[Federal Register Volume 64, Number 15 (Monday, January 25, 1999)]
[Notices]
[Pages 3734-3735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1606]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40953; File No. SR-Phlx-99-01]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. to Modify Existing Rules Relating to Trading of the New
European Currency, the Euro
January 15, 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 January 6, 1999, the Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The Phlx proposes to change the references to the European Currency
Unit (``ECU'') to the New European currency (``Euro'') in the Phlx
rules in response to the European Council's decision to convert the ECU
to the Euro on a one-to-one basis as of January 1, 1999.
The text of the proposed rule change is available at the Office of
the Secretary, the Phlx, and at the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
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.
[[Page 3735]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On May 11, 1998, the Exchange re-introduced the ECU for trading in
the non-customized environment anticipating the advent of the Euro.\3\
Subsequently, the European Council agreed in the Maastrict Treaty to
have a single European currency, the Euro. On January 1, 1999, the ECU
converted to the Euro on a one-to-one basis. Accordingly, Phlx foreign
currency options (``FCO'') contracts on the ECU converted to the Euro
pursuant to Phlx Rule 1009(c).\4\ Phlx Rule 1009(c) states, in the
event that any of the sovereign governments of the European Economic
Community's European Monetary System issuing any of the above mentioned
currencies should issue a new currency intended to replace the one of
the above mentioned currencies as a standard unit of the official
medium of exchange of such government. Such new currency also may be
approved as an underlying currency for options transactions by the
Exchange, subject to any approval criteria the Exchange may deem
necessary or appropriate for the protection of investors.
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\3\ See Securities Exchange Act Release No. 39940 (April 30,
1998) 63 FR 25258 (May 7, 1998) (File No. SR-Phlx-98-17).
\4\ The Commission notes that it was consulted by the Phlx prior
to the conversion of the ECU to the Euro. On these facts, the
Commission believes that the Euro replaces the previously approved
ECU as the standard unit of the official medium of exchange of the
European Council as required by Phlx Rule 1009(c). On different
facts, however, the Exchange may need to submit a filing to the
Commission, pursuant to Section 19(b)(2) of the Act, prior to
trading an option on a new foreign currency intended to replace an
existing foreign currency option.
Pursuant to Phlx Rule 1009(c), the Exchange believes that it is
necessary and appropriate for investors that the Exchange recognize the
conversion of the ECU to the Euro on a one-to-one basis and implement
such changes to its FCO contracts, including options trading pursuant
to Phlx Rule 1069. Because the ECU/Euro conversion was on a one-to-one
basis, the Euro FCO contract size would be 62,500 Euros. The premium
will be $.0044, per unit or $275 for an option contract having a unit
of trading of 62,500, pursuant to Phlx Rule 1033. Pursuant to Rule
1014, the bid-ask differential for the Euro options will be $.0005
between the bid and the offer for each option contract for which the
bid is $.0050 or less; no more than $.0010 where the bid is more than
$.0050 but does not exceed $.0200; and no more than $.0015 where the
bid is more than $.0200. The initial margin for the Euro would be 3%,
the same margin as the ECU.\5\ According to Phlx Rule 1034, the minimum
trading increments for the Euro will be the same as the ECU, $.0001.
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\5\ The Exchange submitted to the Commission a correlation
analysis between the ECU and the Euro, which demonstrated nearly a
one-to-one correlation. Thus, the Exchange proposes not to change
the customer margin level for the Euro at this time. Subject to Phlx
Rule 722, Commentary .15, the Exchange will re-examine the margin
levels for the Euro on January 15, 1999.
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As a result of the conversion, the Exchange proposes to replace all
references to the ECU with the Euro in the text of the various Phlx
rules. Therefore, the Phlx is proposing to amend the text of Phlx Rules
1000(b)(15), 1009, 1014, 1033, 1034 and Options Floor Procedure Advice
F-6 to reflect the proposed change.
2. Statutory Basis
The Phlx believes the proposed rule change is consistent with the
requirements of Section 6(b)(5) of the Act \6\ that an exchange have
rules that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest. Specifically, the Phlx notes that the conversion of
the ECU to the Euro was a major event in world financial markets. This
conversion was adopted by the Exchange in order to provide investors
with a continuous, uninterrupted market to hedge their currency risk
using options on the Euro.
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\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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 solicited or received at the time of this
filing.
III. Date of Effectiveness of the Proposed Rule Change and Timing
for Commission Action
The foregoing rule change constitutes a stated policy, practice, or
interpretation with respect to the meaning, administration, or
enforcement of an existing rule of the Exchange and therefore, has
become effective pursuant to Section 19(b)(3)(A)(i) of the Act,\7\ and
subparagraph (e) of Rule 19b-4 thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A)(i).
\8\ 17 CFR 240.19b-4.
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At any time within 60 days of the filing of such 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 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, 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. 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-99-01 and should
be submitted by February 16, 1999.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-1606 Filed 1-22-99; 8:45 am]
BILLING CODE 8010-01-M
