26898 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices

3The Commission has modified the text of the

summaries prepared by NSCC.

4For a complete discussion of NSCC’s Class A

surveillance procedures and collateralization

requirements refer to Securities Exchange Act

Release Nos. 37202 (May 10, 1996), 61 FR 24993

[File No. SR–NSCC–95–17]; 38622 (May 19, 1997),

62 FR 27285 [File No. SR–NSCC–97–04]; 40034

(May 27, 1998), 63 FR 30277 [File No. SR–NSCC–

98–03]; 41478 (June 4, 1999), 64 FR 31664 [File No.

SR–NSCC–99–06]; and 42864 (May 30, 2000), 65 FR

36204 [File No. SR–NSCC–99–09] (Commission

approval date corrected in Federal Register, 65 FR

42065).

5 15 U.S.C. 78q–1.

6 15 U.S.C. 78q–1(b)(3)(F). 7Supra note 4.

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

9 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

may be examined at the places specified

in Item IV below. NSCC has prepared

summaries, set forth in sections (A), (B),

and (C) below, of the most significant

aspects of such statements. 3

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

NSCC seeks to extend the temporary

approval of Addendum O, which

governs the application of Class A

surveillance procedures and the

additional collateralization

requirements for settling members that

engage in certain over-the-counter

(‘‘OTC’’) market making activities.

Addendum O is designed to decrease

the risks associated with OTC market

makers by use of Class A surveillance

and special collateralization procedures.

The Commission originally granted

temporary approval on May 10, 1996,

and has subsequently extended its

approval through May 31, 2001. 4

NSCC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act 5

and the rules and regulations

thereunder because the surveillance and

additional collateralization procedures

will facilitate the safeguarding of

securities and funds which are in its

custody or control or for which it is

responsible and in general will protect

investors and the public interest.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will have an

impact on or impose a 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 relating to the

proposed rule change have been

solicited or received. NSCC will notify

the Commission of any written

comments received by NSCC.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(F) of the Act

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency and generally to

protect investors and the public

interest.6 As the Commission previously

stated, it finds that NSCC’s proposed

rule change is consistent with these

obligations under the Act because it

should help NSCC protect itself, its

members, and investors from members

that pose an increased risk because of

their involvement in OTC market

making.7

Under the proposal, NSCC will

continue to have the authority with

respect to members which participate in

OTC market making activities or clear

for correspondents that engage in such

activity to (1) place such members on

Class A surveillance, (2) requires such

members to post additional collateral

with NSCC, and (3) calculate an

alternative clearing fund requirement

for such members when additional risk

factors are present. Collectively, the

higher level of surveillance, the

additional level of collateralization, and

the alternative clearing fund

requirements should help ameliorate

NSCC’s exposure, which in turn should

assist NSCC in fulfilling its obligations

under the Act to safeguard securities

and funds for which it has control or is

responsible and to protect investors and

the public interest.

NSCC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice of filing. The

Commission finds good cause because

accelerated approval will allow NSCC to

continue to utilize its Class A

surveillance procedures, the interim

collateralization policy, and the

alternative clearing fund formula

without interruption when the previous

temporary approval expires on June 1,

2001, and until NSCC’s proposed rule

change, SR–NSCC–2001–04, is

completely phased in.

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 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, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of NSCC. All submissions should

refer to the File No. SR–NSCC–2001–05

and should be submitted by June 5,

2001.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (File No. SR–

NSCC–2001–05) be and hereby is

approved through December 31, 2002.

For the Commission by the Division

of Market Regulation, pursuant to

delegated authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–12138 Filed 5–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34-44272; File No. SR–NYSE–

2001–07]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of a Proposed

Rule Change and Amendment No. 1

Thereto by the New York Stock

Exchange, Inc. To Provide for an

Allocation Policy for Exchange-Traded

Funds Trading on an Unlisted Trading

Privileges Basis

May 7, 2001.

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 April 25,

2001, the New York Stock Exchange,

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

the Securities and Exchange

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

the proposed rule change as described

in Items I and II below, which Items

have been prepared by the Exchange.

On May 7, 2001, the NYSE field

Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices 26899

3See letter from James E. Buck, Senior Vice

President and Secretary, NYSE, to Sapna Patel,

Attorney, Division of Market Regulation,

Commission, dated May 4, 2001 (‘‘Amendment No.

1’’). In Amendment No. 1, the NYSE made a minor

technical change to the proposed rule text clarifying

that an approved person of a separate specialist

organization must have received an exemption from

specified specialists rules pursuant to NYSE Rule

98.

4NYSE’s current Policy was amended in

Securities Exchange Act Release No. 42746 (May 2,

2000), 65 FR 30171 (May 10, 2001) (File No. SR–

NYSE–99–34). See Exhibit A to File No. SR–NYSE–

99–34 for a copy of NYSE’s Policy.

5See Securities Exchange Act Release No. 43658

(December 1, 2000), 65 FR 77408 (December 11,

2000) (notice of filing and order granting

accelerated approval to File No. SR–NYSE–00–53).

Amendment No. 1 to the proposed rule

change.3 The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

persons and, for the reasons discussed

below, the Commission is granting

accelerated approval to the proposed

rule change, as amended, on a pilot

basis.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

NYSE proposes to amend its

Allocation Policy and Procedures

(‘‘Policy) 4 to provide for the allocation

of exchange-traded funds (‘‘ETFs’’)

listed and traded on the Exchange

pursuant to unlisted trading privileges

(‘‘UTP’’).

Below is the text of the proposed rule

change. Proposed new language is

italicized.

* * * * *

Policy for Allocation of ExchangeTraded Funds Admitted to Trading on

the Exchange on an Unlisted Trading

Privileges Basis

Exchange-traded funds (‘‘ETFs’’) (as

defined in paragraph 703.16 of the

Listed Company Manual) admitted to

trading on the Exchange on an unlisted

trading privileges basis shall be

allocated pursuant to this Policy rather

than the Exchange’s policy for

allocating securities to be listed on the

Exchange.

ETFs shall be allocated by a special

committee consisting of the Chairman of

the Allocation Committee, the three

most senior Floor broker members of the

Allocation Committee, and four

members of the Exchange’s senior

management as designated by the

Chairman of the Exchange. This

committee shall solicit allocation

applications from interested specialist

units, and shall review the same

performance and disciplinary material

with respect to specialist unit applicants

as would be reviewed by the Allocation

Committee in allocating listed stocks.

The committee shall reach its decisions

by majority vote with any tie votes being

decided by the Chairman of the

Exchange. Specialist unit applicants

shall not appear before the committee.

Special Criteria

In their allocation applications,

specialist units must demonstrate:

(a) an understanding of the trading

characteristics of ETFs;

(b) expertise in the trading of

derivatively-priced instruments;

(c) ability and willingness to engage in

hedging activity as appropriate;

(d) knowledge of other markets in

which the ETF to be allocated trades;

(e) willingness to provide financial

and other support to Exchange

marketing and educational initiatives

with respect to the ETF to be allocated.

Allocation Freeze Policy

The Allocation Freeze Policy as stated

in the Allocation Policy for listed stocks

shall apply.

Prohibition on Functioning as Specialist

in ETF and Specialist in any Component

Security of the ETF

No specialist member organization

may apply to be allocated an ETF if it

is registered as specialist in any security

which is a component of the ETF. A

specialist member organization which is

registered as specialist in a component

stock of an ETF may establish a separate

member organization which may apply

to be the specialist in an ETF. The

approved persons of such ETF specialist

member organization must obtain an

exemption from specified specialist

rules pursuant to Rule 98.

If, subsequent to an ETF being

allocated to a specialist member

organization, a security in which the

specialist member organization is

registered as specialist becomes

component security of such ETF, the

specialist organization must (i)

withdraw its registration as specialist in

the security which is a component of

the ETF; (ii) withdraw its registration as

specialist in the ETF; or (iii) establish a

separate specialist member organization,

which will be registered as specialist in

the ETF and whose approved persons

have received an exemption from

specified specialist rules pursuant to

Rule 98.

* * * * *

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

Exchange 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 III below. The

Exchange 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

1. Purpose

As part of its overall business strategy,

the Exchange believes that it is

appropriate to trade ETFs on the NYSE

Floor. In December 2000, the Exchange

began trading an ETF on the S&S Global

100 (symbol IOO).5 The Exchange

intends to trade additional ETFs listed

by other ETF sponsors.

The Exchange believes it would be

appropriate to trade on the NYSE, on a

UTP basis, certain other ETFs currently

listed and trading on other markets.

These ETFs may include the NASDAQ

100 Trust (symbol QQQ), Standard and

Poor’s Depository Receipts (symbol

SPY) and the DOW Industrials

DIAMONDS (symbol DIA).

It should be noted that UTP ETFs will

trade at a post separate from ay other

type of security trading on the

Exchange.

Allocation Policy for ETFs Trading

Pursuant to UTP. The intent of the

Exchange’s current Policy is: (1) to

ensure that the allocation process is

based on fairness and consistency and

that all specialist units have a fair

opportunity for allocations based on

established criteria and procedures; (2)

to provide an incentive for ongoing

enhancement of performance by

specialist units; (3) to provide the best

possible match between specialist unit

and security; and (4) to contribute to the

strength of the specialist system.

The Allocation Committee has sole

responsibility for the allocation of

securities to specialist units under this

Policy pursuant to authority delegated

by the Board of Directors, and is

overseen by the Quality of Markets

Committee of the Board. The Allocation

Committee renders decisions based on

the allocation criteria specified in this

Policy.

The Exchange believes that it would

be appropriate to modify the

conventional allocation process to

provide that ETFs traded on a UTP basis

be allocated by a special committee,

consisting of the Chairman of the

Allocation Committee, the three most

senior floor broker members of the

26900 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices

6See Section IV, Allocation Criteria, of the Policy.

See supra note 4.

7With respect to ETFs, NYSE has proposed to

amend its Rule 98 information barriers to eliminate

the requirement that approved persons of specialist

member organizations be capitalized separately

from the specialist member organization. However,

a specialist member organization that is registered

only in ETFs will remain subject to the minimum

capital requirements as specified in Exchange

Rules. In addition, NYSE has proposed to amend

NYSE Rules 36, 105(1), 111, 13, 104.21, as well as

the NYSE’s Market-On-Close/Limit-At-The-Close

and Pre-Opening Price Indications Policies to

accommodate the trading of ETFs on a UTP basis.

See File No. SR–NYSE–2–001–08, filed by the

NYSE with the Commission on April 25, 2001.

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

9 15 U.S.C. 78f(b)(5).

10 15 U.S.C. 78f(b). In approving this proposal on

an accelerated basis, the Commission has

considered the proposed rule’s impact on

efficiency, competition and capital formation. 15

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

11 15 U.S.C. 78f(b)(5).

12See 17 CFR 240.11b–1; NYSE Rule 104.

Allocation Committee, and four

members of the Exchange’s senior

management as designated by the

Chairman of the Exchange. This will

permit Exchange management, acting

with key members of the Allocation

Committee, to oversee directly the

introduction of the UTP concept to the

NYSE.

Allocation applications would be

solicited by the Exchange and this

special committee would review the

same performance and disciplinary

material as is reviewed by the

Allocation Committee.6 In addition,

specialist unit applicants would be

required to demonstrate:

(a) An understanding of the trading

characteristics of ETFs;

(b) Expertise in the trading of derivativelypriced instruments;

(c) Ability and willingness to engage in

hedging activity as appropriate;

(d) Knowledge of other markets in which

the ETF which is to be allocated trades;

(e) Willingness to provide financial and

other support to relevant Exchange publicity

and educational initiatives.

The special committee would review

specialist unit applications and reach its

allocation decision by majority vote.

Any tie vote would be decided by the

Chairman of the Exchange. Specialist

units would not appear before the

special committee.

Restriction on a Specialist Member

Organization Acting as a Specialist in

the ETF and in a Component Security of

the ETF. Under the proposed rule

change, specialist member organization

cannot be both the specialist in the ETF

and the specialist in any security that is

a component of the ETF. This restriction

is necessary to avoid the possibility of

‘‘wash sales’’ in a situation where the

specialist in the ETF needs to hedge by

buying or selling component stocks of

the ETF, and could inadvertently be

trading with a proprietary bid or offer

made by a specialist in the same

member organization who is making a

market in the component security. A

specialist member organization

registered in a component security of

the ETF may use a separate affiliated

member organization to function as the

ETF specialist, and thereby avoid the

‘‘wash sale’’ issue. The affiliated

member organization that acts as the

ETF specialist would be required to

establish information barriers between

itself and the specialist member

organization, pursuant to NYSE Rule

98.7

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) of the Act 8 in general, and furthers

the objectives of Section 6(b)(5) of the

Act 9 in particular, because it is

designed to promote just and equitable

principles of trade, to remove

impediments to and perfect the

mechanism of a free and open market

and a national market system and, in

general, to protect investors and the

public interest.

More specifically, the Exchange

believes that trading ETFs on a UTP

basis will provide investors with

increased flexibility in satisfying their

investment needs because they will be

able to purchase and sell a security that

replicates the performance of a broad

portfolio of stocks at negotiated prices

throughout the business day.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is not

necessary or appropriate in the

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

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. 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 NYSE. All

submissions should refer to File No.

SR–NYSE–2001–07 and should be

submitted by June 5, 2001.

IV. 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 Act and the rules

and regulations promulgated thereunder

applicable to a national securities

exchange and, in particular, with the

requirements of Section 6(b).10

Specifically, the Commission finds that

approval of the proposed rule change is

consistent with Section 6(b)(5) 11 of the

Act in that it is designed to promote just

and equitable principles of trade, to

remove impediments and to perfect the

mechanism of a free and open market

and a national market system, and in

general, to protect investors and the

public interest.

Specialists play a crucial role in

providing stability, liquidity, and

continuity to the trading of securities.

Among the obligations imposed upon

specialists by the Exchange, and by the

Act and the rules thereunder, is the

maintenance of fair and orderly markets

in their designated securities.12 To

ensure that specialists fulfill these

obligations, it is important that the

Exchange develop and maintain stock

allocation procedures and policies that

provide specialists with an initiative to

strive for optimal performance. The

Exchange now proposes to amend its

Policy to account for the allocation of

ETFs listed and traded on the Exchange

on a UTP basis.

The Commission notes that the

Exchange proposes to establish a special

committee to allocate ETFs listed and

traded on a UTP basis. The special

committee will consist of the Chairman

of the Allocation Committee, the three

most senior floor broker members of the

Allocation Committee, and four

members of the Exchange’s senior

management as designated by the

Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Notices 26901

13 15 U.S.C. 78s(b)(2).

14 Id.

15 17 CFR 200.30–2(a)(12).

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

2 17 CFR 240.19b–4.

3See letter from Richard Rudolph, Counsel, Phlx,

to Nancy Sanow, Assistant Director, Division of

Market Regulation (‘‘Division’’), Commission, dated

February 20, 2001 (‘‘Amendment No. 1’’). Among

other things, Amendment No. 1 clarifies that the

Exchange: (i) may consider bona fide business

interests in determining whether to list an option;

(ii) must send letters to members setting forth in

reasonable detail the basis on which a decision not

to list a proposed option was made; and (iii) must

forward its written response within 3 business days

of its determination to deny a proposed listing.

4See letter from Richard Rudolph, Counsel, Phlx,

to Nancy Sanow, Assistant Director, Division,

Commission, dated May 1, 2001 (‘‘Amendment No.

2’’). Amendment No. 2 revises Section (c)(ii) of

proposed Commentary .02 to Phlx Rule 1009 to

clarify that the Exchange must notify the member

in writing if the Exchange determines not to list, or

to place conditions or limitations upon, a proposed

listing. Amendment No. 2 also amends Section (e)

of proposed Commentary .02 to clarify that the

Exchange will maintain a record of any bona fide

business interests supporting a decision not to list,

or to place conditions or limitations upon, a

proposed listing.

Chairman of the Exchange. The

Exchange believes that this will permit

its management, acting with key

members of the Allocation Committee,

to oversee directly the introduction of

the UTP concept to the NYSE. The

Commission believes that it is

appropriate to establish a new allocation

committee for ETFs because of the

unique characteristics of ETFs, which

should be considered in the allocation

process.

The Exchange proposes that member

organizations applying to trade ETFs on

a UTP basis be able to demonstrate

certain abilities in addition to the

current performance and disciplinary

requirements of the allocation

application. For example, the applicant

must have: (a) an understanding of the

trading characteristics of ETFs; (b)

expertise in the trading of derivativelypriced instruments; (c) the ability and

willingness to engage in hedging

activity as appropriate; (d) the

knowledge of other markets in which

the ETF which is to be allocated trades;

and (e) the willingness to provide

financial and other support to relevant

Exchange publicity and educational

initiatives. The Commission finds that

these criteria are suitable for the

Committee to rely on when allocating an

ETF to a particular specialist unit.

In addition, the Exchange proposes to

prohibit a specialist in any component

security of the ETF to function as a

specialist in the ETF in order to avoid

‘‘wash sales.’’ The Exchange, however,

proposes to allow specialists in a

component security of an ETF to use a

separate member organization to

function as an ETF specialist so long as

NYSE Rule 98 information barriers are

established and approved by the

Exchange. The Commission believes

that NYSE Rule 98 information barriers

should prevent the flow of any

privileged and/or nonpublic

information between the related entities

and should reduce the potential for any

concerns regarding ‘‘wash sales’’ in this

context.

Because the proposed rule change, as

amended, institutes a new process for

allocating ETFs to NYSE specialist units

and because the Commission is

adopting the proposal on an accelerated

basis, the Commission believes that the

proposal should be approved on a pilot

basis, for a one-year period ending on

May 7, 2002, to ensure that the process

is effective and fair. The Commission

expects the NYSE to report to the

Commission about its experience with

the new allocation process in any future

proposal it files to extend the

amendment to the Policy or approve it

on a permanent basis.

The Commission, pursuant to Section

19(b)(2) of the Act,13 finds good cause

for approving the proposed rule change

and Amendment No. 1 thereto, on a

one-year pilot basis through May 7,

2002, prior to the thirtieth day after the

date of publication of notice thereof in

the Federal Register. The Commission

notes that granting accelerated approval

to this proposal will allow the NYSE to

immediately implement a process for

allocating ETFs to be traded on the

Exchange on a UTP basis to specialist

units. It is necessary to allocate the ETFs

to specialist units as soon as possible so

that the specialists so appointed will

have ample time to prepare for NYSE’s

upcoming listing and trading of ETFs on

a UTP basis. Amendment No. 1 simply

makes minor technical corrections to

the proposed rule text and clarifies that

approved persons of a specialist must be

granted an exemption from specified

specialist rules pursuant to NYSE Rule

98.

V. Conclusion

It is therefore Ordered, pursuant to

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

proposed rule change (SR–NYSE–2001–

07), as amended, is hereby approved on

an accelerated basis through May 7,

2002.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–12137 Filed 5–14–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44285; File No. SR–Phlx–

2001–02]

Self-Regulatory Organizations; Notice

of Filing of a Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Codifying Formal Procedures for

Members To Submit Proposals To List

Option Classes on the Exchange

May 9, 2001.

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 January

11, 2001, the Philadelphia Stock

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

filed with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Phlx. The

Phlx filed amendment Nos. 13 and 24 to

the proposed rule change on February

21, 2001 and May 2, 2001, respectively.

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 Phlx proposes to amend

Exchange Rule 1009 to codify and

implement procedures to be carried out

when an Exchange member, member

organization, or other person requests

that the Exchange list options not

currently traded on the Exchange. The

proposed rule change is set forth below.

New text is in italics.

* * * * *

Criteria for Underlying Securities

Rule 1009. (a)–(c) No change.

Commentary

.01 No change

.02 (a) Members, member

organizations or any person proposing

to list any option not currently listed on

the Exchange shall submit a form of

request (a ‘‘Request to List an Option’’),

available from the Exchange’s Business

and Operations Planning Department

(BOP), to BOP staff.

(b) As soon as practicable, but not

later than three (3) business days

following receipt of the Request to List

an Option, BOP staff shall review the

proposed option’s eligibility for listing,

using the objective listing criteria set

forth in Commentary .01 of this Rule. If

BOP staff determines that the proposed

option does not meet the objective