Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Phlx proposes new Rule 513, Voluntary Resignation of Options Privileges, which provides that when an option specialist unit voluntarily resigns from trading privileges in an option in the best interest of the Exchange, the option specialist unit which last traded that option will be given preference in any future allocation decision regarding that option, barring any performance or disciplinary issues. The text of the proposed rule is as follows:
Rule 513. (a) If an option specialist unit voluntarily resigns from registration in a particular option and the Committee determines such resignation to be in the best interest of the Exchange, and that option is subsequently delisted, barring any specialist performance or disciplinary issues, the option specialist unit which last traded that option will be given preference in any future allocation decision regarding that option.
(b) The preference set forth in Section (a) of this rule shall be in effect for a period of one year from the date of resignation from trading privileges by the specialist unit.
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 III below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
Currently, the Exchange and the Options Price Reporting Authority (“OPRA”) have serious concerns regarding mitigation of quote traffic and maximizing computer capacity. To address those concerns, proposed Rule 513 is intended to provide incentive for options specialists to create more computer capacity by resigning from relatively low volume/high quote traffic options. To provide that incentive, proposed Rule 513 states that the specialist unit which last traded that option will be given preference in any future allocation decision regarding that option.
Mitigation of excessive quote traffic and concomitant preservation of computer capacity is currently an industry-wide concern, and the Exchange believes that a preference provision such as the one contemplated
The rule does not provide an absolute guarantee that the specialist unit that last traded the option will be allocated the option in the event that it is certified and resolicited to the Exchange's options specialist units. All options specialist units will be allowed to apply for trading privileges in relisted options, and all applications will be considered by the Exchange's Allocation, Evaluation and Securities Committee (“Committee”).
In approving Rule 513 for filing with the Commission, the Exchange's Board of Governors has determined that specialist units would be more willing to resign from trading privileges in options in order to mitigate quote traffic and to conserve computer capacity on the Exchange, if they are given some form of preference in the event that the options from which they have resigned in the best interest of the Exchange are to be relisted on the Exchange in the future.
Over time, material changes in the composition, personnel, capitalization, and other aspects of specialist units which resign from option trading privileges may occur, which would affect the Committee's decisions regarding future allocations to those specialist units. For this reason, the proposed rule limits the Committee's preference in such future allocations to one year.
Phlx believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
Phlx does not believe that the proposed rule change will result in any burden on competition.
Phlx has neither solicited nor received written comments on the proposed rule change.
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. 20549–0609. 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 the Phlx. All submissions should refer to File No. SR–Phlx–00–06 and should be submitted by June 5, 2000.
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 and, in particular, with the requirements of Section 6(b).
The Commission has previously note that the aggregate message traffic generated by the options exchanges is rapidly approaching the outside limit of OPRA's systems capacity.
Pursuant to Section 19(b)(2),
It Is Therefore Ordered, pursuant to Section 19(b)(2)
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.