Federal Register / Vol. 62, No. 149 / Monday, August 4, 1997 / Notices 41983

9 17 CFR 200.30–3(a)(12).

1 15 U.S.C. § 78s(b)(1).

2 17 CFR 240.19b–4.

3See Letter from Michele R. Weisbaum, Vice

President and Associate General Counsel, Phlx, to

Deborah Flynn, Attorney, Division of Market

Regulation, SEC, dated July 14, 1997 (‘‘Amendment

No. 1’’). In Amendment No. 1, the Phlx replaced all

references to ‘‘participant’’ and ‘‘participant

organization’’ in the proposal with ‘‘foreign

currency option participant’’ and ‘‘foreign currency

option participant organization’’ to clarify the

applicability of the proposed rule.

4 15 U.S.C. §§ 6101–08.

5According to the Exchange, it will issue an

Information Circular advising the membership of

the new telemarketing rules upon their approval,

and clarifying that abusive, annoying or harassing

telemarketing calls by members, foreign currency

option participants, member organizations and

foreign currency option participant organizations or

their associated persons are violative of Phlx Rules

707 and 762.

6See Telemarketing Act, supra note 4.

7 16 CFR 310.

8 §§ 310.3–4 of FTC Rules.

9 Id. Pursuant to the Telemarketing Act, the FTC

Rules do not apply to brokers, dealers, and other

Continued

general, to protect investors and the

public interest.

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. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the 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 the self-regulatory organization

consents, the Commission will:

(A) By order approve the 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, N.W.,

Washington, D.C. 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–CHX–97–15 and should be

submitted by August 25, 1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority. 9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–20410 Filed 8–1–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38875; File No. SR–Phlx–

97–18]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change and Amendment No. 1

Thereto by the Philadelphia Stock

Exchange, Inc. Relating to

Telemarketing Practices by Members

and Member Organizations

July 25, 1997.

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 June 30,

1997, 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 selfregulatory organization. On July 21,

1997, the Phlx submitted Amendment

No. 1 to the proposed rule change.3 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons and to

grant accelerated approval of the

proposed rule change, as amended.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to add Rule

762, Telemarketing, which is

substantially similar to applicable

provisions of the Federal Trade

Commission rules adopted pursuant to

the Telemarketing and Consumer Fraud

and Abuse Prevention Act

(‘‘Telemarketing Act’’).4

The proposal also amends Rule 605,

Advertising, Market Letters, Research

Reports and Sales Literature, requiring

telemarketing scripts to be retained for

three years and to make the rule

specifically applicable to foreign

currency option participants and foreign

currency option participants

organizations as well as to members and

member organizations.5

The text of the proposed rule change

and Amendment No. 1 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 III 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

Purpose

Under the Telemarketing Act, which

became law in August 1994,6 the

Federal Trade Commission adopted

detailed regulations (‘‘FTC Rules’’) 7 to

prohibit deceptive and abusive

telemarketing acts and practices; the

regulations became effective on

December 31, 1995.8 The FTC Rules,

among other things, (i) Require the

maintenance of ‘‘do-not-call’’ lists and

procedures, (ii) prohibit certain abusive,

annoying, or harassing telemarketing

calls, (iii) prohibit telemarketing calls

before 8 a.m. or after 9 p.m., (iv) require

a telemarketer to identify himself or

herself, the company he or she works

for, and the purposes of the call, and (v)

require express written authorization or

other verifiable authorization from the

customer before the firm may use

negotiable instruments called ‘‘demand

drafts.’’ 9
41984 Federal Register / Vol. 62, No. 149 / Monday, August 4, 1997 / Notices

securities industry professionals. Section 3(d)(2)(A)

of the Telemarketing Act.

A ‘‘demand draft’’ is used to obtain funds from

a customer’s bank account without that person’s

signature on a negotiable instrument. The customer

provides a potential payee with bank account

identification information that permits the payee to

create a piece of paper that will be processed like

a check, including the words ‘‘signature on file’’ or

‘‘signature pre-approved’’ in the location where the

customer’s signature normally appears.

10 In response, the National Association of

Securities Dealers (‘‘NASD’’), the Municipal

Securities Rulemaking Board (‘‘MSRB’’), the New

York Stock Exchange (‘‘NYSE’’) and the American

Stock Exchange (‘‘Amex’’) have adopted rules to

curb abusive telemarketing practices. See Securities

Exchange Act Release Nos. 38009 (Dec. 2, 1996), 61

FR 65625 (Dec. 13, 1996) (order approving File No.

SR–NASD–96–28); 38053 (Dec. 16, 1996), 61 FR

68078 (Dec. 26, 1996) (order approving File No. SR–

MSRB–96–06); 38638 (May 14, 1997), 62 FR 27823

(May 21, 1997) (order approving File No. SR–

NYSE–97–07); and 38724 (June 6, 1997), 62 FR

32390 (June 13, 1997) (order approving File No. SR–

Amex–97–17).

The Commission has determined that the NASD

Rule, the MSRB Rule, the NYSE Rule and the Amex

Rule, together with the Exchange Act and the

Investment Advisers Act of 1940, the rules

thereunder, and the other rules of the SROs, satisfy

the requirements of the Telemarketing Act, because

the applicable provisions of such laws and rules are

substantially similar to the FTC Rules except for

those FTC Rules that involve areas already

extensively regulated by existing securities laws or

regulations or activities inapplicable to securities

transactions. Securities Exchange Act Release No.

38480 (Apr. 7, 1997), 62 FR 18666 (Apr. 16, 1996).

Accordingly, the Commission has determined that

no additional rulemaking is required by it under the

Telemarketing Act. Id. Notwithstanding this

determination, the Commission still expects the

remaining SROs to file similar proposals. 11 15 U.S.C. § 78f(b)(5).

Under the telemarketing Act, the SEC

is required either to promulgate or to

require the SROs to promulgate rules

substantially similar to the FTC Rules,

unless the SEC determines either that

the rules are not necessary or

appropriate for the protection of

investors or the maintenance of orderly

markets, or that existing federal

securities laws or SEC rules already

provide for such protection.10 The

purpose of the proposed rule change is

to add Phlx Rule 762 and to amend Phlx

Rule 605 in response to the

Commission’s request that selfregulatory organizations (‘‘SROs’’)

promulgate rules substantially similar to

applicable provisions of the FTC rules

adopted pursuant to the Telemarketing

Act

Time Limitations and Disclosure: The

proposed rule change adds Rule 762 to

prohibit, under proposed paragraph

(a)(1) to Rule 762, a member, foreign

currency option participant, or person

associated with a member or foreign

currency option participant organization

from making outbound telephone calls

to a member of the public’s residence

for the purpose of soliciting the

purchase of securities or related services

at any time other than between 8 a.m.

and 9 p.m. local time at the called

person’s location and to require, under

proposed paragraph (a)(2) to Rule 762,

such member, foreign currency option

participant or person associated with a

member or foreign currency option

participant organization to promptly

disclose to the called person in a clear

and conspicuous manner the caller’s

identity and firm, the telephone number

or address at which the caller may be

contacted, and that the purpose of the

call is to solicit the purchase of

securities or related services.

Proposed paragraph (a)(3) to Rule 762

creates exemptions from the time-of-day

and disclosure requirements of

paragraphs (a)(1) and (a)(2) for

telephone calls by any persons

associated with a member or foreign

currency option participant organization

or other associated person acting at the

direction of such persons for the

purposes of maintaining and servicing

existing customers assigned to or under

the control of the associated persons, to

certain categories of ‘‘existing

customers.’’ Proposed paragraph (a) also

defines ‘‘existing customer’’ as a

customer for whom the member or

foreign currency option participant

organization, or clearing broker or

dealer on behalf of the member or

foreign currency option participant

organization, carries an account.

Proposed subparagraph (a)(3)(i) exempts

calls, by an associated person, to an

existing customer who, within the

preceding twelve months, has effected a

securities transaction in, or made a

deposit of funds or securities into, an

account under the control of or assigned

to the associated person at the time of

the transaction or deposit. Proposed

subparagraph (a)(3)(ii) exempt calls, by

an associated person, to an existing

customer who, at any time, has effected

a securities transaction in, or made a

deposit of funds or securities into an

account under the control of or assigned

to the associated person at the time of

the transaction or deposit, as long as the

customer’s account has earned interest

or dividend income during the

preceding twelve months. Each of these

exemptions also permits calls by other

associated persons acting at the

direction of an associated person who is

assigned to or controlling the account.

Proposed subparagraph (a)(3)(iii)

exempts telephone calls to a broker or

dealer. The proposed rule change also

expressly clarifies that the scope of this

rule is limited to the telemarketing calls

described herein; the terms of the rule

do not otherwise expressly or by

implication impose on members or

foreign currency options participants

any additional requirements with

respect to the relationship between a

member or foreign currency option

participant and a customer or between

a person associated with a member or

foreign currency option participant

organization and a customer.

Do-Not-Call List: Proposed paragraph

(b) to Rule 762 requires each member or

foreign currency option participant

organization that engages in telephone

solicitation to market its products and

services to make and maintain a

centralized do-not-call list of persons

who do not wish to receive telephone

solicitations from a member or foreign

currency option participant organization

or its associated persons.

Demand Draft Authorization and

Recordkeeping: Proposed paragraph (c)

to Rule 762 prohibits members and

foreign currency option participants or

persons associated with a member or a

foreign currency option participant

organization from obtaining from a

customer or submitting for payment a

check, draft, or other form of negotiable

paper drawn on a customer’s checking,

savings, share, or similar account

(‘‘demand draft’’) without that person’s

express written authorization, which

may include the customer’s signature on

the instrument, and to require the

retention of such authorization for a

period of three years. The proposal also

states that this provision shall not,

however, require maintenance of copies

of negotiable instruments signed by

customers.

Telemarketing Scripts: The proposed

rule change also amends Phix Rule 605

and its accompanying commentary and

supplementary material to include

‘‘telemarketing scripts’’ within its rules

governing the issuance of

advertisements, market letters, research

reports and sales literature. Therefore,

telemarketing scripts will be required to

be retained for a period of three years.

The Exchange also proposes to amend

parts .02, .08 and .10 to the Exchange’s

Supplementary Information Regarding

Rule 605, relating to Disclosure, Claims

for Research and Identification of

Sources, to clarify the applicability of

these guidelines to foreign currency

option participants and foreign currency

option participant organizations.

2. Statutory Basis

The Exchange believes that the basis

under the Act for the proposed rule

change is the requirement under Section

6(b)(5) 11 that an Exchange have rules

that are designed to promote just and

equitable principles of trade, to remove

impediments to, and perfect the
Federal Register / Vol. 62, No. 149 / Monday, August 4, 1997 / Notices 41985

12The Commission, however, received two

comment letters on an NASD proposal (SR–NASD–

96–28), which is substantially similar. See Letter

from Brad N. Bernstein, Assistant Vice President

and Senior Attorney, Merrill Lynch, to Jonathan G.

Katz, Secretary, SEC, dated Aug. 19, 1996 (‘‘Merrill

Lynch Letter’’), and Letter from Frances M. Stadler,

Associate Counsel, Investment Company Institute

(‘‘ICI’’), to Jonathan G. Katz, Secretary, SEC, dated

Aug. 21, 1996 (‘‘ICI Letter’’).

For a discussion of the letters and responses

thereto, see Securities Exchange Act Release No.

38009 (Dec. 2, 1996) (approving File No. SR–

NASD–96–28).

13 15 U.S.C. § 78f(b)(5).

14 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

U.S.C. § 78c(f).

mechanism of a free and open market

and, in general, to protect investors and

the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed rule change will impose no

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 solicited

or received with respect to the proposed

rule change.12

III. 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, N.W.,

Washington, D.C. 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

Room. Copies of the filing will also be

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–Phlx–97–18 and should be

submitted by August 25, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of the

Proposed Rule Change

The Commission finds that the

proposed rule change, as amended, is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with Section 6(b)(5) of the Act13 which

requires, among other things, that the

rules of the exchange be designed to

prevent fraudulent and manipulative

acts and practices, to promote just and

equitable principles of trade, and, in

general, to protect investors and the

public interest.14 The proposed rule

change, as amended, is consistent with

these objectives in that it imposes time

restriction and disclosure requirements,

with certain exceptions, and members’

telemarketing calls, requires verifiable

authorization from a customer for

demand drafts, and prevents members

from engaging in certain deceptive and

abusive telemarketing acts and practices

while allowing for legitimate

telemarketing activities.

The Commission believes that the

addition of Rule 762, prohibiting a

member or foreign currency option

participant or person associated with a

member or foreign currency option

participant organization from making

outbound telephone calls to the

residence of any person for the purpose

of soliciting the purchase of securities or

related services at any time other than

between 8 a.m. and 9 p.m. local time at

the called person’s location, without the

prior consent of the person, is

appropriate. The Commission notes

that, by restricting the times during

which a member or foreign currency

option participant or person associated

with a member or foreign currency

option participant organization may call

a residence, the proposal furthers the

interest of the public and provides for

the protection of investors by preventing

members and foreign currency option

participant organizations from engaging

in unacceptable practices, such as

persistently calling members of the

public at unreasonable hours of the day

and night.

The Commission also believes that the

addition of Rule 762, requiring a

member or foreign currency option

participant or person associated with a

member or foreign currency option

participant organization to promptly

disclose to the called person in a clear

and conspicuous manner the caller’s

identity and firm, telephone number or

address at which the caller may be

contacted, and that the purpose of the

call is to solicit the purchase of

securities or related services, is

appropriate. By requiring the caller to

identify himself or herself and the

purpose of the call, Rule 762 assists in

the prevention of fraudulent and

manipulative acts and practices by

providing investors with information

necessary to make an informed decision

when purchasing securities. Moreover,

by requiring the associated person to

identify the firm for which he or she

works and the telephone number or

address at which the caller may be

contacted, the Rule encourages

responsible use of the telephone to

market securities.

The Commission further believes that

Rule 762, which creates exemptions

from the time-of-day and disclosure

requirements for telephone calls by

associated persons, or other associated

persons acting at the direction of such

persons, to certain categories of

‘‘existing customers’’ is appropriate. The

Commission believes it is appropriate to

create an exemption for calls to

customers with whom there are existing

relationships in order to accommodate

personal and timely contact with a

broker who can be presumed to know

when it is convenient for a customer to

respond to telephone calls. Moreover,

such an exemption also may be

necessary to accommodate trading with

customers in multiple time zones across

the United States. The Commission,

however, believes that the exemption

from the time-of-day and disclosure

requirements should be limited to calls

to persons with whom the broker has a

minimally active relationship. In this

regard, the Commission believes that

Rule 762 achieves an appropriate

balance between providing protection

for the public and the members’ and

foreign currency option participants’

interests in competing for customers.

The Commission believes that Rule

762, requiring that each member or

foreign currency option participant

organization maintain a centralized donot-call list of persons who do not wish

to receive telephone solicitations from

such member, foreign currency option

participant organization or associated

persons, is appropriate. By requiring

members and foreign currency option

participant organizations to maintain a

do-not-call list, Rule 762 assists in the

prevention of fraudulent and

manipulative acts and practices, such as

persistently calling investors who have

expressed a desire to not receive

telephone solicitations.

Moreover, the Commission believes

that the provisions of Rule 762,

requiring that a member, foreign

currency option participant or person

associated with a member or foreign

currency option participant organization

obtain from a customer, and maintain

for three years, express written

authorization when submitting for
41986 Federal Register / Vol. 62, No. 149 / Monday, August 4, 1997 / Notices

15 15 U.S.C. § 78f.

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.

3See Letter from Edith Hallahan, Director and

Special Counsel, Regulatory Services, Phlx, to

Michael Walinskas, Senior Special Counsel,

Division of Market Regulation (‘‘Division’’), SEC,

dated June 25, 1997 (‘‘Amendment No. 1’’). In

Amendment No. 1, the Phlx amended the proposal

by: (1) Requiring the approval of the Options

Committee, rather than two Floor Officials, to

extend the Wheel assignment area beyond two

contiguous quarter turrets; (2) deleting the

requirement that a trade occur while a trader was

away from the Wheel for more than a brief interval

before the trader would be subject to removal and

fines; and (3) clarifying several aspects of the

proposal.

4See Letter from Philip H. Becker, Senior Vice

President and Chief Regulatory Officer, Phlx, to

Michael Walinskas, Senior Special Counsel,

Division, SEC, dated July 22, 1997 (‘‘Amendment

No. 2’’). In Amendment No. 2, the Phlx replaced the

word ‘‘crowd’’ with the phrase ‘‘Wheel assignment

area’’ in the text of the rule to clarify that the

proposal requires the trader to be present in the

Wheel assignment area, but not necessarily the

trading crowd.

5AUTOM is an electronic order routing and

delivery system for options orders.

6 In Amendment No. 1, the Phlx clarified that a

brief interval may exceed 5 minutes where an ROT

payment a check, draft, or other form of

negotiable paper drawn on a customer’s

checking, savings, share or similar

account, is appropriate. The

Commission notes that requiring a

member, foreign currency option

participant or person associated with a

member or foreign currency option

participant organization to obtain

express written authorization from a

customer in the above-mentioned

circumstances assists in the prevention

of fraudulent and manipulative acts in

that it reduces the opportunity for a

member, foreign currency option

participant or person associated with a

member or foreign currency option

participant organization to

misappropriate customers’ funds. In

addition, the Commission believes that

by requiring a member, foreign currency

option participant or person associated

with a member or foreign currency

option participant organization to retain

the authorization for three years, Rule

762 protects investors and the public

interest in that it provides interested

parties with the ability to acquire

information necessary to ensure that

valid authorization was obtained for the

transfer of a customer’s funds for the

purchase of a security.

The Commission believes that the

amendment to Rule 605, requiring the

retention of telemarketing scripts for a

period of three years is appropriate. By

requiring the retention of telemarketing

scripts for three years, Rule 605 assists

in the prevention of fraudulent and

manipulative acts and practices and

provides for the protection of the public

in that interested parties will have the

ability to acquire copies of the scripts

used to solicit the purchase of securities

to ensure that members, foreign

currency option participant

organizations and associated persons are

not engaged in unacceptable

telemarketing practices. Finally, the

Commission believes that the proposed

rule achieves a reasonable balance

between the Commission’s interest in

preventing members from engaging in

deceptive and abusive telemarketing

acts and the members’ and foreign

currency option participant

organizations’ interests in conducting

legitimate telemarketing practices.

The Commission notes that the

Exchange proposes to amend parts .02,

.08 and .10 to its Supplementary

Information Regarding Rule 605,

relating to Disclosure, Claims for

Research and Identification of Sources,

to clarify the applicability of these

guidelines to foreign currency option

participants and foreign currency option

participant organizations. The

Commission believes that the

Exchange’s proposal to clarify that its

guidelines apply to foreign currency

option participants and foreign currency

option participant organizations is

reasonable.

The Commission finds good cause for

approving the proposed rule change,

including Amendment No. 1, prior to

the thirtieth day after the date of

publication of notice thereof in the

Federal Register. The proposal is

identical to the NASD and MSRB rules,

which were published for comment and,

subsequently, approved by the

Commission. The approval of the Phlx’s

rules provides a consistent standard

across the industry. In that regard, the

Commission believes that granting

accelerated approval to the proposed

rule change is appropriate and

consistent with Section 6 of the Act.15

It is therefore ordered, pursuant to

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

proposed rule change (SR–Phlx–97–18),

including Amendment No. 1, is

approved on an accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–20411 Filed 8–1–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–38881; File No. SR–Phlx–

97–21]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change and Amendment Nos. 1

and 2 Thereto by the Philadelphia

Stock Exchange, Inc., Relating to

Wheel Removal and Assignment Areas

July 28, 1997.

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 April 25,

1997, 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 selfregulatory organizations. On July 1,

1997, the Phlx submitted Amendment

No. 1 to the proposed rule change.3 On

July 24, 1997, the Phlx submitted

Amendment No. 2 to the proposal.4 The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons and to

grant accelerated approval to the

proposed rule change, as amended.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx proposes to amend Floor

Procedure Advice (‘‘Advice’’) F–24,

AUTO–X Contra-Party Participation (the

‘‘Wheel’’), to: (1) Establish a procedure

for the removal of Registered Options

Traders (‘‘ROTs’’) from the Wheel; and

(2) extend the Wheel assignment area in

certain circumstances. The Wheel is an

automated mechanism for assigning

floor traders (i.e. specialists and ROTs),

on a rotating basis, as contra-side

participants to AUTO–X orders. AUTO–

X is the automatic execution feature of

the Exchange’s Automated Options

Market (‘‘AUTOM’’) system,5 which

provides customers with automatic

executions of eligible equity option and

index option orders at displayed

markets.

Currently, an ROT must be actively

making markets to be on the Wheel, and

an ROT must be present in his Wheel

assignment area to participate in Wheel

executions. The Exchange proposes to

amend Advice F–24 to state that ROTs

must sign-off the Wheel when leaving

the Wheel assignment area for more

than a brief interval, which means 5

minutes or less, or in matters of a

dispute, the amount of time it takes to

call in a Floor Official and inform him/

her of the issue at hand.6 If an ROT does