[Federal Register Volume 62, Number 25 (Thursday, February 6, 1997)]
[Notices]
[Pages 5662-5663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2912]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38218; File No. SR-Phlx-97-04]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change and Amendment No. 1 Thereto by the Philadelphia Stock Exchange,
Inc. Relating to a 4:02 p.m. Closing Time for Equity Options Trading
January 30, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on January 8, 1997, 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.\3\ 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. Sec. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ On January 29, 1997, the Exchange filed Amendment No. 1 to
its proposal. Amendment No. 1 is a technical amendment, correcting
rule language in Rule 1047, Commentary .03(c), which was submitted
as Exhibit B with the rule filing. See Letter from Edith Hallahan,
Phlx, to Janice Mitnick, Division of Market Regulations, SEC, dated
January 29, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 101, Hours of Business, and
Rule 1047, Trading Rotations, Halts and Suspensions, to close equity
options trading at 4:02 p.m. Currently, equity options trade until 4:10
p.m.
The text of the proposed rule change 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 Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 self-regulatory organization
has prepared summaries, set froth 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
Since 1978, equity options have traded ten minutes longer than the
primary market. At that time, significant delays in the reporting of
stock prices were common; therefore, the additional ten minute period
was necessary to receive final stock prices. These delays have now been
reduced due to technological advances. Currently, the extra time period
for options trading after closing prices are reported in the underlying
equities results in equity options trading without the pricing benefit
of continuing stock trading. The additional ten minutes also results in
repeated automatic executions at outdated equity options prices.
Further, not all market participants are able to respond quickly to
changes in equity options prices between 4:00 and 4:10 p.m. In summary,
the Exchange, in balancing the benefits of an extended trading session
with the difficulties of trading after the underlying stock has closed,
has determined that the benefits do not outweigh the difficulties;
therefore, a 4:02 p.m. close for equity options is appropriate.
The purpose of the rule change is to reduce the amount of time
equity options trade after the close of the primary market for the
underlying security. Under the proposal, there will be a two minute
time period for equity options traders and investors to respond to late
reports of closing security prices and, where warranted, to bring
closing equity option prices in line with stock prices. The proposed
changes to Rule 101 establish a 4:02 p.m. close for equity options, and
expressly except index options. Reference to narrow-based (industry)
index options trading until 4:10 p.m. is being added to Rule 101, and
reference to broad-based index options is replacing the listing of
specific such index options by name. Broad-based index options will
continue to trade until 4:15 p.m. The Exchange understands that other
option exchanges have proposed a 4:02 p.m. close for certain index
options as well as for equity options; however, the Exchange is not
proposing to change the closing time for its index options.
The proposed change to Rule 1047 merely substitutes reference to
the current close of 4:10 p.m. with the proposed 4:02 p.m. close. The
Exchange notes that pursuant to Commentary .03 of this Rule, in unusual
market conditions, a closing rotation after the 4:02 p.m. close may be
conducted in an option, whether or not expiring, with the approval of
the Options Committee. Further, the Exchange proposes to amend the rule
to begin the closing rotation five minutes after the notice is
disseminated. Currently under Rule 1047, Commentary .03(b), the closing
rotation begins 10 minutes after the notice is disseminated.
2. Statutory Basis
The proposed rule change is consistent with Section 6 of the Act in
general, and in particular, with Section 6(b)(5), in that it is
designed to promote just and equitable principles of trade, prevent
fraudulent and manipulative acts and practices, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in
[[Page 5663]]
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, as well as to
protect investors and the public interest, consistent with Section
6(b)(5).
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 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. Sec. 552, will be available for inspection and copying at
the Commission's Public Reference Room. Copies of such filing will also
be available for inspection and copying at the principal office of the
Exchange. All submissions should refer to File No. SR-Phlx-97-04, and
should be submitted by February 27, 1997.
For the Commission, by the Division of Market Regulations,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-2912 Filed 2-5-97; 8:45 am]
BILLING CODE 8010-01-M
