[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Notices]
[Pages 32880-32881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16065]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37323; File No. SR-Phlx-96-11]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the Philadelphia Stock Exchange, Inc. Relating to Exchange's
Calculation of Settlement Values for Cash/Spot Foreign Currency Option
Contracts (``3-D Options'')
June 18, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 30, 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, II, and III below, which Items
have been prepared by the self-regulatory organization. On May 20,
1996, the Exchange submitted to the Commission Amendment No. 1 to the
proposed rule change.\2\ 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. 78s(b)(1).
\2\ See letter from Murrary L. Ross, Vice President and
Secretary, Phlx, to Anthony P. Pecora, Attorney, SEC, dated May 17,
1996. In this letter, the Phlx represented that the limitation of
liability clause may not be relied upon to limit the Exchange's
liability to nonmembers for any intentional or negligent violations
of the federal securities laws. In addition, the Exchange made some
minor clarifying edits.
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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 Phlx Rule 1057 in order to provide the
Exchange with the election to calculate settlement values for the cash/
spot Dollar Denominated Delivery foreign currency option contracts
(``3-D options''). In addition, the Exchange proposes to amend Phlx
Rule 1057 by including a ``limitation of liability'' clause for the
settlement of 3-D options similar to Phlx Rule 1102A, which limits the
Exchange's liability in the calculation and dissemination of settlement
values.
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 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
On March 8, 1994, the Commission approved 3-D options for listing
on the Phlx.\3\ Currently, the closing settlement value for 3-D options
is calculated by a market information vendor acting as the Exchange's
designated agent. The market information vendor will collect the bid
and offer quotations for the current foreign exchange spot price from
quotations submitted by at least fifteen interbank foreign exchange
market participants, which the designated agent will select randomly
from a list of twenty-five active interbank foreign exchange market
participants. After discarding the five highest and the five lowest
bids and offers, the market information vendor averages the remaining
ten bids and offers to arrive at a closing settlement price.
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\3\ See Securities Exchange Act Release No. 33732 (Mar. 8,
1994), 59 FR 12023 (approving File No. SR-Phlx-93-10).
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The Phlx proposes to amend Phlx Rule 1057 to provide the Exchange
with
[[Page 32881]]
the choice of calculating the settlement value for 3-D options itself
rather than employing a designated market information vendor as an
agent of the Exchange for that purpose. The Exchange will use the same
methodology for calculating the settlement value for 3-D options as
described in Phlx Rule 1057.
The Phlx believes that by calculating its own settlement value for
3-D options, the Exchange will be able to exert more control over the
calculation of those values. The Exchange also believes that the
proposed rule change will reduce the response time in the event there
is a problem in the calculation or dissemination of the 3-D options
settlement values.
Secondly, the Exchange proposes to amend Phlx Rule 1057 by
including a ``limitation of liability'' clause similar to the one
contained in Phlx Rule 1102A that limits the Exchange's liability in
the calculation and dissemination of index values. The limitation of
liability clause provides added protection to the Exchange and
alleviates the threat of potential liability in calculating the 3-D
settlement values. If further serves as a more explicit extension of
the limitation of liability contained in the Exchange's By-Laws.\4\
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\4\ See Phlx By-Laws, art. XII, Sec. 12-11 (stating that the
Phlx is not liable for any damages incurred by a member or member
organization utilizing the Exchange's facilities to conduct its
business).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \5\ of the Act in general and furthers the objectives of
Section 6(b)(5) \6\ in particular in that it is designed to facilitate
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes the proposed rule change will impose no
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.
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, 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 at the
Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Also, copies of such filing will be available
for inspection and copying at the principal office of the Phlx. All
submissions should refer to File No. SR-Phlx-96-11 and should be
submitted by July 16, 1996.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 C.F.R. 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-16065 Filed 6-24-96; 8:45 am]
BILLING CODE 8010-01-M
