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Self-Regulatory Organizations; Order Approving a Proposed Rule Change and Amendment No. 1 Thereto by the Philadelphia Stock Exchange, Inc. Proposing To Amend Phlx Rule 201A(b), Alternate Specialist Assignment

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Start Preamble December 20, 2002.

I. Introduction

On February 11, 2002, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “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 to amend Phlx Rule 201A(b), Alternate Specialist Assignment, to delete restrictions on members, member organizations and persons affiliated with member organizations from acting as an alternate specialist while that member, member organization or person affiliated with member organization is either a specialist in the options overlying the equity issue or a Registered Options Trader (“ROT”) with an assignment in the overlying options. The Exchange filed Amendment No. 1 to the proposed rule change on September 10, 2002.[3] The proposed rule change, as amended, was published for comment in the Federal Register on November 7, 2002.[4] The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change, as amended.

After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.[5] In particular, the Commission finds that the proposed rule change to eliminate the restriction on an alternate specialist being affiliated with a specialist or ROT in the overlying option is consistent with Section 6(b)(5) of the Act,[6] which requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market.

The Exchange's rules do not restrict a Phlx primary equity specialist from being affiliated with a specialist or ROT trade in the overlying option. The Commission does not believe that such a restriction is necessary for alternate specialists. The Commission also believes that the potential for manipulative or other improper trading activity is minimized by the physical separation of the Exchange's options and equity trading floors. Further, the Commission notes that the Exchange's Market Surveillance and Examinations Departments will continue to monitor and surveil for improper trading activity. Start Printed Page 79222

II. Conclusion

For the foregoing reasons, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and rules and regulations thereunder.

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[7] that the proposed rule change (SR-Phlx-2002-11), as amended, is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  On September 10, 2002, the Exchange filed a Form 19b-4, which replaced the original filing in its entirety (“Amendment No. 1”).

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4.  See Securities Exchange Act Release No. 46758 (October 31, 2002), 67 FR 67885.

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5.  In approving this proposed rule change, 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. 02-32793 Filed 12-26-02; 8:45 am]

BILLING CODE 8010-01-P