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

69114 Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Notices

3See Securities Exchange Act Release No. 43292

(September 14, 2000), 64 FR 54719.

4Examples of the Exchange’s proprietary indices

Computer Box Maker Index (BMX), Phlx Oil Service

Index (OSX), Gold-Sliver Index (XAU), National

Over-the-Counter Index (XOC), Phlx Forest and

Paper Products Sector Index (FPP), Over-theCounter Prime Index (OTX), Utility Index (UTY),

Semiconductor Index (SOX), TheStreet.com

Internet Sector Index (DOT) and Wireless Telecom

Sector Index (YLS).

5See Amex Rule 902C.

6 15 U.S.C. 78f(b)(5).

7 In approving this proposed rule change, the

Commission has considered the proposal’s impact

on efficiency, competition, and capital formation.

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

8See supra note 5.

9 15 U.S.C. 78s(b)2.

10 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 designated

the proposal as filed pursuant to Section 19(b)(2) of

the Act. The Exchange originally filed the proposal

pursuant to Section 19(b)(3)(A). See Letter from

Edith Hallahan, Deputy General Counsel, Phlx, to

Nancy Sanow, Senior Special Counsel, Division of

Market Regulation, Commission, dated September

23, 1999 (‘‘Amendment No. 1’’). In Amendment No.

2, the Exchange deleted a provision in the original

proposal that restricted the increase in maximum

order size eligibility to 100 options. See Letter from

Nandita Yagnik, Phlx, to Nancy Sanow, Senior

Special Counsel, Division of Market Regulation,

Commission, dated January 20, 2000 (‘‘Amendment

No. 2’’).

4See Securities Exchange Act Release No. 42932

(June 13, 2000), 65 FR 38621 (June 21, 2000).

5See Securities Exchange Act Release No. 36601

(December 18, 1995), 60 FR 66817 (December 26,

limitation of the Exchange’s liability, in

connection with its administration of

Phlx proprietary indices, negligent acts

or omission. Notice of the proposed rule

change appeared in the Federal Register

on September 22, 2000.3 The

Commission received no comments on

the proposal. This order approves the

proposed rule change.

II. Description of the Proposal

The Phlx currently lists and trades

options on several proprietary indices.4

Phlx Rule 1102A limits the Exchange’s

liability in connection with the

administration of its proprietary indices.

The Exchange proposes to amend Phlx

Rule 1102A to disclaim liability for

negligent conduct. The Exchange

represents that there is a great deal work

involved in the daily calculation and

dissemination of these indices. In

addition, the Exchange represents that

although much of such work is

automated, manual input is still

required and the potential for human

error exists which exposes the Exchange

to a risk of liability. Potential human

errors include inputting a symbol or

index value incorrectly or missing a

corporate action that has an effect on the

index.

Phlx Rule 1102A disclaims Exchange

liability for damages caused by errors,

omissions or delays in the calculation or

dissemination of any index value

resulting from any conduct beyond the

reasonable control of the Exchange,

including an act of God, a power failure,

or any error, omission or delay in the

reported price of the underlying

security. The Exchange believes that

these disclaimer provisions are arguably

ambigous with respect to whether the

Exchange remains potentially liable for

damages caused by any human error or

omission by an Exchange employee in

connection with the performance of the

Exchange’s index responsibilities. The

Exchange believes, however, that the

proposed amendment to Phlox Rule

1102 would make clear that the

Exchange disclaims liability for

negligent conduct, in addition to

conduct beyond the Exchange’s

reasonable control, currently covered by

Phlx Rule 1102A. The Exchange

represents that other exchanges,

including the American Stock Exchange

‘‘(Amex’’),5 disclaim liability for

negligent conduct in connection with

their index operations. Finally, the

Exchange acknowledges that Phlx Rule

1102A cannot be relied upon by the

Exchange to limit liability to nonmembers or for any intentional or

negligent violation of federal securities

laws.

III. Discussion

For the reasons discussed below, the

Commission finds that the proposed

rule change is consistent with the Act

and the rules and regulations under the

Act applicable to a national securities

exchange. In particular, the Commission

believes that the proposed rule change

is consistent with the requirements of

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

an exchange be designed to facilitate

transactions in securities.7

The Commission notes that the

proposed rule change is to the Amex’s

rule.8 Further, the Commission notes

that the proposed change cannot be

used to limit the Phlx’s liability to nonmembers for any intentional or

negligent violations of the federal

securities laws. The Commission

believes that the prosed change should

serve to facilitate transactions in

securities. In this regard, the

Commission believes that the proposal

will encourage the Exchange continue to

make options in its proprietary indices

available to investors.

IV. Conclusion

It is therefore ordered, pursuant to

section 19(2) of the Act,9 that the

proposed rule change (SR–Phlx–00–74)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29182 Filed 11–14–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43515; File No. SR–Phlx–

99–32]

Self-Regulatory Organizations; Order

Granting Approval of Proposed Rule

Change by the Philadelphia Stock

Exchange, Inc. Relating to the

Maximum Size of Option Orders That

May Be Executed Automatically

November 3, 2000.

I. Introduction

On August 23, 1999, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or

‘‘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

amending its rules regarding the

automatic execution of options orders to

increase the maximum number of

contracts eligible to be executed on the

Exchange’s automatic execution system

(‘‘AUTO–X’’) from fifty contracts to

seventy-five contracts. On September

27, 1999 and January 23, 2000,

respectively, the Phlx submitted

Amendments Nos. 1 and 2 to the

proposed rule change.3 Notice of the

proposal was published in the Federal

Register on June 21, 2000.4 The

Commission received no comments on

the proposal. This order approves the

proposal.

II. Description of the Proposal

The AUTO–X feature of the

Exchange’s Automated Options Market

System (‘‘AUTOM’’) automatically

executes public customer market and

marketable limit orders in options at the

Exchange’s displayed bid or offer.

Generally, public customer market and

marketable limit orders of up to fifty

contacts may be automatically executed

through AUTO–X.5 Orders are routed