Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices 12579

12 15 U.S.C. 78s(b)(3)(A).

13 17 CFR 240.19b–4(f)(6).

14The Commission has approved similar interim

linkage proposals submitted by the CBOE and the

ISE. See supra note 8.

15 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b-4.

3The Exchange submitted a new Form 19b-4,

which replaced and superseded the original filing

(‘‘Amendment No. 1’’). Amendment No. 1 amended

the purpose section of the proposed rule change to

provide a description of provisions governing floor

brokers, registered options traders, general access

phones, and exchange liability. Amendment No. 1

also clarified that registration and maintenance of

registration records is handled through the

Exchange’s Membership Services Department.

Finally, Amendment No. 1 amended proposed Phlx

Rule 606(e)(3) to include specialists.

4Securities Exchange Act Release No. 43740

(December 19, 2000), 65 FR 82437.

5The proposal will also be set forth in new

Options Floor Procedure Advice (‘‘OFPA’’) F–31.

6All categories of users are permitted to make

and receive personal phone calls, subject to existing

prohibitions when necessary because of electronic

interference. Telephone calls between Rick Rudolf,

Counsel, Phlx, and Sonia Patton, Staff Attorney,

Commission (December 18, 2000).

7Currently, Exchange Rule 606(b)(2) prohibits

members, member organizations and any person

associated with a member organization from

establishing or maintaining any telephonic,

electronic or wireless transmitting system or device,

and from operating any other equipment on the

Options Floor, that creates radio frequency or other

interference with the systems of the Exchange or

other members.

general, to protect investors and the

public interest.

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.

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

Because the foregoing proposed rule

change does not:

(i) Significantly affect the protection

of investors or the public interest;

(ii) Impose any significant burden on

competition; and

(iii) Become operative for 30 days

from the date on which it was filed, or

such shorter times as the Commission

may designate, it has become effective

pursuant to section 19(b)(3)(A) of the

Act 12 and Rule 19b–4(f)(6)

thereunder.13 At any time within 60

days of the filing of the proposed rule

change, the Commission may summarily

abrogate such rule change if it appears

to the Commission that such action is

necessary or appropriate in the public

interest, for the protection of investors,

or otherwise in furtherance of the

purposes of the Act.14

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing,

including whether the proposed rule

change, as amended, 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–01–10 and should be

submitted by March 20, 2001.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.15

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4753 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43972; File No. SR–Phlx–

00–48]

Self-Regulatory Organizations; Order

Approving a Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.,

Relating to Telephone Use on the

Options Floor

February 15, 2001.

I. Introduction

On June 16, 2000, the Philadelphia

Stock Exchange, Inc. (‘‘Phlx’’ or

‘‘Exchange’’) 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

establishing rules on telephone use on

the options floor. The Exchange filed

Amendment No. 1 to the proposed rule

change on December 1, 2000.3 The

Federal Register published the

proposed rule change, as amended, for

comment on December 28, 2000.4 The

Commission received no comments on

the proposal. This order approves the

proposal, as amended.

II. Description of Proposal

The Phlx proposes to amend

Exchange Rule 606 to establish rules

and procedures for telephone use on the

Phlx’s options floor.5 The proposed rule

contemplates that certain types of

telephones (i.e., cellular phones) may be

used for personal purposes.6 The

proposed rule would limit the use of

telephones on the options floor for

business purposes, depending on the

category of user (specialist, registered

options trader (‘‘ROT’’), floor broker, or

clerk).

The proposed rule change would

require members and member

organizations to register by category of

user any new telephone to be used on

the options floor prior to use.

Registration and maintenance of

registration records would be handled

through the Exchange’s Membership

Services Department. If there is a change

in the category of user, the telephone

must be re-registered with the Exchange.

At the time of registration, the user must

sign a statement that the user is aware

of and understands the rules governing

the use of telephones on the options

floor. The Exchange believes that this

should facilitate record keeping and also

should enhance the ability of the

Exchange’s Market Surveillance

Department to investigate potential

violations of the rule.

The proposed rule also would provide

that no person on the options floor may

use any device, including, but not

limited to, intercoms, walkie-talkies,

and similar devices, for the purpose of

maintaining an open line of

communication whereby a person not

located in a trading crown may

continuously monitor the activities of

that crowd.

The proposed rule specifies the

capacity and functionality permitted for

use of telephones on the options floor.

Specifically, proposed Phlx 606(e)(2)

provides that no wireless telephone on

the options floor may have an output of

more than one watt.

The purpose of this provision is to

minimize the possibility of radio

frequency or other interference with the

systems of the Exchange of those of

other members.7

12580 Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices

8Specialists are also permitted to receive

incoming calls, but cannot receive orders from the

trading crowd. The Phlx has also noted that there

is nothing in their rules that would prohibit

specialists from using their phones to solicit orders,

as long as the solicitations are consistent with Phlx

Rule 1064(c). Telephone call between Rick Rudolf,

Counsel, Phlx, and Sonia Patton, Staff Attorney,

Commission (December 18, 2000).

9Someone from the floor broker’s booth would be

permitted to call a floor broker to request the broker

come and pick up an order from the booth.

Telephone call between Rick Rudolf, Counsel, Phlx,

and Sonia Patton, Staff Attorney, Commission

(December 18, 2000)

10 In approving this rule change, the Commission

has considered its impact on efficiency,

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

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

The proposed rule sets forth specific

guidelines for each category of user on

the options floor. Proposed Phlx Rule

606(e)(3) would provide that specialists

and ROTs on the trading floor may use

their own cellular and cordless phones

to place calls to any person at any

location (whether on or off the options

floor).8 Any telephonic order entered

from off the options floor must be

placed with a person located in a floor

broker booth.

Proposed Phlx Rule 606(e)(4) would

allow floor brokers to use cellular and

cordless phones, but only to

communicate with persons located on

the options floor. The proposed rule

would prohibit floor brokers from

receiving telephonic orders while in the

trading crowd. Orders phoned to floor

brokers must be received at the floor

broker’s booth.9

Proposed Phlx Rule 606(e)(5) would

provide that floor broker clerks and

stock execution clerks are subject to the

same terms and conditions on telephone

use as floor brokers.

Proposed Phlx Rule 606(e)(6) states

that the general access in-house

telephones located outside of the

trading post areas may be used by any

member, clerk or floor broker to

communicate with persons located on

the options floor or within the Exchange

complex.

Proposed Phlx Rule 606(e)(7) would

require members to maintain all cellular

or cordless telephone records for at least

one year, and provides the Exchange the

right to inspect and/or examine these

records.

Finally, proposed Phlx Rule 606(e)(8)

states that the Exchange assumes no

liability to members or member

organizations due to conflicts between

telephones in use on the options floor

or due to electronic interference

problems resulting from the use of

telephones on the trading floor.

Proposed OFPA F–31 contains the

same provisions as proposed Rule Phlx

606(e) in order to facilitate on-floor

reference to the Exchange’s regulations

regarding on-floor communications

devices.

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.10 In particular, the

Commission finds that the proposed

rule change meets the requirements of

section 6(b)(5) of the Act,11 which states

that, among other things, the rules of an

exchange must be designed to facilitate

securities transactions and to remove

impediments to and perfect the

mechanism of a free and open market,

and to protect investors and the public

interest. Specifically, the Commission

finds that the requirements of the

proposed rule governing the use of

telephones on the options floor and the

proposed restrictions on each category

of user are reasonable and consistent

with the maintenance of fair and orderly

markets.

Proposed Phlx Rule 606(e)(3) contains

restrictions on telephone use by

specialists and ROTs. The rule permits

specialists and ROTs to use their own

cellular or cordless phones to place calls

to any person at any location. However,

ROTs located off of the trading floor

may not place an order by calling a floor

broker, or a specialist, located in the

trading crowd. Any telephonic order

entered from off of the trading floor

must be placed with the member firm

booth. Because specialists and ROTs

generally do not deal directly with

public customers, the Commission does

not believe that allowing specialists and

ROTs to communicate with persons

located off of the trading floor raises the

same regulatory concerns discussed

below regarding floor brokers. As a

result, the Commission finds that it is

consistent with the Act to allow

specialists and ROTs to use cellular and

cordless phones to call locations off of

the trading floor. In addition, the

Commission believes that it is

reasonable and consistent with the Act

to require orders entered off of the

trading floor to be placed with a

member firm booth.

Proposed Phlx Rule 606(e)(4) permits

floor brokers to use cellular and cordless

phones, but only to communicate with

persons located on the options floor.

The rule also requires all orders phoned

to floor brokers to be received initially

at the floor broker’s booth and states

that floor brokers may not receive

telephonic orders while in the trading

crowd, except from their booth. The

Commission believes that the

Exchange’s prohibition on the use of

telephones by floor brokers to call

locations off of the floor or to receive

orders from off of the floor is justified

by legitimate regulatory concerns.

Specifically, the Phlx must ensure

compliance with rules requiring that

members who accept orders directly

from public customers are qualified to

do so. Accordingly, this prohibition

helps to provide adequate surveillance

over this activity be requiring all orders

to be taken at the member firm booth

and by restricting outside phone calls.

In addition, preventing floor brokers

from directly accessing market

information that might only be available

on the floor of the exchange trading the

securities underlying the options

trading on the Phlx, helps to alleviate

concerns about frontrunning and other

forms of market manipulation. The

proposal also helps to prevent persons

located off of the trading floor from

having virtually direct access to the

trading crowd and receiving certain

time and place advantages over other

customers. Moreover, the Commission

believes that requiring orders to be

initially received at the floor broker’s

booth, where it is recorded before being

forwarded to a floor broker in the

crowd, should help to ensure that there

is a record of each telephonic order if

a trading problem or dispute arises.

Proposed Phlx rule 606(e)(5) provides

that floor broker clerks and stock

execution clerks are subject to the same

terms and conditions on telephone use

as floor brokers. In addition, the

Exchange’s Options Committee reserves

the right to prohibit clerks from using

cellular or cordless phones on the floor

if necessary due to electronic

interference or capacity problems. For

the reasons discussed above regarding

telephone use by floor brokers, the

Commission finds that the proposed

restrictions on clerks are reasonable and

consistent with the Act.

Moreover, the Commission finds that

the registration requirements set forth in

proposed Phlx Rule 606(e)(1) and the

record retention requirements set forth

in proposed Phlx Rule 606(e)(7) are

reasonable, consistent with the Act, and

should assist the Exchange in

monitoring for compliance with the

proposed rule change. The Commission

also finds that the limits on capacity

and functionality set forth in proposed

Phlx Rule 606(e)(2) should help to

ensure that phones used on the options

floor do not cause interference with

each other or with Exchange systems.

Finally, the Commission believes that

the proposed amendments to the

Exchange’s minor rule violation plan are

Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices 12581

12 15 U.S.C. 78s(b)(2).

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. 43739

(December 19, 2000), 65 FR 82440.

4 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition and capital formation. 15

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

5 15 U.S.C. 78f.

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

7See note 4, supra.

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

9 17 CFR 200.30–3(a)(12).

reasonable and provide fair procedures

for appropriately disciplining members

and member organizations for minor

rule violations that warrant some type of

punitive measure, but for which a full

disciplinary hearing would be an

inappropriate waste or resources

because of the minor nature of the

violation. The Commission believes that

the proposed change to the existing fine

schedule is appropriate and should

serve to discourage violations of the

Exchange’s telephone policy.

The Commission supports the

Exchange’s efforts to codify policies on

telephone use to give its membership

adequate notice of what conduct is

prohibited. while supporting the

Exchange’s efforts to monitor and

regulate communications on its options

floor, the Commission expects the Phlx

to ensure that Phlx Rule 606(e) is not

used to limit access to services offered

by the Exchange and is not applied in

a manner that is inconsistent with the

Act. Specifically, the Commission

expects that Phlx Rule 606(e) will not be

interpreted in a manner that permits

unfair discrimination between

customers, issuers, brokers, or dealers or

imposes any unnecessary or

inappropriate burden on competition, or

is otherwise used to limit member

access to Exchange services.

IV. Conclusion

It Is Therefore Ordered, pursuant to

section 19(b)(2) of the Act,12 that the

proposed rule change (SR–PHLX–00–

48), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4751 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43989; File No. SR–Phlx–

00–94]

Self-Regulatory Organizations; Order

Approving Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to Prohibition to Harassment

and Other Improper Behavior Because

of Listing or Competitive Practices

February 20, 2001.

I. Introduction

On November 13, 2000, the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or ‘‘Exchange’’) submitted to the

Securities and Exchange Commission

(‘‘Commission’’), pursuant to section

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

Act of 1934 (‘‘Act’’) 1 and Rule 19b–

4 thereunder,2 a proposed rule change

to add new Commentary .01

(‘‘Prohibition Against Harassment’’) to

the Exchange’s Rule 707 (‘‘Just and

Equitable Principles of Trade’’), to

prohibit members, member

organizations, or persons associated

with or employed by members or

member organizations from engaging in

harassment and other improper

behavior because of listing or

competitive practices.

The proposed rule change was

published for comment in the Federal

Register on December 28, 2000.3 No

comments were received on the

proposal. This order approves the

proposal.

II. Description of the Proposal

The Phlx proposes to add new

Commentary .01 (‘‘Prohibition Against

Harassment’’), to prohibit members,

member organizations, or persons

associated with or employed by

members or member organizations from

engaging in harassment and other

improper behavior because of listing or

competitive practices.

Specifically, proposed new

Commentary .01 to Phlx Rule 707 would

state that it is conduct inconsistent with

just and equitable principles of trade for

any member, member organization, or

person associated with or employed by

a member or member organization to

directly or indirectly threaten, harass,

intimidate, refuse to deal with, or

retaliate against any member, member

organization, person associated with or

employed by a member or member

organization, or other market participant

because such member, member

organization, person associated with or

employed by a member or member

organization, or other market participant

has: (i) Made a proposal to any exchange

or other market to list or trade any

option class; (ii) advocated or proposed

to list or trade an option class on any

exchange or other market; (iii)

commenced making a market in or

trading new option class on any

exchange or other market; (iv) sought to

increase the capacity of any options

exchange or the options industry to

disseminate quote or trade data; (v)

sought to introduce new option

products; or (vi) acted, or sought to act,

competitively.

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,4 and in particular, with the

requirements of section 6 of the Act.5

Specifically, the Commission finds that

the proposal is consistent with sections

6(b)(5) of the Act 6 in that it is designed

to codify the Exchange’s prohibition

against harassment and improper

practices in a manner that promotes just

and equitable principles of trade,

prevents fraudulent and manipulative

acts and practices, maintains fair and

orderly markets, and protects investors

and the public interest.

Phlx’s new Commentary .01 to Phlx

Rule 707 provides generally that it is

conduct inconsistent with just and

equitable principles of trade for market

members, member organizations, their

employees, and associated persons

engage in harassing and certain

improper retaliatory actions as a result

of another market participant’s listing or

competitive behavior. The Commission

believes that this codification of existing

practice in Phlx’s Rules is a reasonable

means to comply with the Commission’s

directive,7 and to prevent fraudulent

and manipulative acts and practices,

maintain fair and orderly markets, and

protect investors and the public interest,

as required by section 6(b)(5) of the Act.

IV. Conclusion

It is Therefore Ordered, pursuant to

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

proposed rule change (SR–Phlx–00–94)

is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4752 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M