Skip to Content

Notice

Self-Regulatory Organizations, Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. To Facilitate the Orderly Resumption of Trading of Non-Phlx Amex Options on the Amex Facility in New York

Document Details

Information about this document as published in the Federal Register.

Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble September 28, 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 September 28, 2001, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Phlx. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and to grant accelerated approval to the proposed rule exchange.

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

As part of the process to return American Stock Exchange LLC (“Amex”) option products to its facility in New York,[3] and in order to facilitate the orderly transition of non-Phlx Amex options [4] back to the Amex, the Exchange proposes to adopt two temporary rules. First Phlx proposes to allow Exchange customers [5] to cancel limit orders currently residing on Exchange's electronic limit order book after the close of trading on the Phlx on the trading day before the non-Phlx Amex options return to the Amex trading floor. Second, Phlx proposes a temporary rule that would require that trading in certain securities (i.e., non-Phlx Amex options) be terminated at the time that the Temporary Arrangement is terminated (the “Termination Time”).

Finally, the Phlx proposes to clarity that the temporary rules describe din the Order will no longer be effective and Amex Temporary Access Persons (“TAPs”) [6] will no longer have access to the Phlx options trading facilities, operations, technology and personnel, as of the Termination Time. In this regard, Amex must submit written notification to the Exchange's Membership Services Department de-registering the Amex TAPs and clerks.

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 III 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

1. Purpose

According to the Phlx, the purpose of the proposed rule change is to facilitate the orderly resumption of trading of non-Phlx Amex options of the Amex facility in New York following their temporary listing on the Phlx facility, which was necessitated by the September 11, 2001 terrorist attacks on the World Trade Center.

Specifically, pursuant to the Order, the Phlx temporarily certified and listed, and certain Phlx specialists were granted temporary trading privileges, in non-Phlx Amex options. Upon the Start Printed Page 51086Termination Time, non-Phlx Amex options will no longer be listed or traded on the Phlx. Therefore, the Phlx proposes a temporary rule to allow Exchange customers to cancel, after the close of trading, as described below, electronic limit orders in non-Phlx Amex options residing on the Phlx limit order book as of the Termination Time. Upon notification by the Amex that non-Phlx Amex options will resume trading on the Amex facility in New York, the Phlx would allow Exchange customers to cancel limit order residing on the Exchange's electronic limit order book as of the close of trading on the day of Termination Time.[7] Such cancellations would be required to take place between the hours of 4:15 p.m. and 5:30 p.m. Eastern Time on the trading day immediately preceding the date on which the Amex resumes trading on the Amex facility in New York. The Exchange anticipates that the cancellations will take place on Friday, September 28, 2001, and that the Amex will resume trading on its New York facility on Monday, October 1, 2001. Normally, cancellations, like other order types, are not permitted after the close of trading.

Orders in non-Phlx Amex options that are not cancelled by 5:30 p.m. Eastern time on the trading day immediately preceding the date on which the Amex resumes trading on the Amex facility in New York would be removed from the Phlx limit order book. This includes electronic orders delivered to the limit order book via the AUTOM system or via the Exchange's Floor Broker Order Entry System. These electronic orders will be removed by the Exchange. In addition, manual orders placed on the specialist's physical ticket limit order book, if any, will be removed by the specialist unit.

In addition, the Exchange proposes to adopt a temporary rule that would require trading in certain securities (i.e., non-Phlx Amex options) to be terminated at the Termination Time. The Exchange believes that this temporary rule would satisfy the requirements of Rule 12d2-2(b) under the Act,[8] which provides that a national securities exchange (i.e., the Phlx) may strike a security from listing and registration thereon if (i) trading in such security has been terminated pursuant to a rule of such exchange requiring such termination whenever the security is admitted to trading on another exchange; and (ii) listing and registration of such security has become effective on such other exchange. The Phlx's certification of the non-Phlx Amex options was pursuant to a temporary rule that terminates at the Termination Time, and thus, requires termination of trading of non-Phlx Amex options on the Exchange.

Finally, the Phlx proposes to clarify that the temporary rules described in the Order will no longer be effective, and Amex TAPs [9] will no longer have access to the Phlx options trading facilities, operations, technology and personnel, as of the Termination Time. In this regard, Amex must de-register the Amex TAPs by submitting written notification to the Exchange's Membership Services Department.

2. Basis

For these reasons, the Phlx believes that the proposed rule change is consistent with Section 6 of the Act,[10] in general, and with Section 6(b)(5) of the Act,[11] specifically, because it is designed to promote just and equitable principles of trade, and 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 mechanisms of a free and open market and the national market system, and, in general, protect investors and the public interest by facilitating the orderly resumption of trading of non-Phlx Amex options on the Amex facility in New York following their temporary listing and trading on the Phlx facility.

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. 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, NW., Washington, DC 20549-0609. Copies of the submissions, 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 the filing will also be available for inspection and copying at the principal office of Phlx. All submissions should refer to File No. SR-Phlx-2001-91 and should be submitted by October 26, 2001.

IV. Commission Findings and Order Granting Accelerated Approval of the Proposed Rule Change

The Commission notes that the proposed rule change was submitted in response to the emergency situation that resulted from the September 11, 2001 attacks on the World Trade Center in New York City. As a result of the attacks, the Amex facilities were damaged and could not be opened when the U.S. markets reopened on September 17, 2001. To accommodate the opening of trading of Amex options and to accommodate trading by Amex members, the Phlx and Amex submitted temporary rules, which the Commission approved on September 17, 2001. [12]

The Commission now understands that the Amex facility has been substantially restored and is scheduled to be open for trading on October 1, 2001. Accordingly, Phlx proposes to terminate trading in non-Phlx Amex options as of the close of trading on the day before trading opens on the Amex's New York facility, which is anticipated to be September 28, 2001. In addition, Phlx proposes to permit Exchange customers to cancel orders that may be on the Phlx limit order book when trading closes on the trading day before trading opens on the Amex New York facility.Start Printed Page 51087

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.[13] Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,[14] which requires, among other things, that the rules of an exchange be 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, and, in general, to protect investors and the public interest.

The Commission believes that Exchange customers should be provided the opportunity to cancel orders that remain on the Phlx limit order book before the Exchange or Phlx specialist cancels the orders for them. The Commission notes that when the Amex facility reopens, non-Phlx Amex options will not longer be traded on the Phlx. Thus, the Commission believes that it is appropriate to allow Exchange customers to decide how they want their orders that remain on the Phlx limit order book handled. Further, because the Exchange will no longer trade non-Phlx Amex options, the Commission believes that it is reasonable for the exchange or Phlx specialist to cancel those remaining orders that are not canceled by the Exchange customer.

The Commission also finds that the Phlx proposal to terminate trading in non-Phlx Amex options upon the Amex's reopening to be consistent with the Act. As noted above, the Phlx listed the non-Phlx Amex options as a temporary measure to help address the emergency situation that arose from Amex's inability to reopen its New York facility following the attacks on, and resulting collapse of, the World Trade Center.[15]

The Commission finds good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice of filing in the Federal Register. The Commission believes that it is necessary to approve the proposed rule change on an accelerated basis to further facilitate the Temporary Arrangement.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[16] that the proposed rule changes (SR-Phlx-2001-91) is hereby approved on an accelerated basis.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[17]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  On September 11, 2001, the Amex suffered physical damage to its New York facility following the terrorist attack on the World Trade Center. In addition, the large area surrounding the Amex was generally inaccessible due to rescue and clean-up efforts, and many basic services (such as electricity, water and communications lines) were not reestablished following the collapse of various buildings and ensuing fires. As an accommodation to the Amex, the Phlx listed certain “non-Phlx Amex options” as defined below, and offered to provide access to its options trading facilities, operations, technology and personnel to the Amex and Amex members, on a temporary basis, in order to facilitate an orderly return to national market system trading in listed equity options and index options by Amex members (“Temporary Arrangement”). The Commission approved the Temporary Arrangement on September 17, 2001. See Securities Exchange Act Release No. 44802 (September 17, 2001) (File Nos. SR-Amex-2001-80, SR-Phlx-2001-86) (“Order”).

Back to Citation

4.  Non-Phlx Amex options are defined, as of the close of trading on September 10, 2001, as (a) equity options trading only on the Amex, (b) equity options traded on the Amex and another options exchange, but not the Phlx, and (c) index options traded only on the Amex.

Back to Citation

5.  For purposes of this proposal, “Exchange customers” means those Phlx and/or Amex members that have represented limit orders in non-Phlx Amex options currently residing on the Exchange's electronic limit order book.

Back to Citation

6.  See Order, note 3, supra. Certain provisions in the agreement between the Phlx and the Amex concerning the Temporary Arrangement, such as limitation of liability, delegation of regulatory and enforcement jurisdiction, payment of transaction fees, and arbitration provisions, will continue to be in effect after the Termination Time.

Back to Citation

7.  Notice of the time period within which Exchange customers may cancel orders for non-Phlx Amex options would be provided prior to opening of trading on the day of the Termination Time as follows: (1) Via email to Exchange customers; (2) via memorandum to be distributed on the Exchange's Options Floor to Phlx members and to Amex TAPs; (3) via electronic message to Exchange customers over the Exchange's Automated Options Market (“AUTOM”) System; and (4) posted on the Exchange's web site. Actual receipt of such notice by Exchange customers shall not be pre-condition to the removal of limit orders are not canceled at of 5:30 p.m. on the day of Termination Time.

Back to Citation

9.  See Order, note 3, supra.

Back to Citation

12.  See Order, note 3 supra.

Back to Citation

13.  In approving the proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

Back to Citation

15.  The Commission notes that this temporary rule does not restrict Phlx's ability to list non-Phlx Amex options at any time. In the Commission's view, the temporary Phlx rule requiring termination of trading of non-Phlx Amex oiptions as of the Termination Time is appropriate in light of the emergency situation that necessitated the temporary listing of these options on the Phlx and, under these circumstances, is consistent with Rule 19c-5 under the Exchange Act. 17 CFR 240.19c-5.

Back to Citation

[FR Doc. 01-24977 Filed 10-4-01; 8:45 am]

BILLING CODE 8010-01-M