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[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65364-65365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30763]

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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36582; File No. SR-PHLX-95-78]

Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to a Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc., Relating to an Extension of the 
Automated Options Market Pilot Program

December 13, 1995.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on December 
1, 1995, 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 self-
regulatory organization. The Commission is approving this proposal on 
an accelerated basis.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PHLX proposes to extend the Exchange's Automated Options Market 
(``AUTOM'') system for a one year period ending December 31, 1996.
    The text of the proposal is available at the Office of the 
Secretary, the PHLX, and at the Commission.

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 self-regulatory organization 
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 self-regulatory organization 
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

    AUTOM, which as operated on a pilot basis since 1988 and was most 
recently extended through December 31, 1995,\1\ is the PHLX's 
electronic order routing, delivery, execution and reporting system for 
equity and index options. AUTOM is an online system that allows 
electronic delivery of options orders from member firms directly to the 
appropriate specialist on the Exchange's trading floor.

    \1\ See Securities Exchange Act Release No. 35183 (December 30, 
1994), 60 FR 2420 (January 9, 1995) (order approving File No. SR-
PHLX-94-41).
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    Certain orders are eligible for AUTOM's automatic execution 
feature, AUTO-X, which was approved as part of the AUTOM pilot program 
in 1990.\2\ AUTO-X orders are executed automatically at the 
disseminated quotation price on the Exchange and reported to the 
Options Price Reporting Authority (``OPRA'') as well as the originating 
firm. Orders that are not eligible for AUTO-X are handled manually by 
the specialist and, upon execution of the order, are inputted into 
exchange systems for reporting to OPRA and the delivering firm.

    \2\ See Securities Exchange Act Release No. 27599 (January 9, 
1990), 55 FR 1751 (January 18, 1990) (order approving File No. SR-
PHLX-89-03).
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    Originally, the AUTOM pilot program was approved by the Commission 
for market orders of up to five contracts for 12 PHLX near-month equity 
options.\3\ Since that time, AUTOM has been extended and amended 
several times.\4\

    \3\ See Securities Exchange Act Release No. 25540 (March 31, 
1988), 53 FR 11390 (April 6, 1988).
    \4\ See Securities Exchange Act Release No. 35183, supra note 1. 
See also Securities Exchange Act Release Nos. 25540 (March 31, 
1988), 53 FR 11390 (April 6, 1988) (order approving AUTOM on a pilot 
basis); 25868 (June 30, 1988), 53 FR 25563 (order approving File No. 
SR-PHLX-88-22, extending pilot through December 31, 1988); 26354 
(December 13, 1988), 53 FR 51185 (order approving File No. SR-PHLX-
88-33, extending pilot program through June 30, 1989); 26522 
(February 3, 1989), 54 FR 6465 (order approving File No. SR-PHLX-89-
1, extending pilot through December 31, 1989); 27599 (January 9, 
1990), 55 FR 1751 (order approving File No. SR-PHLX-89-03, extending 
pilot through June 30, 1990); 28625 (July 26, 1990), 55 FR 31274 
(order approving File No. SR-PHLX-90-16, extending pilot through 
December 31, 1990; 28978 (March 15, 1991), 56 FR 12050 (order 
approving File No. SR-PHLX-90-34, extending pilot through December 
31, 1991); 29837 (October 18, 1991), 56 FR 36496 (order approving 
File No. SR-PHLX-90-03, extending pilot through December 31, 1993); 
and 33405 (December 30, 1993), 59 FR 790 (order approving File No. 
SR-PHLX-93-57, extending pilot through December 31, 1994); 29662 
(September 9, 1991), 56 FR 46816 (order approving File No. SR-PHLX-
91-31, permitting AUTO-X orders up to 20 contracts in Duracell 
options only); 29782 (October 3, 1991), 56 FR 55146 (order approving 
File No. SR-PHLX-91-33, permitting AUTO-X for all strike prices and 
expiration months); 32906 (September 15, 1993), 58 FR 15168 (order 
approving File No. SR-PHLX-92-38, permitting AUTO-X orders up to 25 
contracts in all options); and 33405 (December 30, 1993), 59 FR 790 
(order approving File No. SR-PHLX-93-57, extending pilot through 
December 31, 1994); 34920 (October 31, 1994), 59 FR 55510 (November 
7, 1994) (File No. SR-PHLX-94-40, codifying use of AUTOM for index 
options); 35601 (April 13, 1995), 60 FR 19616 (File No. SR-PHLX-95-
18, codifying the use of AUTOM for certain order types); 35681 (May 
30, 1995), 60 FR 30131 (June 7, 1995) (File No. SR-PHLX-95-29, 
increasing AUTO-X for USTOP 100 Index (``TPX'') options to 50 
contracts); 35782 (May 30, 1995), 60 FR 30136 (June 7, 1995) (File 
No. SR-PHLX-95-30, increasing the maximum AUTOM order size from 100 
to 500 contracts); 36429 (October 27, 1995), 60 FR 55874 (November 
3, 1995) (File No. SR-PHLX-95-35, allowing broker-dealer TPX option 
orders to be routed through AUTOM); and 36467 (November 8, 1995), 60 
FR 57615 (November 16, 1995) (order approving File No. SR-PHLX-95-
33, limiting AUTO-X for National Over-the-Counter Index options to 
series where the bid is $10 or less).
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    The purpose of the proposed rule change is to extend the AUTOM 
pilot program for a one-year period ending December 31, 1996. The PHLX 
believes that this extension of the pilot program should provide the 
Exchange with additional time to study the effectiveness of AUTOM prior 
to permanent approval. During this time, the Exchange intends to 
monitor the implementation of certain enhancements to AUTOM and to 
draft an Exchange rule codifying the entire pilot program.
    Generally, the Exchange believes that, since the date of the last 
Commission order extending the AUTOM pilot program, AUTOM has 
functioned properly and efficiently, without any material problems 
reported by PHLX members or AUTOM users, and without significant 
malfunctions or operational failures.
    AUTOM provides small customer option orders with the benefits of 
electronic delivery and reporting, while AUTO-X provides automatic 
executions as well. Accordingly, the Exchange believes that AUTOM 
increases the speed and efficiency of order delivery, execution and 
reporting. This, in turn, promotes both liquidity and fair and orderly 
markets. For these reasons, the PHLX believes that extending the AUTOM 
pilot program for a one-year period is consistent with Section 6 of the 
Act, in general, and, in particular, with Section 6(b)(5), in that the 
proposal is designed to promote just and equitable principles of trade, 
and to protect investors and the public interest. In addition, the 
Exchange believes that the proposed rule change is consistent with 
Section 11A(a)(1)(B) of the Act in 

[[Page 65365]]
that AUTOM is intended to improve, through the use of new data 
processing and communications techniques, the efficiency with which 
transactions in PHLX equity and index options are executed. Further, 
the Exchange believes that AUTOM fosters competition among options 
exchanges, which have similar systems in place.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The PHLX does not believe that the proposed rule change will impose 
any inappropriate 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 were either solicited or received.

III. Commission's Findings and Order Granting Accelerated Approval 
of Proposed Rule Change

    The Exchange has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
    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 Sections 6 and 11A.\5\ Specifically, 
the Commission continues to believe that the development and 
implementation of the AUTOM system provides for more efficient handling 
and reporting of orders in PHLX options through the use of new data 
processing and communications techniques, thereby improving order 
processing and turnaround time. The Commission does not object to an 
extension of the pilot program until December 31, 1996, in response to 
the PHLX's assertion that continuation of the pilot will provide the 
Exchange with a better opportunity to study its operation and 
effectiveness prior to permanent approval of the program.\6\ The 
Commission notes further that the Exchange has represented that from 
January 1995 until the present, AUTOM has functioned properly and 
efficiently, that no material problems have been reported by PHLX 
members or AUTOM users, and that AUTOM has not had significant 
malfunctions or operational failures.

    \5\ 15 U.S.C. 78f and 78k-1 (1988).
    \6\ The PHLX will submit a request for permanent approval of the 
program no later than November 1, 1996. This request will be 
accompanied by a report covering the period between Janaury 1, 1996, 
and June 30, 1996, that will include: (1) a description of the 
benefits provided by AUTOM; (2) the degree of AUTOM usage, including 
the number and size of the orders routed through AUTOM and the 
number and size of the orders executed automatically through the 
AUTO-X system; (3) the system capacity of AUTOM and AUTO-X; and (4) 
any problems the Exchange has encountered with the routing and 
execution features.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register in order to permit the 
PHLX to continue the AUTOM pilot program on an uninterrupted basis. 
Specifically, the Commission believes that the PHLX's proposal to 
extend the AUTOM pilot program does not raise any new issues since it 
merely extends the pilot program as it is currently operating. Further, 
the Commission believes that the pilot is beneficial in maintaining the 
quality and efficiency of the PHLX's market. In addition, the 
Commission notes that there have been no adverse comments concerning 
the pilot program since its implemention. Accordingly, the Commission 
believes that granting accelerated approval of the proposed rule change 
is appropriate and consistent with Sections 6 and 11A of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. 
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 at the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. Copies of such filing will also be available for 
inspection and copying at the principal office of the above-mentioned 
self-regulatory organization. All submissions should refer to the file 
number in the caption above and should be submitted by January 8, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-PHLX-95-78) is approved 
through December 31, 1996.

    \7\ 15 U.S.C. 78s(b)(2) (1982).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\

    \8\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-30763 Filed 12-18-95; 8:45 am]
BILLING CODE 8010-01-M
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