

[Federal Register: April 25, 2006 (Volume 71, Number 79)]
[Notices]               
[Page 23977-23978]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25ap06-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53673; File No. SR-Phlx-2005-80]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Granting Accelerated Approval to a Proposed Rule Change and 
Amendment No. 1 Thereto Relating to the Automated Delivery and Handling 
of Stop and Stop-Limit Orders

April 18, 2006.

I. Introduction

    On December 15, 2005, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') pursuant to section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder,\2\ the proposed rule change relating to the automated 
delivery and handling of stop and stop-limit orders. On March 6, 2006, 
Phlx filed Amendment No. 1 to the proposed rule change with the 
Commission.\3\ The proposed rule change, as amended, was published for 
comment in the Federal Register on March 27, 2006.\4\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change, as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1, which replaced the original filing in its 
entirety, added clarifying language to the description of the 
proposed rule change and adopted a definition of ``agency order'' in 
Phlx Rule 1080(b)(i)(A).
    \4\ See Securities Exchange Act Release No. 53514 (March 17, 
2006), 71 FR 15240 (March 27, 2006).
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II. Description of the Proposal

    The Phlx proposed to amend Phlx Rules 1066(c)(1) and 1080(b)(i)(A) 
and (C), and to delete Options Floor Procedure Advices (``OFPAs'') A-5 
and A-6, to permit customer and off-floor broker-dealer stop \5\ and 
stop-limit \6\ orders in options to be delivered via the Exchange's 
Automated Options Market (``AUTOM'') System \7\ and to be handled 
electronically. The Exchange also proposed to amend Phlx Rule 
1080(b)(i)(A) to include the definition of ``agency order'' in the rule 
and to delete certain provisions in the Exchange's rules that were 
either redundant or no longer practical.
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    \5\ A stop order is a contingency order to buy or sell when the 
market for a particular option contract reaches a specified price. A 
stop order to buy becomes a market order when the option contract 
trades or is bid at or above the stop price. A stop order to sell 
becomes a market order when the option contract trades or is offered 
at or below the stop price. See Phlx Rule 1066(c)(1).
    \6\ A stop-limit order is a contingency order to buy or sell at 
a limited price when the market for a particular option contract 
reaches a specified price. A stop limit order to buy becomes a limit 
order executable at the limit price or better when the option 
contract trades or is bid at or above the stop-limit price. A stop 
limit order to sell becomes a limit order executable at the limit 
price or better when the option contract trades or is offered at or 
below the stop limit price. See id.
    \7\ See Phlx Rule 1080.
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III. Discussion

    The Commission has reviewed the proposed rule change, as amended, 
and finds that it is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\8\ In particular, the Commission finds the

[[Page 23978]]

proposed rule change, as amended, is consistent with section 6(b)(5) of 
the Act \9\ which, among other things, requires that the rules of a 
national securities exchange be designed to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating securities transactions, to remove 
impediments to perfect the mechanism of a free and open market and a 
national market system and, in general, to protect investors and the 
public interest.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The proposal is intended to increase the number of orders handled 
electronically and establish rules that permit the electronic delivery 
and handling of stop and stop-limit orders via the Exchange's AUTOM 
System. The Commission notes that increasing the number of orders 
handled electronically should increase the efficiency and accuracy of 
the handling of such orders. In addition, the proposal is substantially 
similar to a rule currently in effect on the International Securities 
Exchange, Inc.\10\
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    \10\ See Securities Exchange Act Release No. 48811 (November 20, 
2003), 68 FR 66909 (November 28, 2003).
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    The Exchange requests accelerated approval of the proposal to 
permit implementation of the functionality for stop and stop-limit 
orders in AUTOM as soon as possible. Therefore, the Exchange requests 
that the Commission find good cause for approving the proposal, as 
amended, prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register.
    The Commission notes that the proposal and Amendment No. 1 were 
noticed for the full 21-day comment period, and the Commission received 
no comments regarding the proposal, as amended. As discussed more fully 
above, the Commission believes that the proposed rule change should 
permit the Exchange to handle stop orders and stop limit orders more 
efficiently. Accordingly, the Commission finds good cause pursuant to 
section 19(b)(2) of the Act \11\ to approve the proposed rule change, 
as amended, prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register.
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    \11\ 15 U.S.C. 78s(b)(2).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\12\ that the proposed rule change (File No. SR-Phlx-2005-80), as 
amended, be and hereby is, approved on an accelerated basis.
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
Nancy M. Morris,
Secretary.
[FR Doc. E6-6147 Filed 4-24-06; 8:45 am]

BILLING CODE 8010-01-P
