rule 1080. (a)–(k) No change. 

(l) Directed Orders. For a one-year 

pilot period, beginning on the date of 

approval of this Rule by the Securities 

and Exchange Commission, respecting 

Streaming Quote Options traded on 

Phlx XL, specialists, RSQTs and SQTs 

may receive Directed orders (as defined 

in this Rule) in accordance with the 

provisions of this Rule 1080(l).

(i)(A) The term ‘‘Directed Order’’

means any customer order to buy or sell 

which has been directed to a particular 

specialist, RSQT, or SQT by an Order 

Flow Provider, as defined below. To 

quality as a Directed Order, an order 

must be delivered to the Exchange via 

AUTOM.