30036 Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices

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

2 17 CFR 240.19b–4.

3The PCX subsequently submitted the text of the

proposed rule change language properly formatted

for publication in the Federal Register. The

reformatted version did not contain any substantive

changes to the proposed rule change language. See

letter dated November 1, 2000, from Michael D.

Pierson, PCX, to Kelly Riley, Division of Market

Regulation, SEC.

4Letter dated November 29, 2000, from Michael

D. Pierson, PCX, to Nancy J. Sanow, Assistant

Director, Division of Market Regulation, SEC.

5Securities Exchange Act Release No. 43714

(December 12, 2000), 65 FR 80970 (December 22,

2001).

6Cf. PCX Rule 6.85, Commentary .01 (similar

requirement applicable to market makers).

7Commentary .04 of PCX Rule 6.84 provides:

Any order of a joint account participant, which

is executed by a Floor Broker, shall be in

accordance with procedures set forth in Rule 6.85,

except that the joint account trading number with

its alpha identification should appear in the

‘executing firm’ area. Additionally, a joint account

participant may not bid, offer, purchase, sell, or

enter orders in an option series in which a Floor

Broker holds an order on behalf of the joint account

or for the proprietary account of another participant

in the joint account. Orders of joint account

participants in a particular option series may not be

concurrently represented by one or more Floor

Brokers.

8The Exchange believes that these procedures are

substantially the same as those set forth in

Regulatory Circular RG–98–94 of the Chicago Board

Options Exchange (Joint Account Participant

Trading in Equity Options) (September 9, 1998),

CCH ¶5291.

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

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44355; File No. SR–PCX–

2000–21]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change by

the Pacific Exchange, Inc. Concerning

Financial Arrangements of Options

Floor Members

May 25, 2001.

I. Introduction

On July 12, 2000, pursuant to section

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

of 1934 (‘‘Act’’) 1 and Rule 19b–4

thereunder,2 the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) a proposed

rule change to eliminate PCX Rule 6.40,

which pertains to financial

arrangements of options floor members,

and to adopt supplemental rules on

options floor members who are trading

for the same joint account.3 The PCX

submitted Amendment No. 1 to the

proposed rule change on November 29,

2000.4 The proposed rule change, as

amended, was published for comment

and appeared in the Federal Register on

December 22, 2000.5 The Commission

received no comments on the proposal.

This order approves the PCX’s proposed

rule change, as amended.

II. Description of the Proposal

The PCX proposes to eliminate PCX

Rule 6.40, which currently prohibits

options floor members with financial

arrangements from trading in the same

trading crowd unless they have received

either a short-term or a long-term

exemption from the Options Floor

Trading Committee.

The PCX proposes to replace PCX

Rule 6.40 with PCX Rule 6.84(h), which

governs options floor trading for joint

accounts. Proposed subsection (h)(1) of

PCX Rule 6.84 states that a joint account

may be simultaneously represented in a

trading crowd only by participants who

are trading in person. It further provides

that orders for a joint account may not

be entered in a trading crowd in which

a participant of the joint account is

trading in person for the joint account.

If no participant is trading in person in

the trading crowd for the joint account,

then a floor broker may represent orders

in the trading crowd on behalf of the

joint account as long as the same option

series is not concurrently represented by

more than one floor broker.

Proposed subsection (h)(2) of PCX

Rule 6.84 provides that market makers

may alternate trading in-person between

their individual and joint accounts

while in the trading crowd. It further

provides that market makers who

alternate trading between accounts must

ensure that while trading the joint

account another participant does not

enter orders through a floor broker for

the joint account in the same trading

crowd.

Proposed subsection (h)(3) of PCX

Rule 6.84 provides that before beginning

trading on behalf of a joint account,

participants in the joint account are

responsible for determining whether

any floor brokers are representing orders

in the same trading crowd on behalf of

the same joint account.6

Proposed subsection (h)(4) of PCX

Rule 6.84 provides that floor brokers

may not represent a joint account of

which they are a participant.

Proposed subsection (h)(5) of PCX

Rule 6.84 provides that market makers

who are trading in person in a trading

crowd may not enter orders with a floor

broker either for joint accounts in which

they are participants or for their

individual accounts.

Proposed subsection (h)(6) of PCX

Rule 6.84 provides that the following

trades are prohibited: (a) Trades

between a joint account participant’s

individual account and a joint account

in which that person is a participant; (b)

trades between two joint accounts

having common participants; and (c)

trades in which the buyer and seller are

representing the same joint account and

are on opposite sides of the transaction.

PCX Rule 6.85 currently provides that

a market maker and a floor broker who

represents orders on behalf of the

market maker may not be represented at

a trading post concurrently. This

principle against dual representation of

a market maker account has been

extended to cover joint accounts, as

currently provided in PCX Rule 6.84,

Commentary .04.7 The Exchange is now

proposing to adopt supplemental

procedures that apply to situations

where a joint account is being

concurrently represented by more than

one market maker representative, and to

situations where a joint account is being

represented by a floor broker.8

Finally, the Exchange is proposing to

make technical changes to PCX Rule

4.18 and PCX Rule 6.84 by removing

cross-references to PCX Rule 6.40.

III. Discussion

The Commission finds that the

proposed rule change is consistent with

the requirements of the Act and the

rules thereunder applicable to a national

securities exchange, particularly section

6(b)(5) of the Act.9

PCX Rule 6.40 restricts PCX floor

members who have financial

arrangements with each other from

trading in the same trading crowd at the

same time in the absence of an

exemption. The purpose of PCX Rule

6.40 is to prevent market makers who

have financial arrangements with each

other from unfairly dominating the

market in any option class or series.

The Commission finds that it is

appropriate for the PCX to eliminate

PCX Rule 6.40 and to adopt new

provisions under PCX Rule 6.84

imposing trading restrictions on PCX

members who trade on behalf of the

same joint account. The revisions to

PCX Rule 6.84 specify the

circumstances when orders may be

entered or represented in a trading

crowd on behalf of a joint account, and

also prohibit certain trades between

joint accounts. Moreover, the new

provisions of PCX Rule 6.84 govern the

practice of market makers alternating

trading between their individual and

joint accounts. Finally, as the PCX

points out, PCX Rule 6.37(c)(2)

precludes market makers, individually

or as a group, from dominating the

market irrespective of whether the

parties have a financial arrangement

with each other.

In view of the foregoing, the

Commission believes that the

Federal Register / Vol. 66, No. 107 / Monday, June 4, 2001 / Notices 30037

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

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

12 In approving the proposal, the Commission has

considered the rule’s impact on efficiency,

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

17 CFR 200.30–3(a)(12).

13 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Securities Exchange Act Release No. 43823

(January 9, 2001), 66 FR 3633.

4See letters from Cindy L. Sink, Senior Attorney,

Regulatory Policy, PCX to Heather Traeger,

Attorney Adviser, Division of Market Regulation

(‘‘Division’’), SEC, dated January 10 and April 11,

2001 (‘‘Amendment Nos. 2 and 3,’’ respectively). In

Amendment No. 2, proposed rules 10.13(h)(35) and

10.13(k)(i)(35) are renumbered as 10.13(h)(38) and

10.13(k)(i)(38) because Rules 10.13(h)(35), (36) and

(37) already exist. In Amendment No. 3, Rules

10.13(h)(30) and 10.13(k)(i)(30), which address

fines for violations of option floor trading

restrictions on members with financial

arrangements (Rule 6.40(b)), are eliminated to

reflect rule changes made by other filings. Also

rules affected by the removal of Rules 10.13(h)(30)

and 10.13(k)(i)(30) are renumbered. These are

technical amendments that do not need to be

published for comment.

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

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

7 15 U.S.C. 78s(b)(2).

8 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3AUTOM is the Exchange’s electronic order

delivery and reporting system, which provides for

the automatic entry and routing of equity option

and index option orders to the Exchange trading

floors. Orders delivered through AUTOM may be

executed manually, or certain orders are eligible for

AUTOM’s automatic execution feature, AUTO–X.

Continued

elimination of PCX Rule 6.40, in

conjunction with the codification of

new paragraph (h) of PCX Rule 6.84,

should help assure an appropriate

balance between the need to impose

reasonable trading restrictions for joint

account participants and the need to

allow PCX members flexibility to

participate in trading crowds.

Accordingly, the Commission finds that

the PCX’s proposal 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 to protect investors

and the public interest, as specified in

section 6(b)(5) of the Act.10

IV. Conclusion

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,11 that the

proposed rule change (File No. SR–

PCX–00–21) is approved.12

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–13882 Filed 6–1–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44345; File No. SR–PCX–

99–48]

Self-Regulatory Organization’s; Pacific

Exchange, Inc.; Order Approving

Proposed Rule Change and

Amendments No. 1, 2 and 3 Relating to

Miscellaneous House-Keeping

Amendments to Options Trading Rules

May 23, 2001.

I. Introduction

On November 5, 1999, the Pacific

Exchange, Inc. (‘‘PCX’’ 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 to amend its

options trading rules for house-keeping

purposes.

The proposed rule change and

Amendment No. 1 were published for

comment in the Federal Register on

January 16, 2001.3 No comments were

received on the proposal. The proposal

was amended on January 11 and April

12, 2001.4 In this order, the Commission

is approving the proposed rule change,

as amended.

II. Description of the Proposal

The PCX proposes to modify its rules

on options trading by clarifying existing

provisions, eliminating superfluous

provisions, codifying current policies

and procedures, and renumbering

certain Option Floor Procedure Advices.

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)(5).5

Specifically, the Commission finds that

updating and clarifying rules and

codifying current policies and

procedures will enhance the ability of

PCX members to comply with PCX’s

rules thereby promoting just and

equitable principles of trade, fostering

cooperation and coordination with

persons engaged in regulating, clearing,

settling, processing information with

respect to, and facilitating transactions

in securities, and in general, protecting

investors and the public interest.

The Commission also considers the

proposal as it relates to the PCX’s minor

rule violation plan to be consistent with

section 6(b)(5),6 which requires that

members and persons associated with

members be appropriately disciplined

for violations of Exchange Rules.

IV. Conclusion

It is therefore Ordered, pursuant to

section 19(b)(2) of the Act,7 that the

proposed rule change (SR–PCX–99–48),

as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–13885 Filed 6–1–01; 8:45am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–44362; File No. SR–Phlx2001–56]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Philadelphia Stock

Exchange, Inc. To Extend Its Pilot

Program to Disengage Its Automatic

Execution System (‘‘AUTO–X’’) for a

Period of Thirty Seconds After the

Number of Contracts Automatically

Executed in a Given Option Meets the

AUTO–X Minimum Guarantee for That

Option

May 29, 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 May 17,

2001, 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 and II below, which Items

have been prepared by the Exchange.

The Commission is publishing this

notice to solicit comments on the

proposed rule change from interested

persons and to approve the proposal on

an accelerated basis, for a six-month

pilot, scheduled to end on May 31,

2001.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx proposes to extend, for an

additional six months, its pilot program

effecting a systems change to AUTO–X,

the automatic execution feature of the

Exchange’s Automated Options Market

System (‘‘AUTOM’’),3 that would