[Federal Register Volume 60, Number 78 (Monday, April 24, 1995)]
[Notices]
[Pages 20133-20135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9977]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35615; International Series Release No. 802 File No.
SR-Phlx-95-05]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to the
Response Period for Customized Foreign Currency Options
April 17, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February
21, 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.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend Exchange Rule 1069(b) in order to
[[Page 20134]] simplify customized foreign currency option
(``Customized FCO'') trading by conforming the procedure for obtaining
quotes and executing trades with existing rules for regular Exchange-
traded FCOs. Additionally, the Exchange proposes to adopt Floor
Procedure Advice F-20 (Quoting and Trading Customized Foreign Currency
Options) which will parallel the provisions of Exchange Rule 1069(b).
The text of the proposed rule change is available at the Office of the
Secretary, the 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 the
Statutory Basis for, the Proposed Rule Change
On November 1, 1994, the Commission approved the Exchange's
proposal to trade customized foreign currency options.\1\ The Phlx
proposes to amend Exchange Rule 1069(b) in order to eliminate the
response period and the special parity rules for assigned Registered
Options Traders (``ROTs'') that apply during that response period.
Presently, when a participant requests a quote for a Customized FCO
(``RFQ''), if any participant requests a response time, the preset
amount of time applicable to that type of Customized FCO is invoked and
the assigned ROTs are given the ability to match any responsive quote
that improves their previously voiced responsive quote. The response
period was initially set by the Exchange's FCO Committee at two minutes
for simple strike options, five minutes for simple spreads, inverses,
and cross-rates, and eight minutes for options strategies involving
more than three legs.\2\ Once the response period has been invoked, a
trade may only occur prior to the end of the response period if at
least two assigned ROTs respond to the RFQ. The Exchange has found that
in almost every instance, participants have requested a response
period, however, responsive quotes generally are not received until
after the end of the response period.\3\
\1\See Securities Exchange Act Release No. 34925 (November 1,
1994), 59 FR 55720 (November 8, 1994).
\2\The FCO Committee shortened the response period to one minute
for all types of RFQs for Customized FCOs on January 16, 1995,
effective at the opening on January 17, 1995.
\3\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 22, 1995.
---------------------------------------------------------------------------
The Exchange represents that the intent of the response period was
to give all participants and customers an equal amount of time to
calculate a price in response to a RFQ because Customized FCOs are not
continuously quoted FCOs for which participants have readily available
trade sheets. Presently, when a RFQ is disseminated, a ROT who intends
to respond may have to leave the crowd that he is in, go over to the
Customized FCO post to listen to the RFQ, formulate a responsive quote,
and then voice the responsive quote in the trading crowd.
The response period and attendant parity rules were intended,
according to the Exchange, to assure that the floor traders who are
crucial to providing liquidity to the market place were not placed at a
competitive disadvantage to the off-floor traders due to their lack of
prepared trading sheets. The Exchange has not been able to determine
whether this concern is valid or not by reviewing the present level of
activity in Customized FCOs. The Exchange has determined, however, that
it is important at this time to promote more activity in Customized
FCOs and, therefore, it is proposing to eliminate the response period.
The Exchange represents that, pursuant to the proposed rule change,
Customized FCOs will trade similar to regular Exchange-traded FCOs such
that trades will be executable as soon as any responsive quote is made.
Moreover, existing parity and priority principles in Exchange Rule
1014(h) will apply to trades in Customized FCOs. As more experience is
gained, the Exchange feels that it will be in a better position to
review trading activity to ensure that no competitive disparity is
actually occurring.
The Phlx also proposes to adopt a new Floor Procedure Advice
applicable to the FCO floor. Proposed Advice F-20 (Quoting and Trading
Customized Foreign Currency Options), generally follows the text of
Rule 1069(b). The Exchange represents that the purpose of Advice F-20
is to codify the trading procedure for Customized FCOs in the Floor
Procedure Advice Handbook for ease of reference.
The Exchange believes that the foregoing rule change proposal is
consistent with Section 6 of the Act, in general, and with Section
6(b)(5), in particular, in that it is designed to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest by simplifying the trading
process for Customized FCOs.
(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 [[Page 20135]] 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-95-05 and should be
submitted by May 15, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\4\
\4\17 CFR 200.30-3(a)(12) (1994).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-9977 Filed 4-21-95; 8:45 am]
BILLING CODE 8010-01-M
