[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Notices]
[Pages 9001-9002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36903; File No. SR-Phlx-96-01]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Change by the
Philadelphia Stock Exchange, Inc. Relating to Restrictions on Exercise
for A.M-Settled Index Options
February 28, 1996.
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
January 17, 1996, 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 prepared by the self-regulatory
organization. The Phlx has requested accelerated approval for the
proposal. This Order approves the Phlx proposal on an accelerated basis
and solicits comments from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend Exchange Rules 1042A (and corresponding
Options Floor Procedure Advice G-1) and 1101A to clarify their
application to a.m.-settled index options. In addition, Phlx also
proposes to clarify in its applicable Rule Commentary that Phlx Super
Cap Index options trading hours extend until 4:15 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 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 Exchange recently amended Rule 1006A, ``Other Restrictions on
Options Transactions and Exercises,'' to replace the term ``business
day'' with ``trading day'' in order to correct the application of that
rule to a.m.-settled index options.\1\ As a result, restrictions on
exercise are only in effect until the opening of business on the last
business day before expiration, which is generally Friday for all index
options. Following further review of the index options rules, however,
the Exchange has identified two additional changes necessary to clarify
the application of restrictions on exercise to a.m.-settled index
options.
\1\ See Securities Exchange Act Release No. 35827 (June 8,
1995), 60 FR 31336 (June 14, 1995).
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First, the Exchange proposes to amend Rule 1042A, ``Exercise of
Option Contracts,'' to replace the term ``trading day'' with ``business
day'' in paragraph (b).\2\ Paragraph (a) to Rule 1042A requires members
to follow certain procedures when tendering exercise advices. Paragraph
(b), however, states that the provisions of paragraph (a) do not apply
on the last trading day before expiration. Although all index options
expire on Saturday, the last trading day for a.m.-settled index options
is Thursday. Under the current Rule, therefore, an investor who
exercises an a.m.-settled option on Saturday by notifying his broker on
Friday would be required to submit an exercise advice. Changing the
term ``trading day'' to ``business day'' allows the Exchange to correct
an unintended result and more clearly reflects that an exercise advice
is not required for exercises of index options submitted on expiration
Friday, whether a.m.-settled or p.m.-settled.
\2\ Phlx proposes to make the same change in Options Floor
Procedure Advice G-1, Exercise Requirements.
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Second, the Exchange proposes to amend Commentary .01 to Rule
1101A, Terms of Option Contracts, to replace the language ``including
the business day prior to expiration'' with ``through the last trading
day prior to expiration.'' This change is necessary because the old
language implies that expiring a.m.-settled index options may trade on
the Friday prior to expiration. By changing this language, the Exchange
notes that broad-based index options to which the Commentary is
applicable will be able
[[Page 9002]]
to trade until 4:15 p.m. each business day, through the last trading
day prior to expiration, which would be Friday for p.m.-settled index
options and Thursday for a.m.-settled index options.
The Phlx notes that Rule 1101A(c) establishes that index options
shall trade until 4:10 p.m.. Commentary .01 to this Rule extends the
trading session to 4:15 p.m. for certain broad-based index options.
Accordingly, the Phlx also proposes to amend the language in Rule
1101A(c) from ``business day'' to ``trading day'' in order to clarify
that a.m.-settled index options which trade until 4:10 p.m. may not
trade on the Friday prior to expiration.
Finally, the Exchange proposes to clarify in Commentary .01 to Rule
1101A that Super Cap Index options trade until 4:15 p.m.
2. Statutory Basis
The Exchange believes the proposed rule changes are consistent with
Section 6(b) of the Act in general and further the objectives of
Section 6(b)(5) in particular in that they are designed to prevent
fraudulent and manipulative acts and practices and to promote just and
equitable principles of trade, and are not designed to permit unfair
discrimination between customers, issuers, brokers and dealers.
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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Findings and Conclusions
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of Section 6(b)(5).\3\ Specifically, the
Commission notes that the change in terminology to Rules 1042A and
1101A achieves conformity with the language contained in Phlx Rule
1006A with respect to restrictions on exercise. As a result, exercise
advices will not be required on the Friday before expiration,
regardless of whether an option is a.m. or p.m.-settled, or whether it
trades until 4:10 p.m. or 4:15 p.m. Furthermore, implementation of the
proposal is necessary to effect the Exchange's intended procedures
regarding exercise requirements and restrictions for index options.
\3\ 15 U.S.C. Sec. 78f(b)(5) (1988).
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The Commission also believes that the Exchange's proposed rule text
clarification that trading hours for Super Cap Index options extend
until 4:15 p.m. is reasonable. The Commission has previously approved
the trading of Super Cap Index options to 4:15 p.m.\4\ Therefore, the
amendment is technical in nature and does not raise any new or unique
regulatory issues.
\4\ See Securities Exchange Act Release No. 36369 (Oct. 13,
1995).
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The Commission finds good cause to approve the proposed rule
changes prior to the thirtieth day after the date of publication of
notice of filing thereof in the Federal Register. Specifically, the
Commission finds that because the changes in terminology to Rules 1042A
and 1101A simply bring these Rules into conformity with Phlx Rule 1006A
and other options exchanges, and the Phlx rule text clarification that
Super Cap Index Options trade until 4:15 p.m. is technical in nature,
they do not raise any new or unique regulatory issues. Accordingly, the
Commission believes it is consistent with the Act to approve the
proposal on an accelerated basis.
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 Section, 450 Fifth Street, N.W.,
Washington, D.C. 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-96-01 and should be
submitted March 27, 1996.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\5\ that the proposed rule change (SR-Phlx-96-01) is hereby approved on
an accelerated basis.
\5\ 15 U.S.C. Sec. 78s(b)(2) (1988).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\6\
\6\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5219 Filed 3-5-96; 8:45 am]
BILLING CODE 8010-01-M
