Self Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc., Relating to an Increase in the Maximum Size of Options Orders Eligible for Delivery Through the Automated Options Market System

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder, notice is hereby given that on July 10, 2000, 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 Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The Phlx proposes to change the text of Phlx Rule 1080(b)(ii) to reflect an increase in the maximum order size for the delivery of option orders through its Automated Options Market (“AUTOM”) System. Currently, orders up to 500 contracts are permissible for delivery through AUTOM. The Exchange is proposing to increase the maximum order size to 1,000 contracts.

II. Self-Regulatory Organization's Statements Regarding the Purpose of, and the 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

AUTOM is the Exchange's electronic order routing, delivery, execution and reporting system for equity and index options. Orders are routed from member firms directly to the appropriate specialist on the Exchange's trading floor. AUTOM orders of 50 contracts or fewer are currently eligible for AUTO-X, the automatic execution feature of AUTOM. These AUTO-X orders are executed automatically at the disseminated quotation price on the Exchange and reported to the originating firm. Those orders that are not eligible for AUTO-X are handled manually by the specialist. The current proposal does not affect AUTO-X order size eligibility.

The Exchange proposes to increase the maximum eligible size of AUTOM orders from 500 to 1,000 contracts. This change is intended to extend the use of the AUTOM system to larger sized orders, which would provide more efficient order handling and processing for those orders. The Exchange notes that the maximum AUTOM order size has remained the same since 1995, when it increased from 100 to 500 contracts.

In light of the Phlx's experience with AUTOM over the past five years, during which the maximum AUTOM order size has been 500 contracts, the Exchange believes that it is appropriate, at this time, to increase the maximum size of the option orders eligible for routing and delivery through AUTOM to 1,000 contracts. The Phlx states that the AUTOM system has the capacity to operate with a maximum order size of 1,000 contracts without adversely affecting the functioning of AUTOM and AUTO-X.

2. Statutory Basis

The Phlx believes that the proposal is consistent with Section 6(b)(5) of the Act in that it is designed to promote just and equitable principles of trade and to prevent fraudulent and manipulative acts and practices, as well as to protect investors and the public interest by extending the benefits of AUTOM, including prompt and efficient order handling, to orders for up to 1,000 contracts. The Phlx believes that the proposal should also further increase efficiency through automation from order delivery to execution to reporting, as these orders may currently be delivered by floor brokers. 15 U.S.C. 78f(b)(5)

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

The Phlx does not believe that the proposed rule change 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

The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(b)(f)(6) thereunder 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) by its terms, does not become operative until 30 days after the date on which it was filed or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; and (4) the Phlx has provided the Commission with written notice of its intent to file the proposed rule change at least five days prior to the filing date. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate this rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing. 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 will also be available for inspection and copying at the principal office of the Phlx. All submissions should refer to File No. SR-PHLX-00-35 and should be submitted by September 7, 2000.