34764 Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Notices

13 17 CFR 200.30–3(a)(34).

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

2 17 CFR 240.19b–4.

3See letter from Michael Pierson, Director,

Regulatory Policy, PCX, to John Roeser, Attorney,

Division of Market Regulation, Commission, dated

November 10, 1999 (‘‘Amendment No. 1’’).

4See Securities Exchange Act Release No. 42188

(December 1, 1999), 64 FR 68714.

5See Securities Exchange Act Release No. 42557

(Mar. 21, 2000), 65 FR 16680 (Mar. 29, 2000) (SR–

PCX–98–30) (order approving PCX Rule

6.2(h)(4)(B), ‘‘Floor Brokers who receive telephonic

orders while in the trading crowd must step outside

of the crowd, write up an order ticket and time

stamp it before representing the order in the

crowd’’); See also PCX Rule 6.85, Com. .03 (‘‘when

a Floor Broker receives a verbal order from a Market

Maker, or when a Floor Broker is requested by a

Market Maker to alter an order in his possession in

any way, the Floor Broker shall immediately

prepare an order ticket from outside the trading

crowd and time stamp it’’).

6See Amendment No. 1, supra note 3.

7See supra note 5.

8Under PCX Rule 6.2(h)(4), Floor Brokers are not

permitted to communicate directly with persons

located off the Trading Floor. See supra note 5.

9 15 U.S.C. 78f(b)(5).

10 In approving this proposed rule change, the

Commission has considered the proposal’s impact

on efficiency, competition, and capital formation.

15 U.S.C. 78c(f).

11 15 U.S.C. 78k–1(a)(1)(C)(i).

12 15 U.S.C. 78k–1(a)(1)(C)(ii).

13 15 U.S.C. 78f(b)(5).

14 15 U.S.C. 78k–1(a)(1)(C)(i).

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13531 Filed 5–30–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42810; File No. SR–PCX–

99–17]

Self-Regulatory Organizations; Pacific

Exchange, Inc.; Order Approving

Proposed Rule Change Permitting

Floor Brokers To Represent Orders

With a Ticket-to-Follow

May 23, 2000.

I. Introduction

On June 1, 1999, the Pacific Exchange,

Inc. (‘‘Exchange’’ or ‘‘PCX’’) submitted

to the Securities and Exchange

Commission (‘‘Commission’’), 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 seeking to amend its rules on

options trading to permit Floor Brokers

to immediately represent intra-floor

telephonic orders in the trading crowd,

with a written order ticket immediately

to follow. Amendment No. 1 to the

proposal was submitted on November

12, 1999. 3 Notice of the proposed rule

change, including Amendment No. 1,

appeared in the Federal Register on

December 8, 1999.4 The Commission

received no comments on the proposal.

This order approves the proposed rule

change, as amended.

II. Description of the Proposal

Options Floor Brokers currently are

not permitted to represent orders they

receive over the telephone unless and

until they have prepared, from outside

the trading crowd, a written, timestamped order ticket. 5 The Exchange

now proposes to adopt new PCX Rule

6.2(h)(4)(C), which will permit a floor

Broker in a trading crowd who receives

an order from a Member or Member

Firm representative located on the

Trading Floor to represent that order

immediately in the trading crowd,

provided that: (i) an order ticket is

prepared and time stamped in the

member firm booth before the order is

transmitted telephonically to the Floor

Broker in the trading crowd; and (ii) a

written, time-stamped order ticket for

the order must be taken immediately to

the Floor Broker in the trading crowd.6

The Exchange also proposes to amend

PCX Rule 6.2(h)(4)(B) to eliminate the

requirement that Floor Brokers who

receive telephonic orders while in the

trading crowd must step outside of the

trading crowd, write up an order ticket

and time-stamp it before representing

the order in the crowd. 7 In addition, the

Exchange proposes to add new section

(d) to PCX Rule 6.67, which provides

that a Floor Broker may represent a

telephonic order, with the ticket to

follow, as provided in PCX Rule

6.2(h)(4)(C). Further, the Exchange

proposes to modify PCX Rule 6.85 by

providing that PCX Rule 6.2(h)(4)(C) is

an exception to the general rule that

when a Floor Broker receives a verbal

order form a Market Maker, or when a

Floor Broker is requested by a Market

Maker to alter an order in his possession

in any way, the Floor Broker shall

immediately prepare an order ticket

from outside the trading crowd and

time-stamp it. Accordingly, Floor

Brokers who receive intra-floor

telephonic orders from Market Makers

will be permitted to represent those

orders immediately, with the ticket

immediately to follow.8

Under Options Floor Procedure

Advice F–5 (‘‘OFPA F–5’’), hand signals

may be used to increase or decrease the

size of an order, to change the order’s

limit, to cancel an order or to activate

a market order, as long as the

cancellation or change to the order is

‘‘relayed to the Floor Broker in a timestamped, written form immediately

thereafter.’’ The Exchange is proposing,

as a matter of consistency, to eliminate

the requirement from OFPA F–5 that

changes to an order must be

documented in writing outside of the

crowd and the ticket time-stamped,

before the revised order may be

represented.

III. Discussion

Section 6(b)(5) 9 of the Act requires

that the rules of an exchange be

designed to promote just and equitable

principles of trade, prevent fraudulent

and manipulative acts and practices,

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and

protect investors and the public

interest.10 Section 11A(a)(1)(C)(i) 11 of

the Act states that it is in the public

interest and appropriate for the

protection of investors and the

maintenance of fair and orderly markets

to assure the economically efficient

execution of securities transactions.

Section 11A(a)(1)(C)(ii) 12 states that it is

in the public interest and appropriate

for the protection of investors and the

maintenance of fair and orderly markets

to assure fair competition among

brokers and dealers. For the reasons set

forth below, 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).13

Further, the Commission believes that

the proposed rule change is consistent

with the goals of Section 11A(a)(1)(C).14

The Commission believes that the

proposal should serve to remove

impediments to and perfect the

mechanism of a free and open market by

reducing the amount of time before

telephonic orders may be represented in

the trading crowd without

compromising the Exchange’s audit

trail. In this regard, the Commission

notes that an order ticket must be

prepared and time stamped in the

member firm booth before the order is

transmitted telephonically to the Floor

Broker in the trading crowd. The

Commission believes that requiring

floor members to prepare a written,

time-stamped order ticket before the

order is transmitted to the crowd is

consistent with the Exchange’s audit

trail requirements. Further, the

Commission believes that this

requirement should enable the

Exchange to conduct adequate

surveillance for market manipulation

Federal Register / Vol. 65, No. 105 / Wednesday, May 31, 2000 / Notices 34765

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

16 15 U.S.C. 78s(b)(2).

17 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3On March 30, 2000 and April 13, 2000, the

Exchange submitted Amendment Nos. 1 and 2 to

the proposed rule change, respectively, the

substance of which has been incorporated into this

notice. See letters from John Kenney, Jr., Counsel,

Phlx, to John Roeser, Attorney, Commission, dated

March 29, 2000 (‘‘Amendment No. 1’’) and April 13,

2000 (‘‘Amendment No. 2’’).

and other violations of Exchange rules

and the Act.

The Commission believes that the

proposal may expedite and make more

efficient the process by which customer

orders can be received and executed on

the floor of the Exchange. The

Commission also believes that the

proposed rule change should increase

the efficiency of transmitting orders

from a member firm booth to Floor

Brokers in the trading crowd by

reducing the amount of time required

before these orders may be represented

in the crowd.

In determining to approve this

proposal, the Commission notes that the

Exchange represents the proposal is

necessary to ensure that, as the number

of option orders transmitted and

represented electronically on the

Exchange increases, manual orders

represented by Floor Brokers are not

placed at a competitive disadvantage.

The Commission believes that the

proposal should foster coordination

with persons engaged in facilitating

transactions in securities, remove

impediments to and perfect the

mechanism of a free and open market,

and protect investors and the public

interest by expediting and making more

efficient the process by which orders

can be received and executed on the

floor of the Exchange. Accordingly, the

Commission finds that the proposal is

consistent with Section 6(b)(5) 15 of the

Act.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,16 that the

proposed rule change (SR–PCX–99–17)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–13532 Filed 5–30–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–42811; File No. SR–PHLX–

00–14]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Regarding Listing and Trading Options

on the Wireless Telecom Sector Index

May 23, 2000.

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 February

24, 2000,3 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 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 Exchange, pursuant to Rule 19b–

4 of the Act, proposes to list and trade

European style, cash-settled options, on

the Wireless Telecom Sector Index

(‘‘Index’’), an equal dollar-weighted,

A.M.-settled, narrow-based, index of

twenty companies, involved in various

aspects of wireless telecommunications

services and equipment. A list of the

specific companies comprising the

Index, their capitalizations, six-month

share volumes and the percentage

weightings of these companies, as of

April 10, 2000, is available from the

Exchange.

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 IV 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 proposal is to list

for trading European style, cash-settled

options on the Index, a new index

developed pursuant to Exchange Rule

1009A(b). Options on the Index will

provide an important hedging vehicle

for basket traders who engage in trading

securities that comprise this subsector

of the telecommunications industry.

The following is a more detailed

description of the proposed Index

option:

Ticker Symbol: YLS.

Settlement Value Symbol: YSO.

Underlying Index: The Index is an

equal dollar-weighted index composed

of twenty stocks involved in wireless

telecommunications services and

equipment all of which are traded on

the New York Stock Exchange (‘‘NYSE’’)

or Nasdaq Stock Market (‘‘Nasdaq’’), and

are, therefore, reported securities as

defined in Rule 11Aa3–1 under the Act.

Further, all of the stocks presently meet

the Exchange’s listing criteria for equity

options contained in Exchange Rule

1009 and are currently the subject of

listed options on U.S. options

exchanges.

The Exchange notes that most of the

companies represented in the Index are

U.S. companies. However, to the extent

that non-U.S. companies are part of or

are added to the Index (such as

American Depository Receipts) and

therefore are not subject to

comprehensive surveillance sharing

agreements, those components do not

and will not account for more than 20%

of the weight of the Index.

As of April 10, 2000, the market

capitalization of all the stocks in the

Index exceeded $1 trillion and such

individual capitalizations ranged from

approximately $1 billion to $176 billion.

All twenty component issues in the

Index had monthly trading volumes in

excess of one million shares over each

of the past six months.

Index Calculation: The methodology

used to calculate the Index is an equal

dollar-weighted method, meaning that

each of the component stocks is

represented in the Index in

approximately equal dollar amounts.

The Exchange believes that this method

of calculation is appropriate because it

will provide each component issue with

equivalent influence on the movement

of the Index value instead of allowing