95-29687. Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 to Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Uniform Listing and Trading Guidelines for Narrow-based Stock Index ...  

  • [Federal Register Volume 60, Number 234 (Wednesday, December 6, 1995)]
    [Notices]
    [Pages 62521-62522]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-29687]
    
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    [Release No. 34-36524; File No. SR-Phlx-95-76]
    
    
    Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
    Change and Amendment No. 1 to Proposed Rule Change by the Philadelphia 
    Stock Exchange, Inc. Relating to Uniform Listing and Trading Guidelines 
    for Narrow-based Stock Index Warrants
    
    November 29, 1995.
        Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
    October 27, 1995, 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 self-regulatory 
    organization. On November 22, 1995, the Phlx submitted Amendment No. 1 
    (``Amendment No. 1'') to the proposal to establish a maintenance 
    requirement with respect to the minimum number of securities that must 
    comprise an index underlying a warrant issuance, to clarify issues 
    relating to settlement values for both narrow-based and broad-based 
    index warrants, and to amend certain position limit levels applicable 
    to narrow-based index warrants.\1\ The Commission is publishing this 
    notice to solicit comments on the proposed rule change and Amendment 
    No. 1 from interested persons.
    
        \1\Letter from Michele R. Weisbaum, Associate General Counsel, 
    Phlx, to Michael Walinskas, SEC, dated November 22, 1995.
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    I. Self-Regulatory Organization's Statement of the Terms of Substance 
    of the Proposed Rule change
    
        The Phlx proposes to amend Exchange Rules 722, 803, 1000A, and 
    1001A to establish uniform listing and trading guidelines applicable to 
    narrow-based stock index warrants. The text of the proposed rule change 
    and Amendment No. 1 thereto is available at the Office of the 
    Secretary, Phlx and at the Commission.
    
    II. Self-Regulatory Organization's Statement of the Purpose of and 
    Statutory Basis for, the Proproposed 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
        In view of the recent approval of the regulatory framework for 
    stock index warrants on broad-based stock indexes,\2\ the Exchange now 
    proposes to establish uniform listing and trading guidelines for 
    warrants based on narrow-based indexes. To accommodate the trading of 
    warrants on narrow-based indexes, the Exchange proposes to modify the 
    recently approved regulatory framework for broad-based index 
    warrants.\3\ Thus, the Exchange proposes to conform the rules 
    applicable to warrants on narrow-based indexes to those applicable to 
    options on narrow-based indexes.
    
        \2\See Securities Exchange Act Release No. 36167 (Aug. 29, 
    1995).
        \3\The Exchange notes that a substantially similar regulatory 
    scheme generally applies to broad-based index options and warrants.
    
    [[Page 62522]]
    
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        The Commission approved the trading of options on narrow-based 
    indexes in 1982 and it approved the trading of stock index warrants in 
    1988.\4\ Because the Commission has experience regulating warrants, the 
    Phlx does not believe that the listing of warrants on narrow-based 
    stock indexes will present any novel regulatory issues and, therefore, 
    should be permitted on the same basis as warrants overlying broad-based 
    indexes.
    
        \4\See Securities Exchange Act Release Nos. 19264 (Nov. 22, 
    1982) and 26152 (Oct. 3, 1988).
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        To conform the trading of warrants on narrow-based indexes to the 
    rules applicable to options on narrow-based indexes, the Exchange 
    proposes that the same margin requirements applicable to short sales of 
    narrow-based index options apply to warrants overlying the same index. 
    In addition, the Exchange proposes to apply a position limit structure 
    similar to that which is applicable to narrow-based index options. 
    Accordingly, the Exchange proposes to establish position limits for 
    narrow-based index warrants at three separate, fixed-tier amounts 
    (4,500,000, 6,750,000, and 9,000,000), the applicable level being 
    determined by the level of index component concentration.\5\ These 
    levels are equivalent to 75% of the position limits currently 
    applicable to narrow-based index options. Because broad-based index 
    warrant position limit levels were established at approximately 75% of 
    the corresponding levels for broad-based index options, the Exchange 
    believes it is appropriate to establish narrow-based index warrant 
    position limits at the corresponding level applicable to narrow-based 
    index options.\6\
    
        \5\See Amendment No. 1.
        \6\The position limit tiers have been established at levels that 
    represent 75% of the levels recently approved by the SEC in 
    connection with a Phlx proposal to increase position limits for 
    narrow-based index options. See Securities Exchange Act Release No. 
    36194 (Sept. 6, 1995). Accordingly, the Exchange proposes that 
    position limits for narrow-based index warrants be set at roughly 
    75% of the 6,000, 9,000 and 12,000 position limit levels.
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        Also consistent with the existing regulatory framework for broad-
    based warrants, the issuer may elect to use closing prices for the 
    securities underlying the index to determine settlement values at all 
    times other than the day on which the final settlement valued is to be 
    determined (``valuation date''), as well as during the two business 
    days preceding valuation date.\7\ Finally, the Exchange represents that 
    it will not list a warrant on an index consisting of fewer than nine 
    stocks unless the SEC separately approves such index for warrant 
    trading. In addition, the Phlx will impose a maintenance standard that 
    requires an index to have at least nine stocks at all times, unless 
    separately approved by the SEC.\8\
    
        \7\See Amendment No. 1. The Commission notes that although the 
    recently approved regulatory framework for broad-based index 
    warrants establishes uniform settlement provisions for all 
    exchanges, the Phlx in this filing proposes to amend Section 
    803(e)(3) to clarify its rule language.
        \8\See Amendment No. 1.
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        In all other respects, the Exchange represents that the rules 
    applicable to the trading of broad-based and narrow-based index options 
    are the same. Accordingly, it proposes that all other rules applicable 
    to broad-based index warrants apply equally to warrants on narrow-based 
    indexes. Finally, the Exchange represents that it will surveil trading 
    in narrow-based index warrants in a similar manner to the surveillance 
    of trading in broad-based index warrants.
        Upon approval of this filing, the Exchange proposes that additional 
    Commission review of a specific narrow-based warrant issuance will be 
    required only for warrants overlying narrow-based indexes that have not 
    previously been approved by the SEC for option or warrant trading. 
    Thus, upon approval of this filing, the Exchange proposes it be 
    permitted to list a warrant on any narrow-based index that the SEC has 
    already approved for option trading.\9\
    
        \9\In order to expedite SEC review of a particular warrant 
    issuance, the Exchange may file for approval of the index underlying 
    the proposed warrants pursuant to the procedures and criteria set 
    forth in Rule 1009A. These criteria establish streamlined procedures 
    for listing options on stock industry groups (i.e., narrow-based). 
    Accordingly, the Exchange proposes that the same criteria apply to 
    subsequent proposals to establish narrow-based indexes which 
    underlie proposed warrant issuances.
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    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 in that it is designed to prevent 
    fraudulent and manipulative acts and practices and to promote just and 
    equitable principles of trade, and is not designed to permit unfair 
    discrimination between customers, issuers, brokers and dealers.
    
    B. Self-Regulatory Organization's Statement on Burden on Competition
    
        The Exchange believes the proposed rule change will reduce or 
    eliminate a burden on competition by allowing the listing of warrants 
    on narrow-based indexes in the same manner as options on narrow-based 
    indexes.
    
    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
    
        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 self-regulatory organization 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 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 will also be available for 
    inspection and copying at the principal office of the Phlx. All 
    submissions should refer to File No. SR-Phlx-95-76 and should be 
    submitted by December 27, 1995.
    
        For the Commission, by the Division of Market Regulation, 
    pursuant to delegated authority.\10\
    
        \10\17 CFR 200.30-3(a)(12) (1994).
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    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 95-29687 Filed 12-5-95; 8:45 am]
    BILLING CODE 8010-01-M
    
    

Document Information

Published:
12/06/1995
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
95-29687
Pages:
62521-62522 (2 pages)
Docket Numbers:
Release No. 34-36524, File No. SR-Phlx-95-76
PDF File:
95-29687.pdf