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

Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Notices 69115

1995) (approving proposal to increase order size

eligibility limits for AUTO–X from twenty-five to

fifty contracts).

6See Phlx Rule 1080(c).

7See supra note 5; Securities Exchange Act

Release Nos. 32906 (September 15, 1993), 58 FR

49345 (September 22, 1999) (approving proposal to

increase order size eligibility limits for AUTO–X

from twenty to twenty-five contracts); and 29837

(October 18, 1991), 56 FR 55146 (October 24, 1991)

(approving proposal to increase order size eligibility

limits for AUTO–X from ten to twenty contracts).

8Unlike ROTs, specialists are required to

participate on the Wheel. See Phlx Rule 1080(g).

9See Phlx Rule 1080(e) and Options Floor

Procedure Advice A–13.

10Options Floor Procedure Advice F–10 states, in

relevant part, that ‘‘[d]uring the period for which a

fast market is in effect, displayed quotes for the

respective options are not firm and volume

guarantees of Option Advice A–11 are not

applicable. * * *’’ Options Floor Procedure Advice

A–11 provides that ‘‘public customer market or

marketable limit orders in any options series on the

Exchange are to be filled at the best market to a

minimum of ten contracts by floor traders in the

crowd. * * *’’

11See Phlx Rule 703.

12The Commission has considered the proposed

rule’s impact on efficiency, competition and capital

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

13 15 U.S.C. 78f(b)(5).

14The 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 Pacific

Stock Exchange, Inc. (‘‘PCX’’). See Securities

Exchange Act Release No. 43516 (November 3,

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

(SR–CBOE–99–51); and Securities Exchange Act

Release No. 43518 (November 3, 2000) (SR–PCX–

00–32).

through AUTOM from member firms

directly to the appropriate specialist on

the trading floor. Orders routed through

AUTOM that are eligible for AUTO–X

are automatically executed at the

disseminated quotation price on the

Exchange and reported back to the

originating firm.6

The Exchange proposes to amend

Phlx Rule 1080(c) to increase the

maximum order size eligibility for

automatic execution through AUTO–X

from fifty contracts to seventy-five

contracts. The Exchange represents that

AUTO–X affords prompt and efficient

automatic executions at the displayed

price and therefore believes that

increasing automatic execution levels

will provide the benefits of automatic

execution to a larger number of

customer orders. Further, the Exchange

notes that this increase from fifty

contracts to seventy-five contracts is in

line with prior changes to AUTO–X

levels.7

The Exchange represents that its rules

contain several safeguards to ensure the

proper handling of AUTO–X orders.

First, Phlx Rule 1080(f)(iii) states that a

specialist is responsible for the

remainder of an AUTOM order where a

partial execution has occurred. Phlx

Rule 1015 governs quotation guarantees

and requires the trading crowd to ensure

that public customer orders are filled at

the best market for a minimum of ten

contracts (‘‘ten-contract guarantee’’).

Further, Options Floor Procedure

Advice F–7 provides that the volume

guarantees (including AUTO–X levels)

are deemed to be the stated size in any

bid or offer voiced or displayed on the

Options Floor. Therefore, quoted

markets are guaranteed up to that size.

The Exchange represents that violations

of any of these provisions could be

referred to the Business Conduct

Committee for disciplinary action.

Second, the Exchange represents that

Registered Options Traders (‘‘ROTs’’)

have discretion to participate on the

Wheel that allocates AUTO–X trades.8

Consequently, an increase in the

maximum AUTO–X order size does not

prevent an ROT from declining to

participate on the Wheel. The Exchange

represents that the Wheel operates by

rotating in two-lot to ten-lot increments

depending upon the size of the order,

and thus no single ROT will be

allocated the entire seventy-five

contracts.

Third, the Exchange represents that

its procedures allow a specialist to

disengage AUTO–X in extraordinary

circumstances,9 and that AUTOM users

will be notified of such situations. For

example, in extraordinary (fast market)

conditions, quotations are disseminated

with an ‘‘F’’ and the ten-contract

guarantee on the screen markets is

suspended pursuant to Options Floor

Procedure Advice F–10.10

Finally, the Exchange notes that its

rules provide a minimum net capital

requirement for ROTs.11 In addition, a

ROTs clearing firm performs risk

management functions to ensure that

the ROT has sufficient financial

resources to cover positions throughout

the day. In this regard, the function

includes real-time monitoring of

positions. Further, the Exchange

represents that it believes that clearing

firm procedures address concerns

regarding whether an ROT has the

financial capability to support trading of

options orders a large as seventy-five

contracts.

The Exchange represents that it

believes that automatic execution of

orders for up to seventy-five contracts

will provide customers with quicker,

more efficient executions for a larger

number of orders, by providing

automatic rather than manual

executions, thereby reducing the

number of orders subject to manual

processing. Further, the Exchange

represents that increasing the AUTO–X

maximum order size should not impose

a significant burden on operation or

capacity of the AUTOM System and will

give the Exchange better means of

competing with other options exchanges

for order flow.

III. Discussion

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.12 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.13

While increasing the maximum order

size limit from fifty contracts to seventyfive contracts for AUTO–X eligibility by

itself does not raise concerns under the

Act,14 the Commission believes that this

increase raises collateral issues that the

Phlx 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–X 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–X, the greater the risk market

makers must be willing to accept. The

Commission does not believe that,

because the Exchange’s Options

Committee determines to approve

orders as large as seventy-five contracts

as eligible for AUTO–X, the Options

Committee or any other Phlx committee

or officials should disengage AUTO–X

more frequently by, for example,

declaring a ‘‘fast’’ market. Disengaging

AUTO–X can negatively affect investors

by making it slower and less efficient to

69116 Federal Register / Vol. 65, No. 221 / Wednesday, November 15, 2000 / Notices

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

16 15 U.S.C. 78s(b)(2).

17 17 CFR 200.30–3(a)(12).

execute 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–

X, should not disadvantage all

customers—the vast majority of which

enter orders for less than seventy-five

contracts—by making the AUTO–X

sytstem less reliable.

IV. Conclusion

For the foregoing reasons, the

Commission finds that the proposed

rule change is consistent with the Act

and the rules and regulations

thereunder applicable to a national

securities exchange, and, in particular,

with section 6(b)(5).15

It Is Therefore Ordered, pursuant to

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

proposed rule change (SR–Phlx–99–32)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–29186 Filed 11–14–00; 8:45 am]

BILLING CODE 8010–01–M

SOCIAL SECURITY ADMINISTRATION

[Social Security Acquiescence Ruling 00-

5 (6)]

Salamalekis v. Apfel; Entitlement to

Trial Work Period Before Approval of

an Award of Benefits and Before 12

Months Have Elapsed Since the

Alleged Onset of Disability—Titles II

and XVI of the Social Security Act.

AGENCY: Social Security Administration.

ACTION: Notice of Social Security

Acquiescence Ruling.

SUMMARY: In accordance with 20 CFR

402.35(b)(2), the Commissioner of Social

Security gives notice of Social Security

Acquiescence Ruling 00-5(6).

EFFECTIVE DATE: November 15, 2000.

FOR FURTHER INFORMATION CONTACT:

Cassia W. Parson, Litigation Staff, Social

Security Administration, 6401 Security

Boulevard, Baltimore, MD 21235-6401,

(410) 966-0446.

SUPPLEMENTARY INFORMATION: We are

publishing this Social Security

Acquiescence Ruling in accordance

with 20 CFR 402.35(b)(2).

A Social Security Acquiescence

Ruling explains how we will apply a

holding in a decision of a United States

Court of Appeals that we determine

conflicts with our interpretation of a

provision of the Social Security Act (the

Act) or regulations when the

Government has decided not to seek

further review of that decision or is

unsuccessful on further review.

We will apply the holding of the

Court of Appeals’ decision as explained

in this Social Security Acquiescence

Ruling to claims at all levels of

administrative review within the Sixth

Circuit. This Social Security

Acquiescence Ruling will apply to all

determinations or decisions made on or

after November 15, 2000. If we made a

determination or decision on your

application for benefits between July 20,

2000, the date of the Court of Appeals’

decision, and November 15, 2000, the

effective date of this Social Security

Acquiescence Ruling, you may request

application of the Social Security

Acquiescence Ruling to the prior

determination or decision. You must

demonstrate, pursuant to 20 CFR

404.985(b)(2) or 416.1485(b)(2), that

application of the Ruling could change

our prior determination or decision in

your case.

Additionally, when we received this

precedential Court of Appeals’ decision

and determined that a Social Security

Acquiescence Ruling might be required,

we began to identify those claims that

were pending before us within the

circuit that might be subject to

readjudication if an Acquiescence

Ruling were subsequently issued.

Because we determined that an

Acquiescence Ruling is required and are

publishing this Social Security

Acquiescence Ruling, we will send a

notice to those individuals whose

claims we have identified which may be

affected by this Social Security

Acquiescence Ruling. The notice will

provide information about the

Acquiescence Ruling and the right to

request readjudication under the Ruling.

It is not necessary for an individual to

receive a notice in order to request

application of this Social Security

Acquiescence Ruling to the prior

determination or decision on his or her

claim as provided in 20 CFR

404.985(b)(2) or 416.1485(b)(2),

discussed above.

If this Social Security Acquiescence

Ruling is later rescinded as obsolete, we

will publish a notice in the Federal

Register to that effect as provided in 20

CFR 404.985(e) or 416.1485(e). If we

decide to relitigate the issue covered by

this Social Security Acquiescence

Ruling as provided by 20 CFR

404.985(c) or 416.1485(c), we will

publish a notice in the Federal Register

stating that we will apply our

interpretation of the Act or regulations

involved and explaining why we have

decided to relitigate the issue.

(Catalog of Federal Domestic Assistance,

Program Nos. 96.001 Social Security—

Disability Insurance; 96.002 Social

Security—Retirement Insurance; 96.004

Social Security—Survivors Insurance; 96.005

Special Benefits for Disabled Coal Miners;

96.006 Supplemental Security Income.)

Dated: October 19, 2000.

Kenneth S. Apfel,

Commissioner of Social Security.

Acquiescence Ruling 00–5 (6)

Salamalekis v. Apfel, 221 F.3d 828

(6th Cir. 2000)—Entitlement to Trial

Work Period Before Approval of an

Award of Benefits and Before 12 Months

Have Elapsed Since the Alleged Onset

of Disability—Titles II and XVI of the

Social Security Act.

Issue: Whether a claimant’s return to

substantial gainful activity (SGA) within

12 months of the alleged onset date of

his or her disability, and prior to an

award of benefits, precludes an award of

benefits and entitlement to a trial work

period.

Statute/Regulation/Ruling Citation:

Sections 222(c), 223, 1614(a)(3) and (4)

and 1619 of the Social Security Act (42

U.S.C. 422(c), 423, 1382c(a)(3) and (4)

and 1382h); 20 CFR 404.1505, 404.1520,

404.1592, 416.905, 416.906, 416.920;

Social Security Ruling (SSR) 82-52.

Circuit: Sixth (Kentucky, Michigan,

Ohio, Tennessee).

Salamalekis v. Apfel, 221 F.3d 828

(6th Cir. 2000).

Applicability of Ruling: This Ruling

applies to determinations or decisions at

all administrative levels (i.e., initial,

reconsideration, Administrative Law

Judge (ALJ) hearing and Appeals

Council).

Description of Case: Manuel G.

Salamalekis applied for Social Security

disability insurance benefits on October

1, 1991, alleging disability since April

24, 1991, due to a heart condition and

Parkinson’s Disease. On March 2, 1992,

less than a year after the alleged onset

of disability, Mr. Salamalekis returned

to work and promptly notified the

Agency of his return. On the same day

that Mr. Salamalekis returned to work,

we ‘‘determined he was entitled to

receive disability insurance benefits’’

and an award notice was sent to Mr.

Salamalekis on March 8, 1992. It was

not disputed that we were unaware that

Mr. Salamalekis had returned to work

when we determined his eligibility for

benefits. We subsequently learned of his

return to work. In May of 1992, we

notified Mr. Salamalekis that his claim

would be reviewed when his ‘‘9th

month of trial work’’ ended. He