12578 Federal Register / Vol. 66, No. 39 / Tuesday, February 27, 2001 / Notices

3Securities Exchange Act Release No. 43107

(Aug. 2, 2000), 65 FR 48771.

4See letter from Peter R. Geraghty, Assistant

General Counsel, Nasdaq, to John Polise, Senior

Special Counsel, Division of Market Regulation,

Commission, dated February 12, 2001.

5 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3–4On February 9, 2001, the Exchange submitted

Amendment No. 1 to the proposed rule change. See

letter from Michael Pierson, Vice President,

Regulatory Policy, PCX, to John Roeser, Attorney,

Division of Market Regulation, Commission, dated

February 8, 2001 (‘‘Amendment No. 1’’). In

Amendment No. 1, the PCX made technical changes

to the proposed rule text.

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(6).

7The Commission has agreed to waive the 5-day

pre-filing notice requirement. See 17 CFT 240.19b–

4(f)(6)(iii).

8On January 30, 2001, the Commission approved

similar proposals submitted by the Chicago Board

Options Exchange, Inc. (‘‘CBOE’’) and the

International Securities Exchange LLC (‘‘ISE’’). See

Securities Exchange Act Release No. 43904 (January

30, 2001), 66 FR 9112 (February 6, 2001).

9Under the proposal, the interim linkage would

be for a pilot period expiring on January 31, 2002.

10See Securities Exchange Act Release Nos.

43086 (July 28, 2000), 65 FR 48023 (August 4,

2000); 43573 (November 16, 2000), 65 FR 70851

(November 28, 2000); and 43574 (November 16,

2000), 65 FR 70850 (November 28, 2000). 11 15 U.S.C. 78f(b)(5).

interested persons.3 On February 12,

2001, the Nasdaq withdrew the

proposed rule change.4

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–4750 Filed 2–26–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43986; File No. SR–PCX–

01–10]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to an

Interim Intermarket Linkage Program

February 20, 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 February

6, 2001,3,4 the Pacific Exchange, Inc.

(‘‘PCX’’ 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 PCX. PCX filed the

proposal pursuant to section 19(b)(3)(A)

of the Act,5 and Rule 19b–4(f)(6)

thereunder,6 which renders the proposal

effective upon filing with the

Commission.7 The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PCX is proposing to adopt a rule

providing for the implementation of

‘‘interim linkages’’ with other option

exchanges.8

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

PCX 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 PCX 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

The purpose of this proposed rule

change is to implement certain aspects

of an intermarket options linkage on an

‘‘interim’’ basis.9 This interim linkage

would utilize existing systems to

facilitate the sending and receiving of

order flow between PCX market makers

and their counterparts on the other

option exchanges as an interim step

towards development of a ‘‘permanent’’

linkage.

The Commission has approved a

linkage plan that now includes all five

option exchanges.10 The option

exchanges continue to work towards

implementation of this linkage.

However, because the implementation

may take a significant amount of time,

the option exchanges have discussed

implementing an ‘‘interim’’ linkage.

Such a linkage would use the existing

market infrastructure to route orders

between market makers on the

participating exchanges in a more

efficient manner.

The key component of the interim

linkage would be for the participating

exchanges to open their automated

customer execution systems, on a

limited basis, to market maker orders.

Specifically, market makers would be

able to designate certain orders as

‘‘customer’’ orders, and thus would

receive automatic execution of those

orders on participating exchanges.

This proposed rule would authorize

the PCX to implement bilateral or

multilateral interim arrangements with

the other exchanges to provide for equal

access between market makers on our

respective exchanges. The Exchange

currently anticipates that the initial

arrangements would allow PCX

Designated Lead Market Makers

(‘‘LMMs’’) and their equivalents on the

other exchanges, when they are holding

customer orders, to effectively send

those orders to the other market for

execution when the other market has a

better quote. Such orders would be

limited in size to the lesser of the size

of the two markets’ automatic execution

size for customer orders.

All interim linkage orders must be

‘‘immediate or cancel’’ (that is, they

cannot be placed on an exchange’s limit

order book), and a market maker may

send a linkage order only when the

other (receiving) market is displaying

the national best bid or offer and the

sending market is displaying an inferior

price. This will allow a market maker to

access the better price for its customer.

In addition, if the interim linkage

includes principal orders, it would

allow market makers to attempt to

‘‘clear’’ another market displaying a

superior quote. Any exchange

participating in the interim linkage will

implement heightened surveillance

procedures to help ensure that their

market makers send only properlyqualified orders through the linkage.

LMM participation in the interim

linkage will be voluntary. Only when an

LMM and its equivalent on another

exchange believe that this form of

mutual access would be advantageous

will the exchanges employ the interim

linkage procedures. The PCX believes

that the interim linkage will benefit

investors and will provide useful

experience that will help the exchanges

in implementing the full linkage.

2. Statutory Basis

The PCX believes that the proposed

rule change meets the requirement of

section 6(b)(5) under the Act 11 in that

it is designed to prevent fraudulent and

manipulative acts and practices, to

promote just and equitable principles of

trade, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transaction in securities to

remove impediments to and perfect the

mechanism for a free and open market

and a national market system, and, in

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