Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices 68339

7 15 U.S.C. 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

1See Letter from Gerald D. O’Connell, Senior

Vice President, Market Regulation and Trading,

Operations, Phlx, to Jennifer Choi, Division of

Market Regulation, SEC, dated July 26, 1996

(‘‘Amendment No. 1’’).

2 17 CFR 240.19b–4.

3All times refer to Eastern Time (ET).

4 VTS and UTS are trademarks of UTTC and

VWAP is a trademark of the Dover Group.

5The Exchange also proposes several minor

amendments to Rule 101, including placing ‘‘A.M.’’

and ‘‘P.M.’’ in capital letters and adding a heading

to each commentary.

individuals who are technically

independent contractors, but carry out

the same functions as persons employed

directly by the member organization.

Expanding the class of persons required

to supply member firms with all trading

accounts for which that person

maintains a beneficial interest should

help members to monitor the trading

activities of those individuals that have

a close nexus to the member’s

solicitation or handling of business in

securities. The requirement should also

make covered individuals aware of the

prohibition against the misuse of

material, nonpublic information. In

addition, the Commission believes that

requiring all covered persons to update

the Exchange’s ‘‘ITSFEA Account List’’

should assist Exchange and Commission

review of those records and make any

fraudulent acts easier to deter and

detect.

IV. Conclusion

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change (SR–PHLX–97–

39) is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–33991 Filed 12–30–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39481; File No. SR–Phlx–

96–14]

Self-Regulatory Organizations; Notice

of Filing of Amendment No. 2 to

Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.

Relating to the Universal Trading

System’s Morning Session

December 22, 1997.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. § 78s(b)(1), notice is

hereby given that on April 29, 1996 the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) a proposed

rule change, and on July 26, 1996,

submitted to the Commission

Amendment No. 1 to the proposed rule

change.1 The original filing, as amended

by Amendment No. 1, was published for

comment in Securities Exchange Act

Release No. 37640 (September 4, 1996),

61 FR 47993 (September 11, 1996). No

comment letters were received. On

October 29, 1997, the Exchange

submitted to the Commission

Amendment No. 2 to the proposed rule

change. The proposed rule change, as

amended, is described in Items I, II, and

III below, which Items have been

prepared by the self-regulatory

organization. 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, pursuant to Rule 19b–

4 under the Act,2 proposes to

implement a daily pre-opening order

matching session (‘‘Morning Session’’ or

‘‘Session’’) for the execution of largesized stock orders on a volume weighted

average price (‘‘VWAPTM’’) basis. This

amendment restates the original

proposal and proposes to: (1) Clarify the

system functions of the Exchange and

the Universal Trading System

(‘‘System’’ or ‘‘UTSTM’’); (2) delete

references to over-the-counter (‘‘OTC’’)

securities; (3) provide for an equity

trading floor UTS terminal and prohibit

floor members from UTS trading in nonspecialty issues; (4) update and detail

matching priority provisions; (5) update

and detail order types and order entry

procedures; (6) clarify participation and

subscriber access; (7) separate and

elaborate ‘‘upon extraordinary

circumstances’’ language; and (8)

expand upon the liability provisions.

The Morning Session has been

designed to provide investors with the

means to execute large-sized stock

orders anonymously and at fair market

prices approximately 15 minutes prior

to the opening of the ‘‘regular trading

session’’ (i.e., 9:30 A.M.–4:00 P.M.).3

The price of Morning Session

transactions will be determined at

approximately 4:15 P.M. on the same

day. At that time, the Exchange shall

assign the applicable VWAP and report

each such trade to the appropriate

reporting authority, the Consolidated

Tape or other, as ‘‘VWAP’’ trades.

The receipt and matching of orders for

the Morning Session will be handled

electronically through the UTS. The

UTS is a system which was devised for

facilitating the operational aspects of the

Morning Session. The UTS was

developed by Universal Trading

Technologies Corporation (‘‘UTTC’’) by

agreement with the Exchange. This

proposal relates only to the first product

of the UTS, the VWAP Trading System

(‘‘VTSTM’’).4

Each of the approximately 2,700

equity securities currently available for

trading on the Exchange, both listed and

traded pursuant to Unlisted Trading

Privileges (‘‘UTP’’) (except OTC

securities) will be eligible for the

Morning Session. However, the

Exchange will publish a list of securities

trading on the UTS, periodically

reflecting additions and deletions. Upon

implementation of this proposal, a

certain number of Phlx issues will be

activated for UTS trading, as a phase-in

of the System, and a list of these

securities will be published.

The present proposal consists of the

adoption of a new rule applicable solely

to the Morning Session, Rule 237—UTS

Morning Session (‘‘Rule’’). In addition,

Phlx Rule 101 is proposed to be

amended to add the Morning Session as

an exception to regular trading hours.5

The Rule is organized as follows: an

introductory paragraph, followed by

paragraphs: (a) Explaining reporting; (b)

defining the UTS; (c) governing who the

participants are; (d) explaining order

entry; (e) specifying order priority; (f)

defining the VWAP; (g) governing short

sales in the UTS; (h) concerning

disputes; (i) containing provisions

relating to limitation of liability; (j)

pertaining to trading halts; and (k)

governing extraordinary circumstances.

UTS trades will be subject to

transaction and access fees as

established in the Exchange’s fee

schedule.

The Universal Trading System

The UTS will operate as a separate

system, linked to Exchange systems at

the reporting stage. UTS access will be

available to direct subscribers, by dialup into the UTS system, utilizing

software and a log-on procedure

dependent upon whether the subscriber

is accessing UTS through a personal

computer or main-frame system. UTS

access is also available through

subscribers acting as brokers.

Participation is described more fully

below. Thus, UTS access may include

various types of computer hardware,

software and handheld devices.
68340 Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices

6The enrollment process is the formal

mechanism by which participants specify their

contractual arrangements for using the UTS,

specifying the information needed to establish UTS

access. UTS activation is dependent upon

completing the enrollment process and submitting

the requisite agreements and forms. Enrollment

parameters, including GTC commitments, may be

modified through procedures established by the

Exchange.

7UTS trades, as all Phlx trades, will require both

a Phlx and SCCP member to be involved. See

Securities Exchange Act Release No. 39223 (October

8, 1997) (SR–SCCP–97–04).

8Phlx represents that physical space for

additional screens or computers on the floor is

extremely limited. Telephone conversation between

Edith Hallahan, Director, Associate General

Counsel, Phlx, and Mike Walinskas, Senior Special

Counsel, Division of Market Regulation, SEC, on

December 17, 1997.

The System links off-floor and onfloor computer terminals to a

communications base unit. The UTS

base unit will: (i) Accept orders and

commitments, (ii) match buyers with

sellers, (iii) give execution reports to

matched participants, (iv) calculate the

back-up VWAP for each traded security,

(v) report VWAP trades to the entering

Participant, and (vi) create the necessary

audit trail, recording order and

commitment entry and execution of

Morning Session orders. Other

Exchange systems will calculate the

official VWAP and report trades to the

appropriate reporting authority.

Participation in the Morning Session

may occur by way of a commitment

from a ‘‘Committer’’ or an order from a

‘‘User’’ (collectively, ‘‘Participants’’).

Exchange members may participate as

either Committers or Users, but may not

participate as both Committer and User

in the same security for the same

account during the same Morning

Session.

Commitments must be entered

directly by UTS subscribers or through

the UTS trading floor terminal at the

Exchange. Committers can be either

Phlx Floor Traders or Phlx Off-Floor

Liquidity Providers who may commit

(on a proprietary basis) to provide

contra-side liquidity. UTS commitments

may only be made by Exchange

members, either Phlx Floor Traders or

Phlx Off-Floor Liquidity Providers, who

must register with the Exchange in a

prescribed manner prior to acting in the

capacity of a Committer. Phlx floor

members qualify as Phlx Floor Traders

if they are either the Phlx Specialist or

Phlx Alternate Specialist in the

particular stock that is the subject of the

commitment. Phlx Off-Floor Liquidity

Providers must be Phlx members and

may only engage as Committers for their

proprietary accounts. Committers will

be able to choose which, if any, issues

they wish to make commitments, but for

each chosen issue must provide a

minimum volume guarantee of 2,500

shares on each side of the market.

Commitment sizes can vary on each side

of the market, such as a commitment to

buy 2,500 shares and sell 10,000 shares

at the VWAP. Commitments may be

restricted to execution against nonmembers only.

Commitments are only executable

through the UTS. Commitments may be

entered and modified in the UTS during

the Order Entry Time Period and also

during any other periods which the

Exchange may make available for that

purpose. For instance, in order to reflect

the busy pre-opening time before 9:15

A.M., the Exchange may allow

commitments to be entered or modified

during certain times the previous day,

effective for the next Morning Session.

In such an event, UTS trading still

would occur only during the Morning

Session; the extra time period merely

provides additional time for the entry of

commitments. Committers may make

such contra-side liquidity commitments

through the UTS as day or good-tillcancelled (GTC) commitments; GTC

commitments remain in effect for each

Morning Session until cancelled and

must be established (and cancelled)

through the enrollment process.6

Users are participants who enter

orders, as opposed to commitments, into

the UTS. UTS orders may only be

placed for and by Users who are

enrolled and activated for the UTS.

Users may be either Phlx members or

non-members. Users may enter orders

for customer or proprietary (dealer or

principal) accounts. Paragraph (c) of the

Rule is proposed to be amended to

reflect that Users may enter orders

directly into UTS terminals as

subscribers or through subscribing

brokers. The participation method may

affect matching priority, pursuant to

paragraph (e) of the Rule. A UTS

terminal may be available on the equity

trading floor for the entry and reporting

of UTS orders and commitments.

Exchange floor members may

participate as Users in their specialty

issues only.

All UTS trades will be processed for

clearing like any other Exchange equity

floor trade. The Exchange and the Stock

Clearing Corporation of Philadelphia

(‘‘SCCP’’) perform trade reconciliation

and confirmation functions; once

complete, the trades are forwarded to

the National Securities Clearing

Corporation (‘‘NSCC’’) for clearance and

settlement.7 For jurisdictional and

compliance purposes, Phlx membership

is also required for all UTS trades, as

with all Phlx trades. Thus, all

Committers and Users must provide

both an executing and clearing account

during the enrollment process.

All non-member UTS orders entered

through a broker must be entered either

through a Phlx member or through a

non-member broker with the

appropriate give-up and three-way

agreements in place. UTS non-member

orders may also be entered directly by

subscribing non-members, who have

both agreements with a Phlx member in

place. In the three-way agreement

between the Exchange, the Phlx member

and the non-member User, the Phlx

member must agree to be jointly and

severally liable for actions of the nonmember through the UTS and the nonmember must agree to adhere to all

applicable by-laws and rules of the

Exchange. The three-way agreement is

in addition to the clearing or ‘‘give-up’’

agreement. The give-up agreement is

intended to ensure that a SCCP member,

who must also be a Phlx member, has

assumed responsibility for the order.

Give-up agreements with non-members

must be submitted in advance to the

Exchange’s Examinations Department,

and must include a delineation of the

credit limits for the respective customer.

All Users and Committers must

provide proof of compliance officer

review and approval of enrollment

parameters prior to UTS activation.

UTS Order Entry

Only orders and commitments placed

through UTS will be eligible for

execution during the Morning Session;

similarly, orders and commitments

entered into the UTS are only eligible

for execution through the UTS. Thus,

UTS orders do not automatically

migrate to the Exchange’s regular equity

trading session. UTS orders will only be

accepted during the UTS order entry

time period, 5:00 A.M. to 9:15:00 A.M.,

except that the Exchange may establish

a different period respecting the UTS

trading floor terminal. The proposed

establishment of an equity trading floor

terminal amends the original proposal

and is intended to facilitate Floor Trader

participation. The Phlx believes that

trading floor real estate concerns 8 may

discourage direct subscription, such that

the floor terminal would provide an

alternate means for access. Unlike UTS

commitments, all UTS orders will only

be eligible for a UTS execution on the

day the order has been placed. UTS

orders and commitments may be

cancelled until 9:15 A.M. Confirmation

of order placement and cancellation

occurs electronically through the UTS.

As discussed above, Morning Session

trading interest may be entered into

UTS in the form of either: (i) An order
Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices 68341

to trade as a User; or (ii) as a

commitment to provide contra-side

liquidity to User orders. The minimum

order size for individual User orders

shall be 5,000 shares, while Committers

will be permitted to commit in sizes of

2,500 or greater. In addition to these

minimums, all orders and commitments

must be in 500 share increments,

including any ‘‘AON’’ or ‘‘MON’’

designations, as defined below. This

amendment eliminates reference to

round-lots, meaning 100 shares. Further,

the Exchange’s Floor Procedure

Committee (‘‘FPC’’) may determine

whether different sizes should be

established. This ability is intended to

be responsive to adjustments based on

market and participant need, which

would be subject to prior written notice.

In placing orders and commitments

on the System, Participants will be

required to provide order/commitment

description and account identification

information necessary for UTS to

establish the priority and eligibility of

orders on the System. Specifically, UTS

orders and commitments are to be

placed with the following designations:

(i) Buy/sell; (ii) volume; (iii) stock

symbol; (iv) Participant status:

Committer or User; (v) Committer

account status: Off-Floor Liquidity

Provider, Specialist or Alternative

Specialist; (vi) User account status:

member or non-member, and order type

(basic, cross, facilitation, constraints,

restrictions); (vii) clearing account

number; (viii) trade account

information; and (iv) subscriber

identification number.

Order Types

The UTS order types in paragraph (i)

of the Rule are being amended for better

organization and definition within the

Rule. Eligible order types for the

Morning Session are divided into three

categories: basic, facilitation and cross.

Basic and facilitation orders can be

unconstrained, meaning executable to

the extent possible, or constrained. The

following two constraints are proposed:

All-or-none (AON), meaning execute all

shares of the order or none at all; and

Minimum-or-none (MON), meaning

execute at least a specified number of

shares or none at all. Basic orders can

also be restricted, meaning executable

against non-members only.

Facilitation orders, on the other hand,

are two-sided orders with an identified

Phlx member contra-side, who acts as a

facilitator to that order, and is known as

a ‘‘Guarantor.’’ The Guarantor definition

has also been added to paragraph (c) of

the Rule, which delineates the

categories of access to the UTS. The

contra-side may be entered together

with or separate from the facilitation

order; if the sizes do not match, the

remainder is unexecuted. Facilitation

orders can be submitted on behalf of

Phlx members or non-members. There

are three types of facilitation orders. The

first type is an unconditional

facilitation, which is to be executed

against an identified Guarantor or not at

all; as such, the order is a type of cross,

involving a Phlx member Guarantor.

The second type of facilitation order is

a conditional facilitation order, which is

executable against an identified

Guarantor after attempting to be

executed against non-members to the

extent possible. For instance, User A

may enter an order designating X as its

conditional Guarantor, such that if no

non-member orders are matched with

this order, User A is matched with X,

even if other Phlx members would have

matched. Third, a last resort facilitation

order is executable against an identified

Guarantor only after attempting to

execute against all other orders and

commitments to the extent possible.

Extending the previous example, the

last resort Guarantor X would only

match with User A after all other orders

and commitments have had the

opportunity to match, not just nonmember orders. Facilitation orders

cannot be restricted to non-members in

general, because they contain a contraside.

A cross order is a two-sided order,

with both sides comprised of nonmember interest, with instructions to

match the identified buy-side with the

identified sell-side. The two sides of a

cross can be entered separately, with the

contra-side identified. If the sizes do not

match, the remainder is unexecuted.

Execution and Priority of Orders

Orders for the Morning Session will

be matched at approximately 9:16 A.M.

Trades executed through the UTS are

printed and cleared as Phlx

transactions, executed on the Exchange

and processed through SCCP, as

explained above. In matching VWAP

orders for execution during the Morning

Session, execution priority is

determined in accordance with 23

matching steps, which appear below.

Commitments are not matched with

other Commitments.

Generally, User orders are afforded

priority by account type, then by order

size (largest first); and for orders of the

same size and account type, on a

chronological basis by time-of-entry. As

outlined below, account types are based

on status as a non-member or Phlx

member, type of non-member account,

constraints, and direct subscription

versus broker access.

Similarly, commitments are

prioritized, first, on the basis of subaccount types, meaning Phlx Off-Floor

Liquidity Providers then Specialists and

then Alternate Specialists; then, on the

basis of commitment size (largest first);

and among those commitments at the

same size, priority rotates among

Committers with the fewest aggregate

UTS shares (in all securities) matched at

that time. For example, among three

5,000 share specialist commitments in

stock XYZ, priority would be afforded to

A who has received 10,000 shares of

stock XYZ so far, then B who has 15,000

shares of TTT, and lastly to C who has

3,000 shares of XYZ and 20,000 of TTT.

In the previous version of this proposal,

the matching was proposed to occur on

a rotational basis among those of the

same size and sub-account type.

An additional amendment to the

original proposal is the incorporation of

a Liquidity Rotation Parameter (‘‘LRP’’),

also known as the ‘‘anti-bully’’ rule.

Even though priority is generally based

on size, the LRP provides that order an

commitment participation will rotate in

25,000 share increments, to more fairly

allocate order flow, as opposed to filling

the largest first. The LRP operates

within each matching step (after step 1)

to match in 25,000 share increments,

moving to the next order/commitment

after 25,000 shares have been matched,

and then returning to the remainder of

that unfilled portion once all other

orders/commitments have received their

first 25,000 share match. For example,

where there is one large buyer (‘‘buyer

1’’) for 100,000 shares and three buyers

of 10,000 shares of ABC (‘‘buyers 2–4’’),

without this provision, a seller of

100,000 shares would match with the

buyer 1 for all 100,000 shares, thereby

excluding the other buyers. Instead, the

LRP results in a match of 25,000 shares

for buyer 1, 10,000 shares each for

buyers 2–4 (sub-totaling 55,000), 25,000

shares more for buyer 1, with the

remainder of 20,000 shares going to

buyer 1 (as there are no other buyers

with which to rotate liquidity); the LRP

ensured that buyers 2–4 participated,

while buyer 1 received 70,000 shares.

The proposal would permit the FPC to

establish a different size (than 25,000

shares) based on operational experience,

practicality and demonstrated market

need.

As a follow-up to these introductory

paragraphs respecting the order

matching principles of UTS, the specific

matching steps to be conducted in each

security are outlined below. First, the

following two-sided orders are matched:

non-member/non-member crosses, then

non-member/member unconditional

facilitation orders and then member/
68342 Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices

member unconditional facilitation

orders. Any partially unmatched orders

due to excess size entered by one side

remains unexecuted.

Second, non-member unconstrained

orders (both basic and facilitation) are

matched with each other. For example,

a buy of 10,000 shares of XYZ would be

matched with a sell of 10,000 shares of

XYZ by non-members. Within this step

2, as within all matching steps, priority

is determined based on size and time of

entry. Although step 2 refers to nonmember unconstrained orders,

including facilitation orders,

unconditional facilitation orders are not

matched at this step, because they have

already been matched in step 1. Nonmember unconstrained orders for nonmember broker-dealers are matched in

step 6.

Third, any remaining non-member

unconstrained orders are matched with

non-member constrained (AON and

MON) orders. Any such non-member

constrained orders not matched with the

unconstrained orders left over from step

1 are then matched with other nonmember constrained orders. Nonmember constrained orders for nonmember broker-dealers are matched in

step 6.

Fourth, any remaining non-member

orders from steps 2 and 3 are matched

with non-member institutions’ orders

participating through a broker. Brokers

may be members or non-members as

explained in the participation and

access portions of this proposal. Such

non-member institutions’ orders are

then matched with each other. Nonmember institutions entering orders

directly would have participated in

steps 2 or 3 above, depending on

whether the order is constrained;

constraints are not relevant to

determining priority in step 4 among

institutions participating through a

broker.

Fifth, any remaining non-member

orders are matched with non-member

non-institution orders participating

through a broker. The remaining nonmember orders filtering down through

each step may include unmatched

orders and partially unmatched orders

from all prior steps. These remaining

orders are matched with the new

category of orders in each step first,

before that category is matched against

itself. Thus, after non-member noninstitution orders participating through

a broker are matched against the

unmatched orders of non-member

orders, such non-member noninstitution orders are matched with each

other. Non-member non-institution

orders include non-member brokerdealer orders as well as non-member,

non-broker-dealer, non-institution

orders, such as retail customer orders.

Sixth, any remaining non-member

orders are matched with non-member

broker-dealers subscribing directly.

Non-member broker-dealer orders

subscribing directly are then matched

with each other. Instead of dealer

activity, if the non-member brokerdealer is acting as a broker, then the

order would be matched in steps 4 or 5,

depending on who he or she is

representing as a broker.

Seventh, the matching process is

ended respecting non-member orders.

Thus, any remaining non-member

orders that are restricted to matching

with non-members only are removed;

these are unmatched, except as

provided in step 23 below.

Eighth, any remaining non-member

conditional facilitation orders are

matched with their conditional

Guarantors (facilitating members). These

conditional orders were first subject to

matching against other non-member

orders in the prior steps, and are now

eligible for matching against the

identified Guarantor, who is a member.

Ninth, any remaining non-member

orders are matched with member orders

participating through brokers. Any

unmatched member orders participating

through brokers are then removed.

Tenth, any remaining non-member

orders are matched with orders of offfloor members. Any unmatched off-floor

members’ orders are then removed.

Step 11 involves matching any

remaining non-member orders with

order of Phlx Floor Traders. Any

unmatched Phlx Floor Traders’ orders

are then removed. This category

includes one-sided orders (as opposed

to commitments) of Specialists and

Alternate Specialists, who are permitted

to trade as a ‘‘dealer’’ in specialty issues.

Steps 12 through 14 introduce

commitments into the matching process.

In step 12, any remaining non-member

orders are matched with commitments

of Phlx Off-Floor Liquidity Providers.

The remaining commitments of Phlx

Off-Floor Liquidity Providers are then

removed. In step 13, any remaining nonmember orders are matched with

commitments of Specialists; unmatched

Specialist commitments are then

removed. In step 14, any remaining nonmember orders are matched with

commitments of Alternate Specialists;

unmatched Alternate Specialist

commitments are then removed.

In step 15, any remaining nonmember orders are matched with

member facilitation orders (those with

conditional or last resort Guarantors).

The other type of facilitation order, an

unconditional facilitation, is already

matched in step 1.

In step 16, non-member last resort

facilitation orders are matched with

their identified last resort Guarantors.

Step 17 represents the end of nonmember matching. Any remaining nonmember orders are unmatched, except

as provided in step 23 below.

In step 18, Phlx member conditional

facilitation orders are matched with

their identified conditional Guarantor.

Again, the unconditional facilitation

orders have already been matched; the

last resort facilitation orders are

matched later in the process.

Step 19 involves extensive Phlx

member matching. All remaining

member orders are matched with each

other, as long as they are not restricted

to matching against non-members only.

This includes the following types of

Phlx member orders from steps 9–11

and 15 above: Phlx member orders

participating through brokers, Phlx offfloor member orders, Phlx floor

members’ orders, and member last resort

facilitation orders.

Step 20 involves matching Phlx

member orders with commitments that

have not been restricted to matching

against non-member only. First, any

remaining Phlx member orders are

matched with commitments of Off-Floor

Liquidity Providers, and then with

commitments of Specialists and

Alternate Specialists. Unmatched

commitments are then removed.

In Step 21, Phlx member last resort

facilitation orders are matched with

their identified last resort Guarantor.

Step 22 signals the end of the whole

matching ‘‘round’’ in a security. Any

remaining Phlx member orders and

commitments are unmatched, except as

provided in step 23.

Step (23), the last step, involves

performing matching rounds, which

amends the original proposal.

Specifically, if any unmatched orders

remain, the largest unsatisfied

constrained order is permanently

removed, the matches after step 1 are

unmatched and the matching process

starts again; among unsatisfied orders of

the same size, Phlx member orders

would be removed before non-member

orders, and among two Phlx members

(or non-members), the latest in time is

removed first. Additional matching

rounds occur, each removing another

unsatisfied constrained order, until no

unsatisfied constrained orders remain.

Matching rounds are intended to

maximize the number of executions.

VWAP

The VWAP that the Exchange shall

assign to each eligible security, which
Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices 68343

9A late sale is a transaction which is a correct last

sale but is publicly disseminated later than is

generally required. Generally, transactions are

required to be publicly disseminated within 90

seconds after the execution. A sold sale designates

a transaction appearing on the Consolidated Tape

out of its proper sequence.

10However, prints representing trades executed

after regular trading hours (9:30 A.M. to 4:00 P.M.,

such as the Phlx’s Post Primary Session (‘‘PPS’’)

will not be utilized in the VWAP calculation after

4:02 P.M.

shall be derived daily and publicly

disseminated promptly following

calculation at 4:15 P.M. for each

security where a UTS match occurred

that day, will be calculated on the basis

of those transactions reported during the

regular trading session to the

appropriate reporting authority.

Generally, consistent with Phlx Rule

111, all UTS matches create a binding

contract. However, in the case where a

transaction occurs in the Morning

Session in a security which has not

opened for trading by 3:00 P.M. on the

primary market, the respective Morning

Session transaction will be voided and

a report to that effect will be sent

immediately to all matched Participants.

In general, the VWAP for each eligible

security shall be calculated by: (i)

Utilizing all regular way trades that

appear on the Consolidated Tape

(including sold sales and late sales 9)

effected from the opening of the regular

trading session and printed prior to 4:15

P.M. by the appropriate reporting

authority,10 (ii) multiplying each

respective reported price by the total

number of shares traded at that price;

(iii) adding together each of these

calculated values, compiling an

aggregate sum; and (iv) dividing the

aggregate sum by the total number of

reported shares used in item (i) in the

security. The resulting VWAP will be

reported in the form of a fraction,

rounded to the nearest 1/256th.

Reporting

All UTS transactions will first be

reported to the reporting authority at

approximately 9:20 A.M. as a single

volume print including all matches in

all securities. The morning print for all

UTS matches will occur by way of an

administrative message over the

Consolidated Tape reflecting total

volume in Exchange listed securities.

For example, that message would

indicate that 3 million shares traded

through the UTS at the VWAP. The

morning print is intended to notify

investors regarding pre-opening volume.

Participants, under normal

circumstances, will also be notified of

their levels of participation by 9:20 A.M.

UTS transactions will be reported to the

entering subscriber in the form of

automated reports reflecting the number

of shares traded by the Participant

(whether User or Committer) through

the UTS in each issue.

Promptly following calculation of the

final VWAP at approximately 4:20 P.M.,

trades are assigned that day’s VWAP for

that security and will, at that time, be

reported trade-by-trade to the

appropriate reporting authority. The

Exchange will continuously calculate

the VWAP throughout the trading day

for each issue available for trading. The

final VWAP will be available through

the System to UTS subscribers who

received Morning Session executions.

Each Morning Session match, once a

VWAP is assigned, constitutes a

completed transaction for the purpose of

reporting the trade to the appropriate

reporting authority.

End-of-day prints will normally be

reported promptly following calculation

of the final VWAP at 4:15 P.M. and,

unlike the morning print, the end-of-day

prints will be printed on a trade-bytrade basis representing all matches that

morning. Each print will reflect a

matched trade and the corresponding

VWAP. These trades will be reported to

the Consolidated Tape with the sale

condition ‘‘B’’ indicating average

weighted pricing, which will

distinguish VWAP trades from other

transactions that may possibly be

reported after the close (such as afterhours, crossing session, or late sales

transactions). Thus, these trades will not

impact the determination of the last sale

price in a security. Because reporting is

trade-by-trade, if no UTS trade occurred

that day, the final VWAP will not be

reported to the Consolidated Tape that

day.

The UTS will not disseminate or

disclose orders or commitments,

including UTS bid/ask sizes, prior to the

Morning Session match, nor UTS

imbalances remaining after the Morning

Session match, except to the entering

Participant. The purpose of this

anonymity is to safeguard against

dissemination to any other participant

or to the marketplace the existence of

executed or unexecuted orders, which,

in turn, could, if disseminated,

influence the market after the opening

of the regular trading day.

Other Provisions

Pursuant to paragraph (h) of the Rule,

disputes respecting Morning Session

participation, or eligibility of orders or

participants, are to be resolved by the

Exchange, in accordance with Phlx Rule

124.

The Exchange’s liability respecting

the UTS is limited pursuant to Phlx ByLaw Article 12–11 and paragraph (i) of

the Rule. Thus, the Exchange is not

liable for any damage arising from the

use of the UTS. Specifically, this

provision states that pursuant to By-Law

Article 12–11, the Exchange shall not be

liable for any damages, claims, losses or

expenses caused by any errors,

omissions or delays resulting from any

act, condition or cause beyond the

reasonable control of the Exchange,

including but not limited to, an act of

God; fire; flood; extraordinary weather

conditions; war; insurrection; riot;

strike; accident; action of government;

communications or power failure;

equipment or software malfunction

arising from the use of the UTS, the

calculation of the VWAP or any and all

other matters respecting the operation of

the System or Morning Session.

With respect to trading halts, the Rule

is not intended to limit the ability of the

Exchange to otherwise halt or suspend

trading in any stock traded through the

UTS. Further, as stated in paragraph (k)

of the Rule, a new provision respecting

extraordinary market conditions, the

Floor Procedure Committee may

determine, due to extraordinary

circumstances, to adjust or modify any

of the times referenced by this Rule

respecting the order entry period, order

matching period or any aspect of the

transaction reporting procedures. In

addition to fast market conditions, for

purposes of this paragraph,

extraordinary circumstances also

include systems malfunctions and other

circumstances that limit the Exchange’s

ability to receive, disseminate or report

UTS information in a timely and

accurate manner.

Lastly, short sales are governed by

paragraph (g) of the Rule, which states

that Morning Session orders and

commitments must be appropriately

marked pursuant to Phlx Rule 455, but

are exempt from the ‘‘tick test’’ short

sale restrictions of Rule 455. Further,

positions resulting from Morning

Session transactions are effective for the

purpose of determining long or short

status, immediately upon notification to

the participant of a UTS execution,

notwithstanding that the VWAP has not

yet been determined.

The specific text of the proposed rule

change is available at the places

described in item IV below.

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
68344 Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices

11 15 U.S.C. § 78k–1(a)(1)(B)

1217 CFR 240.11Aa3–1

1317 CFR 240.11Ac1–1

14Accordingly, the Exchange has requested

exemptive relief from the requirements of Rule

11Ac1–1 under the Act. See Letter from Gerald D.

O’Connell, First Vice President, Phlx, to Larry E.

Bergmann, Assistant Director, Division of Market

Regulation, SEC, dated February 28, 1996. In this

letter, the Exchange has also requested interpretive

relief regarding Rule 11A2–2(T) under the Act, 17

CFR 240.11A2–2(T) and exemptive relief from

Section 10(a) of the Act, 15 U.S.C. § 78j(a). A

revised letter, which reflects the changes made to

the proposed rule change as a result of Amendment

No. 2, will be submitted separately.

15See ITS Plan, Section 6.

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV 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

During the past ten years, listed

equities trading volume has experience

explosive growth, from 18 billion shares

in 1982 to a projected 140 billion shares

in 1997, representing a sevenfold

increase in 15 years. A contributing

factor to this volume surge is the

increasing presence of institutional

trading. The Exchange expects that over

11 million trades of 5,000 shares or

more will be executed in the markets

during this year.

Although institutional trading of

block orders often consists of exchange

member firms trading for their

proprietary accounts, the vast majority

of such trading is for the benefit of nonmember accounts. The common thread

among most of these non-member block

orders is that the investment focus is

long-term, rather than short-term. When

the investment focus is long-term, intraday price drops occurring when

positions are purchased or sold are

problematic ‘‘bumps’’ in the road. Many

long-term investors prefer to avoid such

drops, even though an opportunity to

buy at the low or sell at the high may

be lost. Smoothing over these bumps

would be beneficial to long-term

investors. In this vein, long-term

investors often link the ability to secure

fair prices to the ability to retain

anonymity while ‘‘working’’ large

orders.

On the other hand, member firms

typically use intra-day volatility as an

opportunity to trade in the short term.

Such firms do so either as facilitator for

their customer orders, arbitrageur or as

registered floor traders. Many of these

traders welcome the opportunities

presented by additional volume and

volatility. Thus, diverting such intra-day

risks from long-term investors (who seek

to avoid such risks) to proprietary

traders (who seek to assume such risks)

is an important benefit of the proposed

Morning Session for the execution of

large-sized securities on a VWAP basis.

By placing intra-day price risks on

those most willing, and most suited, to

accept such risks, the Morning Session

will serve both institutional investors

and proprietary traders. The advantages

of the Morning Session will be available

to all qualified market participants for

eligible sized orders. Institutions which

will particularly benefit from the

session include corporate pension

funds, state and municipal pension

funds, major money managers and

mutual funds. In addition to offering fair

pricing, the session should also be cost

effective, as it will often replace the

costs of working a VWAP or regular

order over the course of a day or longer,

with the ease of a single execution and

single transaction charge.

In its role as a national securities

exchange and trading venue for equity

securities, the Phlx seeks to provide

liquidity and a marketplace for all types

of investors. In addition to its current

market structure and products, the

Exchange endeavors to provide new

products and systems, thereby

enhancing liquidity, while preserving

full investor protection. The UTS adds

an important dimension to these goals

by way of the VTS, which offers

institutional money managers, brokerdealers and investors the ability to

receive large executions more

efficiently, with less market impact. The

VTS is intended to provide liquidity,

complete anonymity, and end-to-end

data security in an electronic

environment. All VTS trades will be

priced at the VWAP, which the Phlx

believes is regarded industry-wide as

providing a useful execution price

measurement at a reasonable cost.

Institutions have been receiving VWAP

executions since 1985. the VTS is

intended to standardize this pricing

method so that investors can obtain ‘‘at

market returns’’ and implement

investment strategies utilizing the new

standard VWAP.

The Phlx believes that the UTS is an

innovative new automated securities

trading system that complements the

existing auction market. By providing

an automated matching system with

floor traders as well as off-floor traders

serving as facilitators for executions on

a VWAP basis, the UTS incorporates the

principles of an auction market with the

automation benefits of an electronic

execution system. Thus, the Exchange

believes that the UTS, as a new data

processing and communication

technique, creates the opportunity for

more efficient and effective market

operations, consistent with Section

11A(a)(1)(B) of the Act,11 by providing

increased execution alternatives to

investors. By combining pricing in

terms of a VWAP with the ability to

access block-sized liquidity

commitments, and by providing the

ability to anonymously effect such

block-sized orders prior to the opening

of the regular session, the Exchange’s

Morning Session should particularly

accommodate institutional customer

interests.

The Exchange proposes to adopt the

Rule in order to establish and govern the

UTS. In general, the UTS will accept

orders and commitments of established

minimum volumes (i.e., 5,000 shares for

orders and 2,500 shares for

commitments), executing orders against

other orders and commitments at the

VWAP. The VWAP will be assigned to

each matched trade and reported to the

appropriate reporting authority,

including trade-by-trade volume and the

VWAP. Consistent with Rule 11Aa3–1

under the Act,12 the Exchange will

thereby provide for the collection and

dissemination of transaction reports

containing, among other things, the

price of the security. The Exchange

believes that the proposed reporting

structure provides transparency to

Morning Session executions,

specifically identifying the total volume

executed before the opening, first as a

single print and, once the VWAP is

calculated, trade-by-trade. The

Exchange recognizes that within the

meaning of Rule 11Ac1–1 under the

Act,13 bids/offers will not be utilized in

the UTS, because all orders are

executable only at the VWAP, rendering

bids/offers meaningless.14

Because the System’s matching

process should be complete prior the

time of the opening of the Phlx market

(and other equity markets) at 9:30 A.M.,

the Exchange believes that the issue of

the integration of UTS orders into the

auction market is not raised by the

proposal. Specifically, the Exchange

does not believe that the UTS raises

market integration issues, such as the

role of the Intermarket Trading System

(‘‘ITS’’) or integrating booked orders,

because UTS matching would occur preopening, when the markets are not yet

open for regular trading. Therefore, the

Exchange concludes that the operation

of the UTS is outside of the scope of the

ITS Plan, which is based on access

across various markets to continuous

two-sided quotations.15 As a result, the
Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices 68345

16The Exchange notes that, in comparison, the

Optimark System, which would operate as a

periodic call market and was recently approved by

the Commission, does give rise to ITS Plan issues.

See Securities Exchange Act Release No. 39086

(September 17, 1997), 62 FR 50036 (September 24,

1997) (File No. SR–PCX–97–18) (order granting

approval to PCX Application of the OptiMark

System).

17 In fact, if Phlx orders were guaranteed an

execution related to the UTS VWAP, various market

manipulation concerns could arise; for instance,

buy orders in a surging stock could unfairly benefit

from a VWAP that the buyer knows will be lower

than the last sale in that security.

18 15 U.S.C. § 78k.

19 15 U.S.C. § 78c(a)(2).

20See, e.g., Securities Exchange Act Release No.

29237 (May 24, 1991) (File Nos. SR–NYSE–90–52

and SR–NYSE–90–53 establishing an off-hours

trading facility).

21Such trades are currently reported using the

indicator ‘‘W.’’

Exchange believes that UTS pre-opening

matching does not implicate the

intermarket price protection obligations

of the ITS Plan, as no UTS price is

calculated until the end of the trading

day, nor does UTS order flow impact or

create bids/offers for purposes of other

market center quoting during the trading

day.16

Further, the assignment of a final

VWAP to Morning Session executions

would occur after the close of trading.

It is possible that an order on the Phlx

specialist’s limit order book may remain

unexecuted at the end of a trading day

at a price equal or better than the VWAP

in that security, meaning UTS orders

would be executed at that price.

However, the Exchange does not believe

that this presents a market

fragmentation concern, because the

booked order was never eligible for the

VWAP or a UTS execution, as it was not

entered as a UTS order; it may not have

been eligible for a UTS execution due to

size or account status. Further, that

booked order was entered for execution

at a specified limit price or better, not

at the VWAP, which could have

resulted in a different price. For these

reasons, no expectation will be created

for such orders to look to the UTS or

VWAP execution price; orders entered

for execution on the Phlx will continue

to be governed by existing rules.

Requiring that such regular Phlx nonUTS orders be protected in light of only

better VWAP prices after the close is

unfair17 and illogical, as these orders

would then be executable after the

close; not subject to the risk of a

different VWAP; and in effect,

guaranteed a price based on prints in a

system for which the order was not

eligible and in which it was never

entered. In fact, this would disadvantage

unexecuted UTS orders.

Further, the Exchange believes that

UTS orders do not raise price priority

issues, because all orders have been

entered for execution at the VWAP. The

UTS will execute orders based on the

priority principles enumerated in the

Rule, which, according to the Exchange,

is consistent with Section 11 of the

Act 18 and the rules thereunder, in that

specialist activity will be consistent

with Section 11(a)(1)(A) of the Act,

members will generally yield priority to

non-members pursuant to Section

11(a)(1)(G) of the Act, and Committers

will fulfill the obligations of Section

11(b) of the Act. Phlx Off-Floor

Liquidity Providers receive priority over

Floor Traders in order to encourage

commitments. Because Phlx Floor

Traders’ priority is last-in-line, no issue

of Specialist trading ahead of customers

in raised by the UTS. As amended, the

Rule affords priority to orders by

account type (meaning, except crosses,

non-member before member, type of

non-member account, constraints, and

direct subscription versus broker

access); then by order size (largest first);

and for orders of the same size and

account type, on a chronological basis

by time of entry.

The UTS will operate as a facility of

the Exchange within the meaning of

Section 3(a)(2) of the Act,19 in that the

UTS utilizes Phlx equipment and

personnel, floor trader participation,

and SCCP to process UTS trades. Thus,

Morning Session trades will be

appropriately regulated and reported as

Exchange trades. The Phlx notes that

this is similar to the regulatory

treatment afforded to after-hours trading

sessions on the Exchange as well as

other exchanges.20

As previously stated, the VWAP will

be calculated on the basis of those

transactions reported by the appropriate

reporting authority for the respective

security from the beginning of the

regular trading session until 4:15 P.M.

In the case where a transaction occurs

in the Morning Session in a security

which has not opened for trading that

day for any reason in the primary

market by 3:00 P.M., the respective

Morning Session transaction will be

voided and a report to that effect will be

immediately sent. The Exchange

believes that establishing a specific time

frame by which a security must trade

gives further assurance that the VWAP

will consist of a representative sample

of trades from which to derive a

calculation. Additionally, this provision

will also serve the important function of

prompt notice that the Morning Session

transaction will be voided if the primary

market has not yet opened in a

particular issue. Although written or

electronic confirmation will follow,

Participants should be aware that this

rare exception to the creation of a

binding contract through the UTS may

occur by observing that an issue failed

to open on its primary market. The 3:00

P.M. cut-off provides an objective

limitation on the VWAP calculation,

which notifies the User that a

representative VWAP cannot be

calculated for that day. The Exchange

has determined that the 3:00 P.M.

provision is preferable to calculating a

VWAP based on the previous day’s

pricing, because an important purpose

of the VWAP is to incorporate and

average that day’s price movement.

With respect to trading halts, if a

security opens for trading but is the

subject of a halt and does not resume

trading for the remainder of the day, the

Morning Session transaction is based on

the prints that occurred before the halt.

The Exchange realizes that a security

may only be open for a short time before

it is halted; however, the Exchange

believes that for the purposes of the

UTS VWAP calculation, trading that

occurs prior to a halt forms a reasonable

basis for calculating a VWAP for that

day, even if the security does not reopen

that day. A significant amount of price

discovery is involved in an opening

print, such that it provides an

appropriate VWAP measure, which is

preferable to voiding that day’s UTS

trades. For these reasons, the Exchange

has determined that even a few minutes

of trading provides adequate pricing

information, which is preferable to

voiding UTS trades and consistent with

the creation of a binding contract.

Nevertheless, the Exchange maintains

that the Morning Session execution is

an executed Exchange contract, with

only the one unusual circumstances

enumerated above. The Exchange notes

that although utilizing the VWAP as a

pricing mechanism is new to exchange

trading, block trades as well as certain

Nasdaq trades are currently reported as

average weighted pricing trades.21

With respect to access to the System,

as stated above, Participants may be

either Users, who may enter orders, or

Committers, who must be Exchange

members. Because Users may be nonmembers of the Exchange, qualified

non-member access to the UTS is

proposed. The Exchange believes that

the UTS provides adequate controls

regarding limited non-member access to

the System. For computer processing

purposes, one control mechanism

requires SCCP account information for

UTS trades, just as for all Phlx equity

trades. For disciplinary jurisdiction and

compliance purposes, the second
68346 Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices

22See Securities Exchange Act Release No. 35030

(November 30, 1994) (File No. SR–CHX–93–19)

(order approving Chicago Match and, at n.70

therein, reference to the New York Stock

Exchange’s SuperDOT).

23 15 U.S.C. § 78f(b)(5).

24CFR 240.30b–3.

25The Exchange understands that proposed

amendments to these provisions provide that if the

ownership of a security is claimed by virture of

having entered into a contract to purchase it, the

contract must involve a fixed, currently

ascertainable amount of the security at a fixed,

currently ascertainable price. Separately, the

Exchange requested that an exemption for the

Morning Session be incorporated into these

proposed amendments. See letter from Gerald D.

O’Connell, First Vice President, Phlx, to Larry E.

Bergmann, Assistant Director, Division of Market

Regulation, SEC, dated November 9, 1995. 26See supra note 14.

control mechanism over non-member

access to the UTS is the requirement of

a three-way agreement. As described

above, in the three-way agreement, the

Phlx member must agree to be jointly

and severally liable for actions of the

non-member through the UTS; and the

non-member must agree to adhere to all

applicable by-laws and rules of the

Exchange. This is intended to provide a

jurisdictional basis for disciplinary

action against such non-member, to the

same degree as if the order were placed

directly. The required agreement with

the non-member provides that the

Exchange has the right to terminate

access to the UTS, without prior notice

for any reasons, or no reason

whatsoever. Because both a three-way

and give-up agreement are required,

termination of either agreement

necessarily results in the Exchange’s

ability to terminate access to the UTS.

In sum, the Exchange believes that these

requirements ensure adequate controls

over non-member access, including

Exchange supervision of and

jurisdiction over non-member Users.

The Exchange notes that similar nonmember access has been afforded to

other exchange system.20 Utilizing

SCCP facilities and requiring Exchange

agreements with non-members is

intended to facilitate coordination with

persons engaged in clearing and settling

these transactions, consistent with

Section 6(b)(5) of the Act.23

Section 10(a) of the Act governs short

sales in securities, while Rule 3b–3

under the Act 24 defines the term ‘‘short

sale’’ as ‘‘any sale of a security which

the seller does not own or any sale

which is consummated by the delivery

of a security borrowed by, or for the

account of, the seller.’’ Further, Rule

3b–3 provides that if a person has

‘‘purchased, or has entered into an

unconditional contract, finding on both

parties thereto, to purchase’’ a security,

then that person shall be deemed to own

that security.25 Separately, the Exchange

has requested exemptive relief from the

‘‘tick test’’ of Section 10(a) of the Act.26

Thus, pursuant to paragraph (g) of the

Rule, Morning Session orders and

commitments should not be subject to

the tick test/short sale restrictions of

Phlx Rule 455. Nevertheless, UTS orders

must be marketed in accordance with

that rule. Further, because a long

position creates an irrevocable contract,

a purchase during the Morning Session

may be followed by sales during the

regular trading session in that security,

without such sales deemed to be short

sales.

Lastly, the Exchange proposes to

amend Phlx Rule 101 to adopt

Commentary .03 reflecting the Morning

Session and providing reference to the

Rule. The Exchange also proposes minor

changes to Rule 101 for clarity and

correction. Specifically, ‘‘A.M.’’ and

‘‘P.M.’’ would appear in capital letters

consistently throughout the rule, and

there would be a heading for each

commentary. The Exchange believes

that these changes to Rule 101 should

both correct and clarify its provisions.

For the reason stated above, the Phlx

believes that the proposal to operate a

Morning Session utilizing the UTS is

consistent with the Act, and particularly

with Sections 6, 11 and 11A thereof.

Specifically, the proposal is consistent

with Section 6(b)(5) of the Act, in that

it is designed to promote just and

equitable principles of trade, prevent

fraudulent and manipulative acts and

practices, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, as well as

to protect investors and the public

interest, by providing an automated

order entry and execution system for

securities traded during the Morning

Session, based on a comprehensive rule

and extensive matching algorithm.

The Exchange anticipates that

significant institutional volume could

be attracted to the Phlx, which should,

in turn, add liquidity to both the

Morning Session as well as to the Phlx’s

regular trading session. The Exchange

believes that the UTS provides an

important new pricing mechanism for

exchange trades the VWAP. Further, the

Exchange believes that the Morning

Session should provide a unique

opportunity to electronically submit

block-sized orders for automatic

matching before the regular opening at

9:30 A.M. Thus, the UTS should perfect

the mechanism of a free and open

market and a national market system.

The proposal at hand employs specific

procedures and safeguards designed to

protect investors and the public interest,

prevent fraudulent and manipulative

acts and practices, and promote just and

equitable principles of trade. These

procedures include specific execution

priority parameters, order entry

specifications and Exchange

surveillance procedures (separately

submitted) designed to monitor UTS

transactions. The Exchange also believes

that because the Morning Session is

limited to a once-per-day session and

adequately provides for transparency,

despite the requested limited exemptive

relief, the proposal is consistent with

the Act.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Phlx 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 amendment,

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
Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / Notices 68347

27 17 CFR 200.30–3(a)(12).

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

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. 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–Phlx–96–14

and should be submitted by January 21,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.27

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–33992 Filed 12–30–97; 8:45 am]

BILLING CODE 8010–01–M

OFFICE OF THE UNITED STATES

TRADE REPRESENTATIVE

Thresholds for Implementation of

Trade Agreements Act

AGENCY: Office of the United States

Trade Representative.

ACTION: Adjustment of thresholds for

implementation of Trade Agreements

Act.

SUMMARY: Executive Order 12260

requires the U.S. Trade Representative

to set the U.S. dollar thresholds for

application of Title III of Trade

Agreements Act of 1979 (19 U.S.C. 2511

et seq), which implements U.S.

obligations under the World Trade

Organization (WTO) Agreement on

Government Procurement and Chapter

10 of the North American Free Trade

Agreement (NAFTA). These obligations

apply to procurements valued at or

above specified U.S. dollar thresholds.

The U.S. Trade Representative has

determined that, effective January 1,

1998, the thresholds will be as follows:

1. WTO Agreement on Government

Procurement

A. Central Government Entities

Covered by the WTO Agreement on

Government Procurement (as listed in

United States Annex 1 of the

Agreement):

—Procurements of goods and services—

$186,000

—Procurements of construction

services—$7,143,000

B. Sub-Central Government Entities

Covered by the WTO Agreement on

Government Procurement (as listed in

United States Annex 2 of the

Agreement):

—Procurement of goods and services—

$507,000

—Procurement of construction

services—$7,143,000

C. All Other Government Entities

Covered by the WTO Agreement on

Government Procurement (as listed in

United States Annex 3 of the

Agreement):

—Procurement of goods and services—

$571,000

—Procurement of construction

services—$7,143,000

2. Chapter 10 of the NAFTA

A. Federal Government Entities (as

listed in the United States Schedule to

Annex 1001.1a–1 of the NAFTA):

—Procurements of goods and services—

$51,450

—Procurements of construction

services—$6,688,500

B. Government Enterprises (as listed

in the United States Schedule to Annex

1001.1a–2 of the NAFTA):

—Procurements of goods and services—

$257,250

—Procurement of construction

services—$8,232,000

FOR FURTHER INFORMATION CONTACT:

Rebecca Reese, Office of WTO Affairs

(202–395–3063), Office of the United

States Trade Representative, 600

Seventeenth Street, NW, Washington,

D.C. 20508.

Frederick L. Montgomery,

Chairman, Trade Policy Staff Committee.

[FR Doc. 97–34142 Filed 12–30–97; 8:45 am]

BILLING CODE 3190–01–M

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

Reports, Forms and Recordkeeping

Requirements Agency Information

Collection Activity Under OMB Review

AGENCY: Office of the Secretary, DOT.

ACTION: Notice.

SUMMARY: In compliance with the

Paperwork Reduction Act of 1995 (44

U.S.C. 3501 et seq.), this notice

announces that the Information

Collection Requests (ICRs) abstracted

below have been forwarded to the Office

of Management and Budget (OMB) for

review and comment. The ICRs describe

the nature of the information collections

and their expected burden. The Federal

Register Notice with a 60-day comment

period soliciting comments on the

information collection entitled ‘‘Study

of the First There, First Care National

Campaign: An Intervention to Save

Lives’ (previously referred to as the

‘‘Bystander Care Program’’) was

published on February 3, 1997 [62 FR,

page 5066—5067] and on information

collection entitled ‘‘Development of

Improved Driver Interview Procedures

for Police Use at Checkpoints’ was

published on February 19, 1997 [62 FR

7494—7495].

DATES: Comments must be submitted on

or before January 30, 1998.

FOR FURTHER INFORMATION CONTACT:

Edward Kosek, NHTSA Information

Collection Clearance Officer at (202)

366–2589.

SUPPLEMENTARY INFORMATION:

National Highway Traffic Safety

Administration (NHTSA)

Title: Study of the First There, First

Care National Campaign: An

Intervention to Save Lives.

OMB No.: 2127–NEW.

Type of Request: Approval of a New

Information Collection.

Affected Public: Individuals ages 16

and older living in households with

telephones within a population of two

rural sites.

Abstract: NHTSA will conduct a

telephone survey as a major component

of a two-site evaluation of its ‘‘First

There, First Care National Campaign’’

Program. In accordance with the

agency’s mandate to reduce fatalities

and economic loss resulting from motor

vehicle crashes, this Program was

established to encourage passerby to

stop at rural crash sites, render lifesaving assistance, and summon

emergency medical services (EMS). The

program is designed to raise public

awareness of the importance of

bystander care, and to teach the few

basic skills necessary to recognize an

emergency, start victims’ breathing, stop

victims’ bleeding, and contact EMS. The

data from the survey will be used to

evaluate the extent to which the ‘‘First

There, First Care’’ messages have

reached the public in targeted areas, the

extent to which these messages were

successful in changing attitudes towards

providing emergency care, and the

extent to which the program improved

knowledge needed to successfully

provide emergency care.

Estimated Annual Burden Hours: 164

hours.

Estimated Number of Respondents:

640.

Need: The findings will be used to

judge the efficacy of the ‘‘First There,

First Care’’ Program. NHTSA will draw

on this information when considering

continuation, refinement, and

expansion of the ‘‘First There, First

Care’’ Program.