57416 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

March 14, 2000 meeting. See supra note 8. The

word ‘‘addition’’ was removed from this sentence

and replaced with the word ‘‘deletion.’’ Telephone

conversation between Jean I. Feeney, Special

Advisor to the President, NASD Dispute Resolution,

and Joseph Corcoran, Attorney, Division,

Commission, on September 14, 2000.

14 Id.

15 15 U.S.C. 78o–3(b)(6). 16 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 In Amendment No. 1, the Exchange withdrew

the proposed changes to PCX Rule 6.6 because the

changes were previously made and approved in

Securities Exchange Act Release No. 40875

(December 31, 1998), 64 FR 1842 (January 12, 1999).

See letter from Michael D. Pierson, DirectorRegulatory Policy, PCX, to Heather Traeger,

Attorney, Division of Market Regulation, SEC, on

March 27, 2000 (‘‘Amendment No. 1’’).

4Securities Exchange Act Release No. 42590

(March 29, 2000), 65 FR 17690.

5See, e.g., PCX Rule 6.8 Com. .08(a) (‘‘If a firm

desires to facilitate customer orders in the XYZ

option issue * * *.’’); PCX Rule 6.28(a)(9) (‘‘the

permissible size of orders that may be

automaticallay executed’’ may be increased ‘‘in a

particular issue, or for all option issues.* * *’’); PCX

Rule 6.82(e) (‘‘[t]he allocation of option issues to

LMMs shall be effected by the Options Allocation

Committee.* * *’’).

NASD Dispute Resolution also

proposes to amend Rule 10312 to

provide, as in Rule 10308, that the

Director’s authority to remove

arbitrators does not cease with the first

pre-hearing or hearing session. There

are two restrictions on the exercise of

this authority, however, once such

sessions have begun. Proposed Rule

10312(d)(2) provides that, after the

earlier of the first pre-hearing

conference or the first hearing, the

Director may remove an arbitrator based

only on information not known to the

parties when the arbitrator was selected.

This provision is intended to prevent

parties from raising challenges late in

the process which could have been

raised at the outset. Rule 10312(d)(2)

also will provide that the Director’s

authority under this subparagraph may

only be exercised by the Director or by

the President of NASD Dispute

Resolution. 14

Finally, NASD Dispute Resolution

proposes to amend Rule 10312(e)

consistently with the above changes, to

delete language limiting the time within

which the Director may remove

arbitrators for cause; and Rule 10312(f)

is deleted as no longer necessary in light

of the proceeding changes.

2. Statutory Basis

NASD Dispute Resolution believes

that the proposed rule change is

consistent with the provisions of section

15A(b)(6) of the Act,15 which requires,

among other things, that the

Association’s rules must 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. The NASD believes that

the proposed rule change will protect

the public interest by providing a

procedure to remove an arbitrator for

sufficient cause shown at any time in an

arbitration, where the challenge is based

on information not known to the parties

at the time of the arbitrator’s

appointment.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Dispute Resolution does not

believe that the proposed rule change

will result in any burden on

competition that it not necessary or

appropriate in furtherance of the

purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule is

consistent with the Act. Persons making

written submissions should file six

copies thereof with the Secretary,

Securities and Exchange Commission,

450 Fifth Street, NW., Washington, DC

20549–0609. Copies of the submission,

all subsequent amendments, all written

statements with respect to the proposed

rule change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASA. All

submissions should refer to File No.

SR–NASD–00–34 and should be

submitted by October 13, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–24389 Filed 9–21–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43293; File No. SR–PCX–

99–36]

Self-Regulatory Organizations; Order

Granting Approval to Proposed Rule

Change and Amendment No. 1 by the

Pacific Exchange, Inc. Relating to

Options Trading Rules

September 14, 2000.

I. Introduction

On October 1, 1999, the Pacific

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

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commissiion’’), pursuant to section

19(b)(1) of the Securities Exchange Act

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 a proposed rule change to

modify its options trading rules.

Amendment No. 1 was filed with the

Commission on March 28, 2000.3 The

proposed rule change was published for

comment in the Federal Register on

April 4, 2000.4 No comments were

received on the proposal. This order

approves the proposal, as amended.

II. Description of the Proposal

The proposed rule change would

make the following changes to the text

of the PCX rules on options trading.

A. Definition of Term ‘‘Option Issue’’

The proposal would adopt new Rule

6.1(b)(12) to define the term ‘‘option

issue’’ as ‘‘the option contract overlying

a particular underlying security.’’ The

Exchange notes that the commonly-used

term ‘‘issue’’ appears in several

locations in the PCX Rulels.5 The

Exchange believes that the term ‘‘issue’’

means the same as ‘‘option’’ or ‘‘option

contract’’ when used, for example, as in

PCX Rule 6.65(a), which states:

‘‘Trading on the Exchange in any option

contract shall be halted or suspended

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57417

6See, e.g., PCX Rule 6.4(a) (‘‘After a particular

class of option * * * has been opened for trading

* * *.’’); PCX Rule 6.37(c) (‘‘Whenever a Market

Maker enters the trading crowd for a class of

options in which he does not hold a Primary

Appointment * * *’’); PCX Rule 6.64, Com. .02

(‘‘For those opotion classes and within such time

periods as the Options Floor Trading Committee

may designate * * *.’’).

7PCX Rule 6.1(a)(10) states that ‘‘[t]he term ‘class

of options’ means all option contracts of the same

type of option covering the same underlying stock’’

(emphasis added), while the term ‘‘type of option’’

is defined in PCX Rule 6.1(a)(7) to mean ‘‘the

classification of an option contract as either a put

or call (emphasis added).’’ Therefore, the term

‘‘class’’ may refer to either a put class or a call class

of option contracts.

8PCX Rule 5.2(a) states: ‘‘All orders on the

Exchange must either be ‘day,’ ‘immediate or

cancel,’ ‘good ’til canceled’ (‘GTC’), or ‘good ’til

canceled that are eligible for execution in the post—

1:00 p.m. auction market trading and closing price

protection sessions’ (‘GTX’). Each class of orders

must be recorded on the proper ticket provided

therefore.’’

9 ‘‘GTX’’ orders are not recognized on the Options

Floor. See PCX Rule 5.25(f) (‘‘GTX Orders Under P/

COAST’’).

10The Exchange believes that the order ticket

requirement of PCX Rule 5.2(a) is superfluous

because current PCX Rules 6.67–6.69 expressly

cover the use of order tickets for option orders.

11PCX Rule 5.6(a) states: ‘‘Bids and offers shall

be for one trading unit or multiples thereof to

constitute an Exchange quotation. Bids and offers

in other market centers which may be displayed on

the Floor for the purpose of ITS or other purposes

shall have no standing in the trading crowd on the

Floor.’’

12PCX Rule 6.74 states: ‘‘Unless otherwise

specified, all bids or offers made on the floor shall

be deemed to be for one option contract unless a

specific number is expressed in the bid or offer. A

bid or offer for more than one option contract shall

be deemed to be for that amount or any lesser

number of option contracts, unless specified

otherwise.’’

13PCX Rule 6.73 states: ‘‘Bids and offers to be

effective must be made at the post by public outcry,

except that bids and offers made by the Order Book

Official shall be effective if displayed in a visible

manner in accordance with PCX Rule 6.55. All bids

and offers shall be general ones and shall not be

specified for acceptance by particular members.’’

14PCX Rule 5.6(b) states: ‘‘Bids and offers made

without stated conditions shall be considered to be

‘regular way.’ ‘Regular way’ bids or offers have

priority over conditional bids or offers.’’

15PCX Rule 5.6(c) states: ‘‘A bid or offer may be

made ‘all or none’; however, regular bids or offers

at equal or better prices shall have priority. No ‘all

or none’ transaction in round lots may be effected

unless all regular bids or offers at equal or better

prices are executed thereby or simultaneously or

unless the holders of such regular bids or offers

consent thereto. All bids and offers, unless

specifically made ‘all or none,’ shall be subject to

split-up without objection except that in no case

may a division of stock be made of less than round

lots except by mutual consent.’’

16PCX Rule 6.75(a) provides in part that ‘‘If two

or more bids represent the highest price * * *

priority shall be afforded to such bids in the

sequence in which they are made.’’

17PCX Rule 5.8(d) states: ‘‘When bids or offers are

made simultaneously, or when it is impossible to

determine clearly the order of time in which they

were made, all such bids or offers shall be on parity,

except as noted in Rule 5.8(e).’’

18PCX Rule 5.8(h) states: ‘‘All stop loss orders

must clearly indicate in writing that they are such

and, in addition, the amount and the price of the

stock appearing at the top of the buy and sell ticket

must be circled.’’

19See PCX Rule 6.46 (‘‘Responsibilities of Floor

Brokers’’).

20PCX Rule 5.12(a) states: ‘‘The seller shall be

responsible for transactions being properly recorded

by the floor reporters.’’

21PCX Rule 5.13(a) states: ‘‘Every transaction on

the Exchange must be compared as provided herein

unless the same shall have been officially removed

from the record in accordance with Exchange

rules.’’ PCX Rule 5.13(b), Comparison Ticket, states

Continued

whenever * * *.’’ However, the

Exchange believes that the use of the

terms ‘‘option’’ and ‘‘option contract’’

would often result in ambiguities that

the use of ‘‘issue’’ would not create.

While the term ‘‘class of options’’ is

used in many PCX Rules to refer

generally to options overlying a

particular underlying security,6 the

Exchanges believes that the use of the

term ‘‘class’’ can be ambiguous because

it may refer either to a ‘‘put class’’ or a

‘‘call class.’’ 7 Accordingly, the proposed

rule change would formally adopt the

definition of the term ‘‘option issue.’’

B. General Rules Applicable to Options

Trading

PCX Rule 6.1 sets forth a list of

general PCX trading rules that are

applicable, by cross-reference, to

Exchange transactions in option

contracts. Most of these rules relate

primarily to the trading of equity

securities on the Exchange. The

proposed rule change would remove

PCX Rules 5.2(a), 5.6(a)–(c), 5.8(d),

5.8(h), 5.12(a) and 5.13(a)–(b) from that

list. Each of the cross-references to be

removed is discussed below:

• PCX Rule 5.2(a)—‘‘Types of

Orders.’’ 8 The Exchange believes that

the first part of this rule—the part

stating that all orders on the Exchange

must be ‘‘day,’’ ‘‘immediate or cancel’’

or ‘‘good ’til canceled’’—applies to

options trading, and accordingly, the

proposed rule change would adopt PCX

Rule 6.62, Commentary .01, to

incorporate this part of the rule into the

rules on options trading. However, the

Exchange believes that the remainder of

PCX Rule 5.2(a) either does not apply to

options trading 9 or is superfluous.10

• PCX Rule 5.6(a)—‘‘Bids—Offers—

Quotations.’’ 11 The Exchange believes

that PCX Rule 6.74 12 adequately covers

the meaning of bids and offers as

applied to options trading. Further the

Exchange believes that the part of PCX

Rule 5.6 covering the display of bids

and offers on other market centers is

superfluous in light of PCX Rule 6.73,

which provides the requirements for

bids and offers to have standing on the

Options Floor.13 Moreover, bids and

offers are not displayed on the Options

Floor for Intermarket Trading System

(‘‘ITS’’) purposes.

• PCX Rule 5.6(b)—‘‘Regular Way.’’ 14

The Exchange believes that the current

cross-reference to this equity trading

rule is also superfluous because, unlike

settlement of equity securities,

settlement of option contracts is not

based on a distinction between ‘‘regular

way’’ and ‘‘non-regular way.’’

• PCX Rule 5.6(c)—‘‘All or None.’’ 15

The Exchange believes that the crossreference to this equity trading rule is

erroneous and inconsistent with current

practices. For example, assume that a

floor broker who is holding an order to

sell twenty option contracts enters a

trading crowd and calls for a market.

Next, assume that there are two

responses: (1) A floor broker holding an

‘‘all or none’’ order for twenty contracts

for a customer bids $3, and (2) a market

maker bids $3. Under current practices

and consistent with PCX Rule 6.75(a), if

the broker were first to vocalize a bid,

the broker would have first priority to

execute the order.16 However, if PCX

Rule 5.6(c) were applied, the market

maker’s bid would have priority, even if

it were made second in sequence. The

Exchange believes that PCX Rule 6.75

should prevail over PCX Rule 5.6(c), in

accordance with current practices.

• PCX Rule 5.8(d)—‘‘Simultaneous

Bids and Offers.’’ 17 The Exchange notes

that simultaneous bids and offers are

not recognized in the general rules on

priority of bids and offers for options

contracts. The Exchange believes that

PCX Rules 6.75 and 6.76 are exhaustive

and that the cross-reference to Rule

5.8(d) is erroneous.

• PCX Rule 5.8(h)—‘‘Marking Stop

Loss Orders.’’ 18 This rule covers the

manual handling of stop loss orders.

The Exchange believes that the

procedure covered by this rule is

unnecessary and that the responsibility

of floor brokers to use due diligence in

their handling of orders, as codified in

the rules on option trading, is

sufficient.19

• PCX Rule 5.12(A)—‘‘Seller

Responsible for Recording.’’ 20 The

Exchange believes that the specific

procedures currently set forth for

reporting options transactions—codified

in PCX Rule 6.69 and OFPA G–12—

adequately address this procedure and

that the cross-reference to PCX Rule

5.12 is unhelpful and unnecessary.

• PCX Rule 5.13(a)–(b)—

‘‘Comparisons.’’ 21 The Exchange

57418 Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices

‘‘The comparison ticket shall contain and constitute

a record of the name, quantity and price of the

securities traded and the names of the buying and

selling members from which daily transaction

sheets will be prepared for member firms.’’

22The provisions being eliminated include the

following:

‘‘Rule 6.45 requires that each Floor Broker shall

have in effect a Letter of Authorization that has

been issued for such Floor Broker by a clearing

member, and Section 77 of Rule VI requires that

each Market Maker shall have in effect a Letter of

Guarantee which has been issued for such market

maker by a clearing firm.’’ (OFPA F–6)

23Subsection of OFPA F–2 currently provides:

‘‘The inviting member or member organization floor

manager may not sign in more than four guests at

any given time. Visitors may remain on the Options

Trading Floor a maximum of two hours during the

trading session and one-half hour after it. Visitors,

except those referred to in paragraph #4 above, may

not be allowed on the Options Trading Floor more

than five times in a calendar month, regardless of

the duration of each visit.’’

24This part of OFPA F–2 states: ‘‘Rule 6.2(a)

limits admission to the Floor to members,

employees of the Exchange, clerks or messengers

employed by members, and such other persons as

may be provided for in the Rules. Pursuant to this

Rule, the Exchange encourages the presence of

appropriate visitors on the Options Trading Floor,

but it is deemed necessary to strictly enforce certain

procedures governing the admission to the Floor of

such visitors.’’

25OFPA E–5 states:

‘‘A Member of the Options Floor with a

complaint concerning a situation arising on or

relating to the Floor, should: (1) Notify the

Surveillance Department of the circumstances

involved, and (2) subsequent to such notification,

submit the complaint in writing to the Surveillance

Director. If the concerned Member believes it

necessary for the Surveillance Department to

personally review or rectify the situation, a member

of the Department will immediately come to the

Floor. A study will be conducted on all matters

referred to the Surveillance Department pursuant to

this floor Procedure Advice. Upon completion of

such study, the Member(s) filing the complaint will

be informed of the conclusion (i.e., filed closed or

referred to the Compliance Department for further

review or action). A written report of each study

will be submitted to the Options Floor Trading

Committee. General Information regarding such

study may be given to concerned Members;

however, the specific details shall remain

confidential.’’

26OFPA E–6 states:

‘‘Upon receipt of a written complaint from a

member of the Options Floor, the Compliance

Department shall commence an investigation into

the allegations contained in such complaint. The

Compliance Department may, among other things,

interview the Complainant, and any witnesses and

parties to the action which gave rise to the

complaint. The Compliance Department may

request a written response from the parties involved

and any witnesses. Upon the Compliance

Department obtaining the facts pertinent to the

issue, a written recommendation will be drafted

and presented to the Options Floor Trading

Committee. After the Options Floor Trading

Committee has received the written

recommendation of the Compliance Department,

the item should be placed on the Committee’s

agenda for discussion, and final action, insofar as

the Options Floor Trading Committee is concerned.

The Compliance Department may, in addition,

commence Disciplinary Proceedings based upon

any violation of the Pacific Exchange Constitution,

Rules, Commentaries or procedures uncovered

during the investigation of the complaint.’’

27The proposal would also fix a typographical

error in PCX Rule 6.4(e).

28Cf. CBOE Rule 5.5, Interp. & Policy .03. 29 Id.

believes that PCX Options Rule 6.16

adequately covers the Exchange

procedures for comparison of trade

information and that the cross-reference

to PCX Rules 5.13(a)–(b) is superfluous.

C. Trading Floor Badges

The proposed rule change would

eliminate provisions currently set forth

in OFPA F–1 and F–6 relating to trading

floor badges on the Options Floor that

the Exchange believes are superfluous

and unnecessary.22 The proposal also

would redesignate the remaining text of

those as paragraphs (d)(1) and (d)(2) of

PCX Rule 6.2.

D. Visitors to the Options Floor

The proposal would redesignate

OFPA F–2 as PCX Rule 6.2(e) (‘‘Visitors

on the Options Floor’’). The proposal

also would eliminate subsection 6 of

OFPA F–2, which limits the number of

visitors and lengths of time during

which visitors are permitted on the

Options Floor.23 In addition, the

proposal would make technical changes

to OFPA F–2 and eliminate superfluous

provisions, including a summary of the

provisions of current PCX Rule 6.2(a).24

Finally, the proposal would add a new

provision to PCX Rule 6.2(e), stating

that a group of visitors comprising more

than fifteen persons may not enter the

Trading Floor without prior approval of

the Chair or Vice Chair of the Options

Floor Trading Committee.

E. Complaints From Floor Members

The proposal would eliminate OFPA

E–5 25 and OFPA E–6 26 and replace it

with new PCX Rule 6.2(f), which

advises options floor members as to

where they may direct complaints

concerning situations arising on or

relating to the Options Trading Floor.

Specifically, the proposed rule would

state that Floor Members may direct

complaints concerning situations arising

on or relating to the Options Trading

Floor to the Options Surveillance

Department or to the Enforcement

Department so that appropriate followup action may be taken.

F. Series of Options Open for Trading

The proposal would update PCX Rule

6.4(a) 27 so that it will conform with

current Exchange practices by changing

from three to four the number of

different expiration months that will

normally be opened at the

commencement of trading a particular

option issue.28 The proposed rule

change also would remove provisions

the Exchange believes are erroneous on

the specific expiration month that may

be added at the commencement of

trading of a particular issue and at the

time a previous month’s series expires.

The rule currently states that three

months will normally be opened, with

the first expiration month being within

approximately three months thereafter,

the second month being approximately

three months after the first and the third

being approximately three months after

the second. In addition, the rule states

that additional series of the same class

may be opened for trading on the

Exchange at or about the time a prior

series expires, and the expiration month

of each such series shall normally be

approximately nine months following

the expiration of such series. However,

the current industry practice is normally

to add four expiration months, the first

two being the two nearest months, and

the third and fourth being the next two

months of the quarterly cycle previously

designated by the Exchange for that

specific issue.29 When a previous

expiration month’s series expires, a new

expiration month is added to assure that

there are always four expiration months.

G. Verification of Compared Trades

The proposal would reduce the

amount of time during which members

or their representatives are required to

remain available on the trading floor

after the Trade Processing Department

closes. The reduction would be based

on the number of transactions processed

per trading day. Specifically, the

proposed rule change would require

that members or their representatives be

available after Trade Processing closes

for 30 to 60 minutes, depending on the

number of transactions involved.

Currently, members or their

representatives are required by PCX

Rule 6.17, Commentary .01 to remain

available after the close as follows:

when fewer than 8,000 transactions on

the Exchange have occurred, 45

minutes; but when more than 8,000

trades have occurred, one hour and 15

minutes. Under the proposal, these

times would be modified as follows: 0–

8,000 transactions, 30 minutes; 8,000–

12,000 transactions, 45 minutes; and

over 12,000 transactions, 60 minutes.

The Exchange believes that the new

requirements are more reasonable and

better reflect the Exchange’s needs.

H. Resolution of Uncompared Trades

The proposal would modify PCX Rule

6.21 by changing the basis for

establishing a loss as the result of an

Federal Register / Vol. 65, No. 185 / Friday, September 22, 2000 / Notices 57419

30Cf. CBOE Rule 6.61, Interp. & Policy .01.

31Commentary .02 provides: ‘‘An open exercise

position shall include any position with respect to

which the Options Clearing Corporation has

assigned an exercise notice to the member

organization and the member organization has not

delivered the shares of the underlying stock in

accordance with the Rules of the Options Clearing

Corporation and these Rules.’’ Commentary .03

provides: ‘‘All such reports shall be delivered to the

Department of Member Organizations of the

Exchange.’’ The Exchange does not believe that a

specific department needs to be identified in this

rule and, in any event, member firms are currently

on notice that such reports must be filed with the

Department of Options Surveillance.

32 15 U.S.C. 78f(b).

33 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).

34 15 U.S.C. 78s(b)(2).

35 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

uncompared trade so that it will be the

opening price on the business day

following the trade date. Currently, the

basis is the lesser of either the opening

price on the business day following the

trade date or the price at which the

uncompared trade was closed. After

careful consideration and review of this

proposal by Exchange members and

member firms, the Exchange proposes

this change in an effort to simplify and

make uniform the administration of

pricing uncompared trades.30 The

proposal also would require that notice

of uncompared trades must be provided

no later than the scheduled

commencement of trading (unless a

floor official directs otherwise). The

Exchange believes that the current time

requirement—15 minutes from the

scheduled commencement of trading—

is overly flexible.

I. Reports of Open Exercise Positions

The proposal would clarify and

simplify PCX Rule 6.27, which currently

requires member organizations to file

certain reports on open positions with

the Exchange. The proposed rule change

would include the last sentence of PCX

Rule 6.27, the text of commentary .01 to

that rule, and eliminate commentaries

.01, .02 and .03.31 As amended, PCX

Rule 6.27 would provide that the

Exchange may require each member

organization to file with the Exchange a

report, as of the 15th of each month, of

all open positions resulting from the

exercise of options contracts in accounts

carried by a member organization. It

would then incorporate current

Commentary .01 into the rule by adding

that such reports, when required, must

be filed no later than the second

business day following the day as of

which the report is made.

J. Fast Markets

The proposal would change PCX Rule

6.28 by redesignating OFPA G–9 as

paragraph (b) of PCX Rule 6.28.

Currently, OFPA G–9 lists procedures

that become effective in a fast market

situation. The Exchange proposes this

change to simplify and consolidate rules

relating to fast market and unusual

market conditions. In addition, the

proposal adds as paragraph (b)(5) a

cross-reference to the current

requirement that market makers have

under Rule 6.37(f) to trade a minimum

of one contract based on quoted markets

during fast markets. The proposal would

specify in new paragraph (b)(6) that

regular trading procedures will be

resumed when two floor officials

determine that the conditions

supporting the fast market no longer

exist. Finally, it would remove, as

unnecessary, the current provision

allowing floor officials to assign

brokerage responsibilities for particular

series to specific floor brokers in the

trading crowd during fast markets.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules and regulations thereunder

applicable to a national securities

exchange, and in particular, with the

requirements of Section 6(b).32 The

proposal would modify certain rules

relating to options trading on the PCX

by clarifying existing provisions,

eliminating unnecessary provisions, and

codifying current policies and

procedures. By clarifying and updating

its rules and obligations for market

participants, the Commission believes

the proposal is consistent with the Act

and will promote just and equitable

principles of trade, foster cooperation

and coordination with persons engaged

in regulating, clearing, settling,

processing information with respect to,

and facilitating transactions in

securities, and protect investors and the

public interest.33

IV. Conclusion

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,34 that the

proposed rule change (SR–PCX–99–36),

as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.35

Margaret H. McFarland,

Deputy Secretary

[FR Doc. 00–24353 Filed 9–21–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43292; File No. SR–Phlx–

00–74]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to the Exchange’s Liability in

Connection With the Administration of

Its Proprietary Indices

September 14, 2000.

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

Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 4,

2000, the Philadelphia Stock Exchange,

Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with

the Securities and Exchange

Commission (‘‘SEC’’ or ‘‘Commission’’)

the proposed rule change as described

in Items I, II, and III below, which Items

have been prepared by the Phlx. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Exchange proposes to amend

Phlx Rule 1102A, Limitation of

Exchange Liability, to add to the

limitation of the Exchange’s liability, in

connection with its administration of

Phlx proprietary indexes, negligent acts

or omissions. Below is the text of the

proposed rule change. Additions are

italicized; deletions are in brackets.

Rule 1102A Limitation of Exchange

Liability

Neither the Exchange, the Reporting

Authority nor any agent of the Exchange

shall have any liability for damages, claims,

losses or expenses caused by any errors,

omissions, or delays in calculating or

disseminating the current index value or the

closing index value resulting from any

negligent act or omission by the Exchange or

any [an] 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;

any error, omission or delay in the reports of

transactions in one or more underlying

securities; or any error, omission or delay in

the reports of the current index value or the

closing index value by the Exchange or the

Reporting Authority.