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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to an Interpretation of Phlx Rule 237 Governing the eVWAP Morning Session

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Start Preamble February 5, 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 January 11, 2001, the Philadelphia Stock Exchange, Inc. (“Exchange” or “Phlx”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described Start Printed Page 9743in Items I, II, and III below, which Items have been prepared by Phlx. Phlx filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act,[3] and Rule 19b-4(f)(1) and (5) thereunder.[4] Pursuant to Rule 19b-4(f)(1) and (5), Phlx has designated this proposal as one constituting an interpretation of the meaning and administration of existing Phlx Rule 237, and as one effecting a change in an existing order-entry or trading system of the Phlx that does not: (1) Significantly affect the protection of investors or the public interest, (2) impose any significant burden on competition, or (3) significantly have the effect of limiting the access to or availability of the system. As such, the proposed rule change is immediately effective upon the Commission's receipt of this filing. 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

Pursuant to Rule 19b-4 of the Act, Phlx is providing an interpretation to Phlx Rule 237, eVWAP Morning Session,[5] to include New York Stock Exchange, Inc. (“NYSE”) Rule 127 transactions in the eVWAP calculation. NYSE Rule 127 transactions are block trades executed on the NYSE floor outside of the present quote and are denoted as “J trades” by the Securities Industry Automation Corporation.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, 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. Nasdaq 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

The purpose of the proposed rule change is to intepret Phlx Rule 237 to include NYSE Rule 127 trades in the eVWAP price calculation. The eVWAP is a pre-opening order matching session for the electronic execution of large-sized stock orders at a standardized volume weighted average price (“eVWAP Price”).

In accordance with Phlx Rule 237, the eVWAP Price is derived from all regular way trades (including sold sales and late sales) reported by the appropriate reporting authority from the opening of the regular trading session and printed prior to 4:15 p.m. EST. The calculation excludes NYSE Rule 127 trades that are block executed on the NYSE floor outside of the present quote. A number of eVWAP participants have requested of UTTC that these trades be included in the eVWAP calculation to the extent that such trades are regular way trades and are reported by the appropriate reporting authority before 4:15 p.m. EST. Upon review, the Exchange has interpreted Phlx Rule 237 to include these in the eVWAP Price calculation.[6] The Exchange included these trades in the calculation methodology beginning on Tuesday, January 16, 2001. UTTC endeavored to notify all enrolled eVWAP participants of this change by letter dated January 11, 2001.

The proposed rule change is consistent with Section 6(b) of the Act in that it is designed to promote just and equitable principles of trade, prevent fraudulent and manipulative acts and practices and protect investors and the public interest by including NYSE Rule 127 trades in the eVWAP Price calculation.

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

Phlx does not believe that the proposed rule change will result in any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.

(C) Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) [7] of the Act and Rule 19b-4(f)(1) and (5) [8] thereunder in that it constitutes an interpretation of the meaning and administration of Phlx Rule 237, an existing rule governing operation of eVWAP, and a change in an existing order-entry or trading system of Phlx that does not: (1) Significantly affect the protection of investors of the public interest, (2) impose any significant burden on competition, or (3) significantly have the effect of limiting the access to or availability of the system. At any time within 60 days of the filing of such 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 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 Phlx. All submissions should refer to the number in the caption above and should be submitted by March 2, 2001.

Start Signature
Start Printed Page 9744

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margared H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

4.  17 CFR 240.19b-4(f)(1) and (5).

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5.  eVWAP was developed by Universal Trading Technologies Corporation (“UTTC”), and was approved by the Commission to operate as a facility of the Exchange. See Securities Exchange Act Release No. 41210 (March 24, 1999) (SR-Phlx-96-14). The Commission approved the facility to operate as pilot program until November 30, 2001. See Securities Exchange Act Release No. 43477 (October 30, 2000) (SR-Phlx-00-84).

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6.  In a telephone conversation on January 29, 2001 between John Dayton, Esq., Exchange, and Heidi Pilpel, Special Counsel, Commission, the Exchange represented that the proposed interpretation will conform the value weighted average price calculation methodology used by UTTC to the value weighted average price calculation methodology used by other similar services.

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8.  17 CFR 240.19b-4(f)(1) and (5).

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[FR Doc. 01-3362 Filed 2-8-01; 8:45 am]

BILLING CODE 8010-01-M