[Federal Register Volume 69, Number 27 (Tuesday, February 10, 2004)]
[Notices]
[Pages 6360-6361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2812]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49178; File No. SR-Phlx-2004-10]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. Relating To a Pilot Program To Deploy 
the Options Floor Broker Management System

February 3, 2004.
    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 February 2, 2004, 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 and II 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 and to approval the 
proposal, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend its pilot program pertaining to the 
Options Floor Broker Management System (the ``System'') from February 
6, 2004 until August 2, 2004.\3\ The System is a new component of the 
Exchange's Automated Options Market (AUTOM) and Automatic Execution 
(AUTO-X) System.\4\
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    \3\ 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 to September 12, 2003. 
See Securities Exchange Act Release No. 48425 (August 29, 2003), 68 
FR 53210 (September 9, 2003) (SR-Phlx-2003-60). On September 12, 
2003, the Commission extended the pilot again until November 14, 
2003. See Securities Exchange Act Release No. 48490 (September 12, 
2003), 68 FR 54926 (September 19, 2003). On December 18, 2003, the 
Commission extended the pilot until February 6, 2004. See Securities 
Exchange Act Release No. 48947 (December 18, 2003), 68 FR 75012 
(December 29, 2003). In order to avoid a lapse in the effectiveness 
of this pilot, the Commission now is approving the Exchange's 
proposal to extend the rule from February 6, 2004 until August 2, 
2004. 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.
    \4\ 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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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 III 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 through August 2, 2004, 
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 would not be in violation of current Exchange rules 
regarding ticket marking requirements. The rules had previously been 
effective through August 29, 2003, extended through September 12, 2003, 
November 14, 2003, and February 6, 2004.\5\
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    \5\ See note 3, supra.
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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 would 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''),\6\ as part of a roll-out of the new 
System floor-wide.
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    \6\ 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 effective February 6, 
2004 are proposed to be extended until August 2, 2004, including: 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.
    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 
Sanctions.\7\
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    \7\ See Securities Exchange Act Release No. 43268 (September 11, 
2000) and Administrative Proceeding File 3-10282 (the ``Order'').
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and

[[Page 6361]]

furthers the objectives of Section 6(b)(5) of the Act \9\ 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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    \8\ 15 U.S.C. 78f(b).
    \9\ 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. 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. 
Comments may also be submitted electronically at the following e-mail 
address: <a href="/cdn-cgi/l/email-protection#3e4c4b525b135d5153535b504a4d7e4d5b5d10595148"><span class="__cf_email__" data-cfemail="592b2c353c743a3634343c372d2a192a3c3a773e362f">[email protected]</span></a>. All comment letters should refer to 
File No. SR-Phlx-2004-10. 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, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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 Exchange. All 
submissions should be submitted by March 2, 2004.

IV. Discussion

    After careful review, 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.\10\ In particular the Commission finds that the proposed rule 
is consistent with Section 6(b)(5) of the Act, which requires that the 
rules of an exchange be designed to promote just and equitable 
principles of trade, remove impediments to and perfect the mechanism of 
a free and open market and a national securities System, and protect 
investors and the public interest.\11\
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    \10\ In approving this proposed rule change, the Commission 
notes that it has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of the publication of 
notice thereof in the Federal Register. The Commission believes that 
granting accelerated approval to the proposed rule change on a pilot 
basis will allow the Exchange to have enforceable rules governing use 
of the Exchange's new System in effect prior to permanent approval of 
the rules, and will help ensure that members are properly trained and 
familiar with the rules. In addition, that Commission is granting 
accelerated approval in order to prevent a lapse in the effectiveness 
of the Exchange's rules governing operation of the System to ensure 
continuity of the pilot.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-2004-10) is approved on 
an accelerated basis on a pilot basis until August 2, 2004.
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    \12\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-2812 Filed 2-9-04; 8:45 am]
BILLING CODE 8010-01-P


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