[Federal Register Volume 60, Number 28 (Friday, February 10, 1995)]
[Notices]
[Pages 8104-8106]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3327]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35326; File No. SR-Phlx-95-07]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange Relating to the Listing and
Trading of Options on the Phlx USTOP Index
February 3, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 30, 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 Phlx. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
\1\15 U.S.C. 78s(b)(1) (1988).
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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 list and
trade options on the Phlx USTOP 100 Index, a broad-based index
developed by the Phlx and comprised of 100 highly capitalized U.S.
stocks representing a variety of industries (``USTOP 100 Index'' or
``Index''). Exchange Rules 1001A, 1006A and 1101A respecting position
limits, exercise restrictions, trading hours and far term strike prices
respectively will be amended to add references to the USTOP 100 Index.
The test of the proposed rule changes is available at the Office of the
Secretary, Phlx, and at the Commission.
II. Self-Regulatory Organization's Statement of 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 the
Statutory Basis for, the Proposed Rule Change
The Phlx proposes to list for trading European-style options\2\ on
the Index, a broad-based, capitalization-weighted index composed of 100
highly capitalized U.S. common stocks in a variety of industries,
including but not limited to technology, manufacturing and the service
industries. USTOP 100 Index options will be traded pursuant to current
Phlx rules governing the trading of index options.\3\
\2\European-style options can be exercised only during a
specific time period prior to expiration of the options.
\3\See Phlx Rules 1000A through 1103A, and 1000 through 1070.
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The Phlx represents that the Index includes some of the largest and
most widely-held U.S. common stocks. As of January 23, 1995, the Phlx
represents that the market capitalization of the individual stocks in
the Index ranged from a high of $86 billion to a low of $7.6 billion.
The market capitalization of all of the stocks in the Index was
approximately $2 trillion. As of that same date, no one stock accounted
for more than 4.17% of the Index's total value and the percentage
weighting of the five largest issues in the Index accounted for 17.28%
of the Index's value. The percentage weighting of the lowest weighted
stock was 0.37% of the Index's value.
The formula for calculating the value of the Index is as
follows:\4\
\4\The formula for calculating the value of the Index is the
same as that previously approved by the Commission for calculating
the value of the Phlx Big Cap Index. See Securities and Exchange Act
Release No. 33973 (April 28, 1994), 59 FR 23245 (May 5, 1994).
Telephone conversation between Michele Weisbaum, Associate General
Counsel, Phlx, and Brad Ritter, Senior Counsel, Office of Market
Supervision, Division of Market Regulation, Commission, on February
2, 1995.
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[GRAPHIC][TIFF OMITTED]TN10FE95.000
Where:
MVn=Price x Shares outstanding for each component of the Index
Divisor=Number calculated to achieve a base value of 370 for the Index
as of the close of trading on December 14, 1994.
In order to maintain continuity in the value of the Index, the
index divisor will be adjusted for changes in capitalization of any of
the component issues resulting from, among other things, mergers,
acquisitions, delistings, and substitutions. As the close of trading on
January 27, 1995, the Index Value was 383.81.
The Index value will be updated dynamically at least once every 15
seconds during the trading day. The Phlx has retained Bridge Data, Inc.
to compute the value of the Index. Pursuant to Phlx Rule 1100A, updated
Index values will be disseminated and displayed by means of primary
market prints reported by the Consolidated Tape Association and over
the facilities of the Options Price Reporting Authority. The Index
value will also be available on broker/dealer interrogation devices to
subscribers of the option information.
In accordance with Phlx Rule 1009A, if any change in the nature of
any stock in the Index occurs as a result of delisting, merger,
acquisition or otherwise, the Exchange will take appropriate steps to
delete that stock from the Index and replace it with another stock
which the Exchange believes would be compatible with the intended
market character of the Index. In making replacement determinations,
the Exchange will also take into account [[Page 8105]] the
capitalization, liquidity, and volatility of a particular stock.
The Exchange represents that all of the stocks comprising the Index
currently are options eligible\5\ and have standardized options listed
on them. If at any time, less than 90% of the components in the Index,
by weight, are options eligible, the Exchange will submit a Rule 19b-4
filing for Commission approval before opening any new series of options
on the Index for trading. Further, the Exchange will submit a Rule 19b-
4 filing for Commission approval prior to opening any new series of
options on the Index if the number of stocks in the Index ever
increases to more than 120 or decreases to less than 80.
\5\The Phlx's options listing standards, which are uniform among
the options exchanges, provide that a security underlying an option
must, among other things, meet the following requirements: (1) The
public float must be at least 7,000,000 shares; (2) there must be a
minimum of 2,000 stockholders; (3) trading volume in the U.S. must
have been at least 2.4 million over the preceding twelve months; and
(4) the U.S. market price must have been at least $7.50 for a
majority of the business days during the preceding three calendar
months. See Phlx Rule 1009, Commentary .01.
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The settlement value for Index options will be based on the opening
values of the component securities on the date prior to expiration.
Index options will expire on the Saturday following the third Friday of
the expiration month, and the last day for trading in an expiring
series will be the second business day (ordinarily a Thursday)
preceding the expiration date.
The Phlx proposes to employ position and exercise limits applicable
to the Exchange's other broad-based indexes pursuant to Phlx Rule
1001A(b)(i) and 1002A, respectively. Specifically, the position limit
will be $25,000 contracts total, of which no more than 15,000 contracts
can be in the nearest expiration month.
Exercise price intervals will be set at five point intervals in
terms of the current value of the Index except exercise prices in the
far-term series shall be $25.00 unless demonstrated customer interest
exists at $5.00 intervals. The Exchange represents that demonstrated
customer interest will include institutional (firm), corporate or
customer interest expressed directly to the Exchange or through the
customer's floor brokerage unit but not interest expressed by a
registered options trader (``ROT'') with respect to trading for the
ROT's own account. Exchange Rule 1101A, Commentary .02, which already
permits $25.00 intervals for the Exchange's other broad-based indexes,
will be amended to include this treatment for the USTOP 100 Index.
Additional exercise prices will be added in accordance with Phlx Rule
1101A(a).
As with the Exchange's other indexes, the multiplier for options on
the USTOP 100 Index will be 100. Index options will trade during the
Exchange's regular trading hours (9:30 a.m. through 4:15 p.m., Eastern
time).
The Phlx will trade consecutive and cycle month series pursuant to
Phlx Rule 1101A. Specifically, there will be three expiration months
from the March, June, September, and December cycle plus two additional
near-term months so that the three nearest term months will always be
available.
Surveillance procedures currently used to monitor trading in each
of the Exchange's other index options will also be used to monitor
trading in options on the Index. These procedures include having
complete access to trading activity in the securities underlying the
Index, all of which are traded on either the New York Stock Exchange
(``NYSE'') or the American Stock Exchange (``Amex''), or are Nasdaq
National Market securities. In addition, the Intermarket Surveillance
Group Agreement will be applicable to the trading of options on the
Index.\6\
\6\The Intermarket Surveillance Group (``ISG'') was formed on
July 14, 1983 to, among other things, coordinate more effectively
surveillance and investigative information sharing arrangements in
the stock and options markets. See Intermarket Surveillance Group
Agreement, July 14, 1983. The most recent amendment to the ISG
Agreement, which incorporates the original agreement and all
amendments made thereafter, was signed by ISG members on January 29,
1990. See Second Amendment to the Intermarket Surveillance Group
Agreement, January 29, 1990. The members of the ISG are: the Amex;
the Boston Stock Exchange, Inc.; the Chicago Board Options Exchange,
Inc.; the Chicago Stock Exchange, Inc.; the National Association of
Securities Dealers, Inc.; the NYSE; the Pacific Stock Exchange,
Inc.; and the Phlx. Because of potential opportunities for trading
abuses involving stock index futures, stock options, and the
underlying stock and the need for greater sharing of surveillance
information for these potential intermarket trading abuses, the
major stock index futures exchanges (e.g., the Chicago Mercantile
Exchange and the Chicago Board of Trade) joined the ISG as affiliate
members in 1990.
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The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act, in general, and with Section 6(b)(5),\7\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to facilitate transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market.
\7\15 U.S.C. 78f(b)(5) (1988).
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(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 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 date of 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 such 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, N.W., Washington, D.C. 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 Section, 450 Fifth Street, N.W.,
Washington, D.C. 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-95-07 and should be
submitted by March 3, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\8\
\8\17 CFR 200.30-3(a)(12) (1994). [[Page 8106]]
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-3327 Filed 2-9-95; 8:45 am]
BILLING CODE 8010-01-M
