69112 Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Notices

8 15 U.S.C. 78(b)(2).

9The Commission has considered the proposed

rule’s impact on efficiency, competition and capital

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

10 15 U.S.C. 78f(b)(5).

11 15 U.S.C. 78s(b)(2).

12 In approving this proposal, the Commission has

considered its impact on efficiency, competition,

and capital formation. 15 U.S.C. 78c(f).

13The Commission notes that it is concurrently

approving similar proposals filed by the American

Stock Exchange, LLP (‘‘Amex’’), Chicago Board

Options Exchange, Inc. (‘‘CBOE’’), and the

Philadelphia Stock Exchange, Inc. (‘‘Phlx’’). See

Securities Exchange Act Release Nos. 43516

(November 3, 2000) (SR–Amex–99–45); 43517

(November 3, 2000) (SR–CBOE–99–51); and 41515

(November 3, 2000) (SR–Phlx–99–32).

14 15 U.S.C. 78s(b)(2).

15 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

effectiveness pursuant to section

19(b)(2) 8 of the Act.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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 PCX. All

submissions should refer to File No.

SR–PCX–00–32 and should be

submitted December 6, 2000.

V. Commission’s Findings and Order

Granting Accelerated Approval of the

Proposed Rule Change

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange and, in particular,

the requirements of section 6 of the

Act.9 Among other provisions, section

6(b)(5) of the Act requires that the rules

of an exchange be designed to foster

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating securities

transactions; remove impediments to

and perfect the mechanism of a free and

open market and a national securities

system; and protect investors and the

public interest.10

Pursuant to section 19(b)(2) 11 of the

Act, the Commission finds good cause

for approving the proposed rule change

prior to the 30th day after the date of

publication of notice thereof in the

Federal Register.12 The Commission

believes that granting accelerated

approval will provide the PCX with

flexibility to compete for order flow

with other exchanges without being

limited to responding to increases in

automatic execution eligibility levels

initiated by those other exchanges.13

While increasing the maximum order

size limit from fifty contracts to seventyfive contracts for Auto-Ex eligibility by

itself does not raise concerns under the

Act, the Commission believes that this

increase raises collateral issues that the

PCX will need to monitor and address.

Increasing the maximum order size for

particular option classes will make a

larger number of option orders eligible

for the Exchange’s automatic execution

system. These orders may benefit from

greater speed of execution, but at the

same time create greater risks for market

maker participants. Market makers

signed onto the Auto-Ex system will be

exposed to the financial risks associated

with larger-sized orders being routed

through the system for automatic

execution at the displayed price. When

the market for the underlying security

changes rapidly,it may take a few

moments for the related option’s price

to reflect that change. In the interim,

customers may submit orders that try to

capture the price differential between

the underlying security and the option.

The larger the orders accepted through

Auto-Ex, the greater the risk market

makers must be willing to accept. The

Commission does not believe that,

because the Exchange’s OFTC

determines to approve orders as large as

seventy-five contracts as eligible for

Auto-Ex, the OFTC or any other PCX

committee or officials should disengage

Auto-Ex more frequently by, for

example, declaring a ‘‘fast’’ market.

Disengaging Auto-Ex can negatively

affect investors by making it slower and

less efficient to executive their option

orders. It is the Commission’s view that

the Exchange, when increasing the

maximum size of orders that can be sent

through Auto-Ex, should not

disadvantage all customers—the vast

majority of which enter orders for less

than seventy-five contracts—by making

the Auto-Ex system less reliable.

It is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,14 that the

proposed change, as amended, (SR–

PCX–00–32) is hereby approved on an

accelerated basis.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29183 Filed 11–14–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43519; File No. SR–PCX–

00–18]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. To Increase

the Maximum Auto-Ex Order Size to

100 Contracts

November 3, 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 June 30,

2000, the Pacific Exchange, Inc. (‘‘PCX’’

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 PCX. 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 PCX is proposing to increase the

maximum size of equity and index

option contracts that may be designated

for automatic execution to 100

contracts.

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

PCX included statements concerning the

purpose of and basis for the proposed

rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The PCX has prepared

summaries, set forth in Sections A, B,

Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Notices 69113

3See Securities Exchange Act Release No. 41823

(September 1, 1999), 64 FR 49265 (September 10,

1999) (approving PCX proposal to increse the

maximum size of index and equity option orders

that may be automatically executed, from twenty to

fifty contracts). Concurrent with its issuance of this

notice, the Commission approved, on an accelerated

basis, a PCX proposal to increase the maximum

order size for Auto-Ex eligibility from fifty contracts

to seventy-five contracts. See Securities Exchange

Act Release No. 43518 (November 3, 2000).

4The Exchange notes that, pursuant to PCX Rule

6.86(g), if the OFTC determines, pursuant to PCX

Rule 6.87(b), that the size of orders in an issue that

are eligible to be executed on Auto-Ex will be

greater than twenty contracts, then the trading

crowd will be required to provide a market depth

for manual (non-electronic) orders in that greater

amount, as provided in PCX Rule 6.86(a).

5See PCX Rule 6.87(c) (permitting the PCX to

match the maximum size of orders eligible for

automatic execution that are permitted on another

options exchange in multiply traded issues).

6 15 U.S.C. 78f(b).

7 15 U.S.C. 78f(b)(5).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b-1.

and C below, of the most significant

aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

The Exchange’s automatic execution

system (‘‘Auto-Ex’’) automatically

executes public customer market and

marketable limit orders within certain

size parameters. PCX Rule 6.87(b)

currently provides that the Options

Floor Trading Committee (‘‘OFTC’’)

shall determine the size of orders that

are eligible to be executed through

Auto-Ex. The rule further provides that

although the OFTC may change the

order size parameter on an issue-byissue basis, the maximum order size for

execution through Auto-Ex is fifty

contracts for both equity and index

options.3 The Exchange is now

proposing to increase the maximum size

of option orders that are eligible for

automatic execution, subject to

designation by the OFTC on an issue-byissue basis, to 100 contracts.4

The Exchange believes that these

changes will help it to meet the

changing needs of customers in the

marketplace and give the Exchange

better means of competing with other

options exchanges for order flow,

particularly in multiply traded issues.

The Exchange also believes that

increasing to 100 the number of option

contracts executable through the

Exchange’s Auto-Ex order execution

system will enable the Exchange to

more effectively and efficiently manage

increased order flow in actively traded

option issues consistent with its

obligations under the Act. In addition,

this increase should bring the speed and

efficiency of automated execution to a

greater number of retail orders. The PCX

further believes that it should have

flexibility to compete for order flow

with other exchanges without being

limited to responding to increases in

automatic execution eligibility levels

initiated by those other exchanges.5

The Exchange represents that it

believes that the increase will not

expose the Exchange’s Auto-Ex system

to risk of failure or operational

breakdown. The Exchange represents

that it further believes that its systems

capacity is sufficient to accommodate

the increased number of automatic

executions anticipated to result from

implementation of this proposal.

2. Statutory Basis

The Exchange believes that this

proposal is consistent with section 6(b) 6

of the Act, in general, and furthers the

objectives of section 6(b)(5),7 in that it

is designed to promote just and

equitable principles of trade, to facilitate

transactions in securities, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system, and to

protect investors and the public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

PCX does not believe that the

proposed rule change will impose any

burden on Competition that is 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

No written comments were solicited

or received with respect to the proposed

rule change.

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

Registeror 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

change is consistent with the Act.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, DC 20549–0609. 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 PCX. All

submissions should refer to File No.

SR–PCX–00–18 and should be

submitted by December 6, 2000.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29185 Filed 11–14–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43524; File No. SR–Phlx–

00–74]

Self-Regulatory Organizations;

Philadelphia Stock Exchange, Inc.;

Order Approving Proposed Rule

Change Regarding Exchange Liability

in Connection with the Administration

of its Proprietary Indices

November 6, 2000.

I. Introduction

On August 4, 2000, the Philadelphia

Stock Exchange, Inc. (‘‘Exchange’’ or

‘‘Phlx’’) submitted to the Securities and

Exchange Commission (‘‘Commission’’),

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

Securities Exchange Act of 1934

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

proposed rule change seeking to amend

Phlx Rule 1102A, Limitation of

Exchange Liability, to add to the