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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Clarifying the Applicability of Phlx Rule 606 to Tethered Communication Devices

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Start Preamble February 13, 2002.

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 December 20, 2001, 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 Phlx. The Phlx submitted an amendment to the proposed rule change on February 7, 2002.[3] The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

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

The Phlx proposes to add new Supplementary Material .03 to Phlx Rule 606 (Wire and Other Connections, Communications and Equipment) to clarify that the rule and relevant policies apply to users of all communication and other electronic devices on the floors of the Exchange, including, but not limited to, tethered [4] as well as, wireless, wired, voice, and Start Printed Page 8054data devices. The proposed amendment to Phlx Rule 606 is proposed in conjunction with the Exchange's installation of tether connections and imposition of initial and monthly fees on the users of such tethers, namely registered options traders and floor brokers (but not specialists) on the options trading floor.[5]

The proposed rule change is set forth below. Additions are in italics.

Rule 606. Wire and Other Connections Rule Communications and Equipment

(a) No member or member organization shall establish or maintain any private wire connection, private radio, television or wireless system, between the Exchange Trading Floor and a non-member without application to and approval by the Committee.

* * * * *

Supplementary Material:

* * * * *

.03 This rule and any relevant Exchange policy are intended to apply to all communication and other electronic devices on the floor of the Exchange, including, but not limited to, wireless, wired, tethered, voice, and data.

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

1. Purpose

Due to increases in bandwidth demands and the use of applications by traders, namely on the options floor, that are not designed to effectively operate on the Exchange's shared wireless network, the Exchange installed tether connections on its options floor. As a result, traders have a choice of how they access the Exchange's local area network (“LAN”) in order to receive and transmit non-trading data through hardwired tether connections or wireless connections. The Exchange believes that traders should be subject to consistent rules and disciplinary processes regardless of what type of access to the LAN or communication device they choose. Accordingly, the Exchange proposes to add new Supplementary Material .03 to its Rule 606 (Communications and Equipment) to clarify that the rule and relevant policies apply to users of all communication and other electronic devices on the floors of the Exchange, including, but not limited to, tethered as well as wireless, wired, voice, and data devices.

2. Statutory Basis

The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act [6] in general, and furthers the objectives of Section 6(b)(5) [7] in particular, in that it is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and protect investors and the public interest by clarifying the applicability of the Exchange rules, and the disciplinary process thereunder, to member users of tethered communication devices on the options floor.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change, as amended, 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. 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 time as the Commission may designate,[8] provided that the Exchange has given the Commission written notice of its intention to file the proposed rule change at least five days prior to the date of filing, or such shorter time as designated by the Commission,[9] it has become effective pursuant to Section 19(b)(3)(A) of the Act [10] and Rule 19b-4(f)(6) [11] thereunder. At any time within 60 days of the filing of Amendment No. 1 to 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.

The Commission believes that it is consistent with the protection of investors and the public interest and therefore finds good cause to waive the 5 day pre-filing requirement and to designate the proposal to become immediately operative upon filing. Waiver of the 5 day requirement and acceleration of the operative date will further clarify without undue delay the applicability of Phlx Rule 606 to various types of communications devices, including those connected via tethers. For these reasons, the Commission finds good cause to waive the 5 day pre-filing requirement and to designate that the proposal become operative immediately upon filing.[12]

II. 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 Start Printed Page 8055Room. Copies of such filing will also be available for inspection and copying at the principal office of the Phlx. All submissions should refer to File No. SR-Phlx-2001-109 and should be submitted by March 14, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[13]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See letter from Jurij Trypupenko, Esquire, Phlx, to Sharon M. Lawson, Senior Special Counsel, Division of Market Regulation, Commission, dated February 6, 2002 (“Amendment No. 1”). Amendment No. 1 deletes the second sentence of proposed Supplementary Material .03 to Phlx Rule 606.

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4.  A tether is a hardwire connection to an existing Exchange communication network. It augments the current wireless network on the options floor and allows users to connect their handheld devices to the existing Exchange communication network and thereby interface with member firm communication networks.

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5.  See Securities Exchange Act Release No. 44963 (October 19, 2001), 66 FR 64317 (October 26, 2001) (SR-Phlx-2001-84). Footnote 6 notes that the restrictions of Exchange Rule 606 and any other rules applicable to communications apply to all communications via tethers, and that the Exchange intends to propose a clarifying amendment to Rule 606.

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8.  The Exchange requested the Commission to waive the 30 day operative period.

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9.  The Exchange requested, and the Commission agreed, to waive the five day pre-filing requirement

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12.  For purposes only of accelerating the operative date of this proposal, 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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[FR Doc. 02-4169 Filed 2-20-02; 8:45 am]

BILLING CODE 8010-01-P