E7-25366. Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to $5 Strike Price Intervals of Options on Exchange-Traded Fund Shares above $200

December 21, 2007.

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 December 19, 2007, 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 and II below, which Items have been substantially prepared by the Phlx. The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to section 19(b)(3)(A) of the Act ^[3] and Rule 19b-4(f)(6) thereunder,^[4] which rendered the proposal effective upon filing with the Commission. 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

Phlx proposes to amend Commentary .05 to Exchange Rule 1012 (“Series of Options Open for Trading”) to clarify that strike price intervals of options on Exchange-Traded Fund Shares (“ETFs”) will be $5 or greater where the strike price is over $200.^[5]

The text of the proposed rule change is available at the Phlx, the Commission's Public Reference Room, and http://www.phlx.com.

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.

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 clarify that strike price intervals of options on ETFs will be $5 or greater where the strike price is over $200. Commentary .05 to Phlx Rule 1012 currently states that strike price intervals of options on ETFs will be $1 or greater when the strike price of the underlying asset is $200 or less. As such, most ETF options, which have become popular investment tools, are priced at $1 strike price intervals.^[6] However, some ETF options are listed at $10 strike price intervals at strike prices greater than $200.^[7] According to the Exchange, within the last few months, the Phlx has received requests from Phlx traders to price ETF options at $5 strike price intervals above $200. Because the Exchange does not currently have a provision that allows ETF options to list and trade at $5 or greater strike price intervals where the strike price is more than $200, however, the Exchange has only been able to list these ETF options at $10 or greater strike price intervals.^[8] This has put Phlx at a competitive disadvantage, particularly with respect to options exchanges that allow $5 strike price intervals for ETF options.^[9]

The Exchange believes that the rule proposal to clarify the availability of $5 strike price intervals for ETF options above $200 should enable Phlx to competitively list and trade ETF options at appropriate strike price intervals to the benefit of public customers, traders on the Exchange, and the Exchange itself.

2. Statutory Basis [?USGPO Galley End:?]

The Exchange believes that its proposal is consistent with section 6(b) of the Act ^[10] in general, and furthers the objectives of section 6(b)(5) of the Act ^[11] in particular, in that it is designed to promote just and equitable principles of trade, 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 Exchange believes that the proposal would achieve this by allowing listing and trading of options on ETFs at $5 strike price intervals within certain parameters, commensurate with the rules of other options exchanges.

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 that is not necessary or appropriate in furtherance of the purposes of the Act.

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 by the Exchange.

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

The proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act ^[12] and Rule 19b-4(f)(6) thereunder,^[13] because the foregoing proposed rule does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from 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. As required under Rule 19b-4(f)(6)(iii) under the Act,^[14] Phlx provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, prior to the date of the filing of the proposed rule change.

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 furtherance of the purposes of the Act.^[15]

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. Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's Internet comment form (http://www.sec.gov/​rules/​sro.shtml); or
• Send an e-mail to [e-mail]. Please include File Number SR-Phlx-2007-93 on the subject line.

Paper Comments

• Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2007-93. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/​rules/​sro.shtml). 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2007-93 and should be submitted on or before January 22, 2008.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.^[16]

Nancy M. Morris,

Secretary.

Footnotes

1.  15 U.S.C. 78s(b)(1).

2.  17 CFR 240.19b-4.

3.  15 U.S.C. 78s(b)(3)(A).

4.  17 CFR 240.19b-4(f)(6).

5.  Strike price intervals for series of options on ETFs were initially established at $1 or greater where the strike price is $200 or less. See Securities Exchange Act Release No. 44055 (March 8, 2001), 66 FR 15310 (March 16, 2001) (SR-Phlx-2001-32) (filing silent regarding strike price intervals where the strike price is over $200).

6.  The proposal establishing strike price intervals for series of options on ETFs at $1 or greater where the strike price is $200 or less did not discuss strike price intervals where the strike price is over $200. See Securities Exchange Act Release No. 44055 (March 8, 2001), 66 FR 15310 (March 16, 2001)(SR-Phlx-2001-32).

7.  For example, ETF options trading under the symbols ILF, FXI, MDY, and EEM are all listed at strike prices greater than $200.

8.  Commentary .05(a) to Phlx Rule 1012 states, among other things, that strike prices of options may be $2.50 or greater where the strike price is $25 or less, $5 or greater where the strike price is more than $25 but less than $200, and $10 or greater where the strike price is $200 or more.

9.  See, e.g., Amex Rule 903 stating that options on ETFs may trade at $5 strike price intervals where the strike price is over $200. See Securities Exchange Act Release Nos. 40157 (July 1, 1998), 63 FR 37426 (July 10, 1998) (SR-AMEX-1996-44) and 48024 (June 12, 2003), 68 FR 36617 (June 18, 2003) (SR-AMEX-2003-36). Supplementary Material .01 to Chapter IV, Sec. 6 of BOX rules similarly allows listing and trading of ETF options at $5 strike price intervals where the strike price is over $200.

10.  15 U.S.C. 78f(b).

11.  15 U.S.C. 78f(b)(5).

12.  15 U.S.C. 78s(b)(3)(A).

13.  17 CFR 240.19b-4(f)(6).

14.  17 CFR 240.19b-4(f)(6)(iii).

15.  See 15 U.S.C. 78s(b)(3)(C).

16.  17 CFR 200.30-3(a)(12).