[Federal Register Volume 60, Number 219 (Tuesday, November 14, 1995)]
[Notices]
[Pages 57257-57259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27992]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36461; File No. SR-Phlx-95-38]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc., Relating to an
Increase in Position and Exercise Limits on the Phlx National Over-the-
Counter Index
November 6, 1995.
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 September 25, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx''
or ``Exchange'') filed with the Securities Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. Sec. 78s (b)(1) (1988).
\2\ 17 CFR 240.19b-4 (1994).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx, pursuant to Rule 19b-4 of the Act, proposes to increase
the
[[Page 57258]]
position \3\ and exercise limits \4\ for options (``XOC'') on its
National Over-the-Counter Index (``Index'') \5\ from 17,000 to 25,000
contracts.
\3\ Position limits impose a ceiling on the aggregate number of
option contracts on the same side of the market that an investor, or
group of investors acting in concert, may hold or write. See Phlx
Rule 100A(a)(ii).
\4\ Exercise limits impose a ceiling on the aggregate long
positions in option contracts that an investor, or group of
investors acting in concert, can or will have exercised within five
consecutive business days. See Phlx Rule 1002A.
\5\ The Index is a capitalization-weighted market index composed
of the 100 largest capitalized stocks trading over-the-counter.
---------------------------------------------------------------------------
The text of the proposed rule change is available at the Phlx and
at the Commission.
I. 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 Exchange 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 raise XOC position
and exercise limits to 25,000 contracts in order to increase liquidity,
which should be enhanced by the ability to hold a higher position. In
addition, the Exchange seeks to remain competitive with broad-based
index option products traded on other exchanges.
Currently, the position limit for XOC options is 17,000 contracts.
In early 1994, the Commission approved a 70% increase to the Phlx's
position limit from 10,000 to 17,000 contracts.\6\ The Exchange notes
that a proposal was recently filed by the Pacific Stock Exchange, Inc.
(``PSE'') to raise the position limit on its Technology Index to 37,500
contracts.\7\ In addition, most market (broad-based) index options have
position limits of at least 25,000 contracts,\8\ with certain products
trading with even higher limits.\9\ Thus, the proposed rule change is
intended to keep the Phlx in line with position limits of index options
traded on other exchanges.
\6\ Securities Exchange Act Release No. 33634 (February 17,
1994), 59 FR 9263 (February 25, 1994) (File No. SR-Phlx -93-07).
This increase corresponded to the listing of options on the Nasdaq
100 Index (``NDX'') on the Chicago Board Options Exchange, Inc.
(``CBOE'') with a position limit of 25,000 contracts.
\7\ See Securities Exchange Act Release No. 36146 (August 23,
1995), 60 FR 45509 (August 31, 1995) (File No. SR-PSE-95-18).
\8\ See, e.g., American Stock Exchange, Inc.'s (``Amex'') EUR-
25,000 contracts, HKO-25,000 contracts, JPN-25,000 contracts; and
CBOE's NDX-25,000 contracts.
\9\ See, e.g., CBOE's SPX-45,000 contracts, RUT-50,000
contracts; Amex's XII-45,000 contracts, XMI-34,000 contracts; New
York Stock Exchange, Inc.'s (``NYSE'') NYA and NNA--45,000 contracts
each.
---------------------------------------------------------------------------
XOC options have been trading on the Exchange since 1985.\10\ The
Index value is currently at 868,\11\ with volume having increased
sharply since 1991, and consistently since 1993.\12\ At the current
position limit, the aggregate dollar value of the maximum permissible
XOC position is approximately $1.5 billion.\13\ With the limit raised
to 25,000 contracts, the aggregate dollar value would be increased to
approximately $2 billion.\14\ The Exchange believes that this compares
with the values of other exchanges' broad-based index options,\15\ as
well as its own.\16\
\10\ Securities Exchange Act Release No. 22044 (May 17, 1985),
50 FR 21532 (May 24, 1985).
\11\ This value was recorded on September 14, 1995.
\12\ XOC volume January-June 1995 was 167,894 contracts,
compared to 158,228 contracts January-June 1993.
\13\ The aggregate dollar value of the maximum position is
calculated by multiplying the Index value by the multiplier by the
position limit as follows: 868 x 100 x 17,000 = $1,475,600,000.
\14\ 868 x 100 x 25,000 = $2,170,000,000.
\15\ These values were recorded on June 27, 1995:
CBOE: OEX 520 x 100 x 25,000 = $1,300,000,000
CBOE: SPX 545 x 100 x 45,000 = $2,452,500,000
CBOE: RUT 281 x 100 x 50,000 = $1,405,000,000
CBOE: NDX 534 x 100 x 25,000 = $1,335,000,000
Amex: XMI 477 x 100 x 34,000 = $1,621,800,000
PSE: WSX 363 x 100 x 37,500 = $1,361,250,000
NYSE: NYA 292 x 100 x 45,000 = $1,314,000,000
\16\ VLE: 518 x 100 x 25,000 = $1,295,000,000.
TPX: 482 x 100 x 25,000 = $1,205,000,000.
---------------------------------------------------------------------------
Recently, the Exchange filed a separate proposed rule change to
conduct a ``two-for-one split'' of the Index, such that the value will
be reduced by one-half.\17\ For example, with the Index at 868, the new
Index value after the split would be 434. At the current position
limit, the aggregate dollar value of the maximum permissible post-split
XOC position would be approximately $700 million.\18\ With the limit
raised to 25,000 contracts, the aggregate dollar value of a post-split
position would be approximately $1 billion.\19\ The Exchange believes
that these post-split values also compare with the values of other
exchanges' broad-based index options,\20\ as well as its own.\21\
\17\ See File No. SR-Phlx-95-61.
\18\ 434 x 100 x 17,000=$737,000,000.
\19\ 434 x 100 x 25,000=$1,085,000,000.
\20\ See supra note 15. The Exchange notes that post-split the
maximum size of the proposed XOC position would be lower than most
other broad-based index options.
\21\ See supra note 16.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act in general and furthers the objectives of
Section 6(b)(5) in particular \22\ in that it is designed to prevent
fraudulent and manipulative acts and practices, and to promote just and
equitable principles of trade, as well as to protect investors and the
public interest.
\22\ 15 U.S.C. Sec. 78f(b)(5) (1988).
---------------------------------------------------------------------------
(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 with respect
to the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the Phlx consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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.
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
[[Page 57259]]
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. Sec. 552, will
be available for inspection and copying at the Commission's Public
Reference Section, 450 Fifth Street, NW., Washington, DC 20549. 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-95-38 and should be submitted by December 5, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\23\
\23\ 17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27992 Filed 11-13-95; 8:45 am]
BILLING CODE 8010-01-M
