Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Use of Wireless and Radio Frequency Communications and the Prevention of Related Interference

[Federal Register Volume 64, Number 105 (Wednesday, June 2, 1999)]
[Notices]
[Pages 29726-29727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13928]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41451; File No. SR-PHLX-99-15]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Use of Wireless and Radio Frequency 
Communications and the Prevention of Related Interference

May 25, 1999.
    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 May 11, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx'' of 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items, I, II, and III below, which Items have been prepared by the 
Exchange.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The proposal was initially submitted on May 7, 1999. 
Amendment No. 1, correcting the numbering of proposed subparagraph 
``(c)'' to ``9d),'' was filed with the Commission on May 11, 1999. 
See Letter from John Dayton, Counsel, Phlx, to Michael A. Walinskas, 
Associate Director, Division of Market Regulation, SEC (May 11, 
1999).
---------------------------------------------------------------------------

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

    Phlx proposes to adopt a policy and rule regarding the use of 
wireless and radio frequency (``RF'') communications and the prevention 
of related interference at Phlx. Specifically, proposed Rule 606(b)(2) 
would state that no member, member organization or person associated 
with a member organization shall (i) establish or maintain any 
telephonic, electronic or wireless transmitting system or device, 
including related antennas, on the Options Floor or (ii) operate any 
other equipment on the Options Floor that creates RF or other 
interference with the systems of the Exchange or other members.\4\ 
Proposed rule 606(c) would state that the Exchange may remove any 
telephonic, electronic or wireless equipment that violates Rule 
606(b)(2) from any Exchange facility.
---------------------------------------------------------------------------

    \4\ The Phlx also has filed a proposed rule change to adopt Rule 
606(b)(1) and Supplementary Material .02 and add language to Rule 
606(c) respecting wireless telephone access. See Securities Exchange 
Act Release No. 41450 (May 25, 1999) (SR-PHLX-99-14).
---------------------------------------------------------------------------

    Below is the text of the proposed rule change. Proposed additions 
are in italics and deletions are in brackets.
Rule 606. [Connection with Non-members] 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 nonmember without 
application to and approval by the Committee.
    Every such means of communication shall be registered with the 
Committee. Notice of the discontinuance of any such means of 
communication shall be promptly given to the Committee.
    (b)
* * * * *
    (2) No member, member organization or person associated with a 
member organization shall:
    (i) establish or maintain any telephonic, electronic or wireless 
transmitting system or device, including related antennas, on the 
Options Floor or
    (ii) operate any other equipment on the Options Floor that creates 
radio frequency (RF) or other interference with the systems of the 
Exchange or other members.
    (c) The Exchange may remove any telephonic, electronic or wireless 
equipment that violates subsection (b)(2) from any Exchange facility.
Supplementary Material:
    .01  Specialists on the Exchange's equity floor shall permit each 
NASDAQ System market maker telephone access to the specialist post in 
any NASDAQ/NMS Security for which the latter is the assigned 
specialist.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    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 IV below. 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
    The purpose of the proposed rule change is to adopt a policy and a 
rule concerning wireless and RF interference emanating from member 
systems on the (index/equity) Options Floor. The Financial Automation 
Department (``FA'') of the Exchange has determined that certain 
member's wireless and RF equipment operating on the Options Floor is 
causing interference with other member and Exchange systems. The 
uncoordinated use of RF and other wireless equipment on the trading 
floor creates an unmanageable environment for both the Exchange and the 
members.
    The proposed policy and rule will prohibit any member, member 
organization or person from establishing, maintaining or operating any 
telephonic, electronic or wireless transmitting system or device, 
including related antennas on the Option Floor that create RF or other 
interference with the systems of the Exchange or other members. In 
addition to the normal disciplinary proceedings that accompany 
violation of an Exchange rule, the proposed rule will allow the 
Exchange to remove any telephonic, electronic or wireless equipment 
that causes such interference. The proposed policy will be included in 
a memorandum that will be distributed to all Option Floor members.
    FA has employed a wireless industry consultant to investigate the 
current situation and environment on the entire trading floor. 
Following this effort, FA intends to issue a comprehensive plan which 
will manage the finite RF and wireless availability on the trading 
floor. However, at this time, FA is concerned about potential, existing 
interference. This proposed policy and rule will address this issue by 
explicitly prohibiting equipment that creates interference and allow 
the Exchange to immediately act to curtail it.
2. Statutory Basis
    Phlx believes that the proposed rule change is consistent with 
Section 6 \5\ of the Act in general and furthers the objectives of 
Section 6(b)(5) \6\ in particular, because it removes

[[Page 29727]]

impediments to and perfects the mechanism of a free and open market and 
protects investors and the public interest by prohibiting wireless and 
RF interference and allowing the Exchange to manage wireless and RF 
transmissions on the floor of the Exchange.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) thereunder \8\ 
because the proposed rule change (1) does not significantly affect the 
protection of investors or the public interest; (2) does not impose any 
significant burden on competition; (3) does not become operative for 30 
days from the date of filing, or such shorter time that the Commission 
may designate if consistent with the protection of investors and the 
public interest; and (4) Phlx provided the Commission with written 
notice of its intent to file the proposed rule change at least five 
business days prior to the filing date. At any time within 60 days of 
the filing of 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 the furtherance of the 
purposes of the Act.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In reviewing this proposal, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The Exchange has requested that the rule change be accelerated to 
become operative immediately, in order to address existing interference 
issues. According to the Exchange, the uncoordinated use of RF 
communications and other wireless equipment on the trading floor 
creates an unmanageable environment for both the Exchange and the 
members. Because the proposed policy helps to remove these impediments 
to and perfect the mechanism of a free and open market by making more 
efficient the process by which members receive and execute orders on 
the floor of the Exchange,\9\ the Commission finds that accelerating 
the operative date of the rule change is consistent with the protection 
of investors and the public interest, and thus designates May 25, 1999, 
the date of this notice, as the operative date of this filing.
---------------------------------------------------------------------------

    \9\ C.f., Securities Exchange Act Release No. 40019 (May 21, 
1998), 63 FR 29272 (May 28, 1998) (allowing the American Stock 
Exchange, LLC, to immediately terminate a member's ability to send 
wireless communications for failure to comply with the Wireless 
Communications Policy).
---------------------------------------------------------------------------

IV. 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 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 at the 
Commission's Public Reference Room. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Phlx. All submissions should refer to File No. SR-PHLX-99-15 and should 
be submitted by June 23, 1999.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-13928 Filed 6-1-99; 8:45 am]
BILLING CODE 8010-01-M