[Federal Register Volume 63, Number 92 (Wednesday, May 13, 1998)]
[Notices]
[Pages 26666-26667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12704]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39972; File No. SR-PHLX-98-20]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change By the Philadelphia Stock
Exchange, Inc. To Adopt, on a Pilot Basis, a System Enhancement to the
X-Station Electronic Book
May 7, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act),\1\ notice is hereby given that on April 24, 1998, 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 Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Exchange, pursuant to Rule 19b-4 under the Act, proposes, as a
six month pilot, to adopt a system enhancement to the X-Station
electronic book on the options floor which matches incoming Automatic
Execution System (``AUTO-X'') orders with orders residing on the
specialist's book.
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 Phlx 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 Phlx 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
As described in Phlx Rule 1080, Comment .02, the electronic order
book is an automated mechanism for specialists to hold and display
orders based on price/time priority. The Exchange is currently
preparing floor-wide deployment of the new X-Station electronic book on
the options floor. The new X-Station provides certain improvements such
as expedited non-AUTO-X order execution as well as expedited cancel
replacement processing.
AUTO-X is the automatic execution feature of the Automated Options
Market (``AUTOM'') System, the electronic order delivery and routing
system for options orders. Currently, AUTO-X orders are executed
against a ``shadow account'' for which the specialist is ultimately
responsible. The execution is immediately reported back to the sending
firm, and then, the specialist must manually input the contra-side
interest representing the booked order that becomes due as a result of
the AUTO-X trade.
At this time, the Phlx proposes to adopt, as a six month pilot, a
system enhancement to the electronic book that matches incoming AUTO-X
orders with booked orders. The proposed matching ability would allow
the specialist to match these two participants directly, without the
specialist participating in the trade, by dropping the order to manual
status. The match would not be automatic, as the specialist must ensure
that crowd participation under current parity/priority rules is not due
before executing the trade; thus, the specialist must ``select'' the
orders to execute the trade. Since the AUTO-X order has dropped to
manual, the sending firm will not receive an execution report until the
specialist selects and executes the trade.
The proposed enhancement affords specialists relief from the manual
burden of inserting trade participant and clearing information by
writing an order ticket for the booked order. Without the X-Station
itself, the booked order appears on an actual order ticket, which the
specialist submits for key punch entry. Thus, implementing the X-
Station without the matching feature is more burdensome than the
process required without the X-Station itself because it requires more
ticket-writing. The proposed enhancement should reduce the amount of
paper processed on the options floor. This in turn should reduce
handling and processing time, including the likelihood of errors,
thereby facilitating more prompt and accurate trade reporting.
For these reasons, the proposed rule change is consistent with
Section 6 of the Act in general, and in particular, with Section
6(b)(5), in that it is designed to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, as well as to
protect investors and the public interest by enhancing efficiency
through automation in the market.
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.
[[Page 26667]]
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SECURITIES AND EXCHANGE COMMISSION
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. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The proposed rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \2\ and Rule 19b-4(e)(5) \3\ thereunder. The
proposal effects a change in an existing order-entry or trading system
of a self-regulatory organization that: (i) does not significantly
affect the protection of investors or the public interest; (ii) does
not impose any significant burden on competition; and (iii) does not
have the effect of limiting the access to or availability of the
system.\4\
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\2\ 15 U.S.C. 78s(b)(3)(A).
\3\ 17 CFR 240.19b-4(e)(5).
\4\ In reviewing this rule, the Commission has considered the
proposed rule's impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
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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.
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, 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. Sec. 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
Phlx. All submissions should refer to the File No. SR-PHLX-98-20 and
should be submitted by June 3, 1998.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-12704 Filed 5-12-98; 8:45 am]
BILLING CODE 8010-01-M