94-16754. 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 Semiconductor Index  

  • [Federal Register Volume 59, Number 132 (Tuesday, July 12, 1994)]
    [Unknown Section]
    [Page 0]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 94-16754]
    
    
    [[Page Unknown]]
    
    [Federal Register: July 12, 1994]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    [Release No. 34-34307; File No. SR-Phlx-94-02]
    
     
    
    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 Semiconductor Index
    
    July 5, 1994.
        Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act''),\1\ notice is hereby given that on January 5, 1994, 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.\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) (1988).
        \2\On January 14, 1994, the Phlx submitted Amendment No. 1 to 
    the proposal: (1) To correct the description of the formula for 
    calculating the value of the Index; (2) to set the exercise prices 
    at 5 point intervals instead of 2\1/2\ point intervals; (3) to 
    provide that if the number of components in the Index increases to 
    more than 21 components or decreases to less than 11 components, the 
    Exchange shall submit a rule filing to the Commission pursuant to 
    Section 19(b)(4) of the Act; and (4) to require that the components 
    of the Index will be required to be listed for trading on the New 
    York Stock Exchange or the American Stock Exchange, or traded as 
    National Market securities through the facilities of the National 
    Association of Securities Dealers, Inc. Automated Quotation system. 
    See Letter from William Uchimoto, General Counsel, Phlx, to Richard 
    Zack, Branch Chief, Office of Derivatives and Equity Oversight 
    (``ODEO''), Division of Market Regulation (``Division''), SEC, dated 
    January 14, 1994. On April 26, 1994, the Phlx filed Amendment No. 2 
    to the proposal which: (1) provides that the index will be updated 
    during the trading day at least once every 15 seconds, rather than 
    once every minute; (2) specifies that the expiration cycle 
    applicable to options of the Index will be three expiration months 
    from the March, June, September, December cycle plus two additional 
    near-term months; (3) provides that additional exercise prices will 
    be added pursuant to Rule 1101A rather than Rule 1012; and (4) 
    clarifies the Exchange's obligations with respect to delisting and 
    replacing components of the Index. See Letter from Michele R. 
    Weisbaum, Associate General Counsel, Phlx, to Michael Walinskas, 
    Branch Chief, ODEO, Division, SEC, dated April 26, 1994. The 
    Exchange filed Amendment No. 3 to the proposal on May 20, 1994, to 
    provide that the Index will be maintained so that if at any time, 
    less than 90% of the component issues by weight are eligible for 
    exchange options trading, the Exchange will submit a Rule 19b-4 
    filing to the Commission before opening any new series of options on 
    the Index for trading. See Letter from Michele R. Weisbaum, 
    Associate General Counsel, Phlx, to Brad Ritter, Attorney, ODEO, 
    Division, SEC, dated May 20, 1994.
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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 Semiconductor Index (``Index''), an index 
    developed by the Phlx and comprised of sixteen of the most highly 
    capitalized and widely-held U.S. stocks representing the semiconductor 
    industry.
    
    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
    
        The Phlx proposes to list for trading American-style options\3\ on 
    the Index, a price-weighted index composed of sixteen highly 
    capitalized and widely held common stocks of U.S. companies that are 
    primarily involved in the design, manufacture, sale and distribution of 
    semiconductors used in computer and other electronic device 
    manufacturing.\4\ The Exchange proposes classifying the Index as a 
    narrow-based industry index.
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        \3\An American-style option can be exercised at any time before 
    the option expires.
        \4\The components of the Index are: Advanced Micro Devices; 
    Analog Devices; Applied Materials; Cypress Semiconductor; Integrated 
    Device Technology; Intel Corp. International Rectifier Corp.; 
    Lattice Semiconductor Corp.; LSI Logic Corp.; Micron Technology 
    Inc.; Motorola Inc.; National Semiconductor Corp.; Novellus Systems, 
    Inc.; Teradyne, Inc.; Texas Instruments, Inc.; and VLSI Technology, 
    Inc.
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        The formula for calculating the Index is as follows:
    
    TN12JY94.000
    
    where:
    
    SP=Current stock price for each component.
    BASE=Base Value; Number by which the Index is initially normalized 
    to a value of 200.
    
        The current price of each component issue is multiplied by 100 
    shares. The resulting market values are added to determine the current 
    aggregate market value of the issues in the Index. To compute the 
    current Index value, the aggregate market value is divided by the base 
    divisor. The value of the Index was set to equal 200 on December 1, 
    1993.
        Adjustments in the value of the Index which are necessitated by the 
    addition and/or deletion of an issue from the Index are made by adding 
    and/or subtracting the market value (current stock price  x  100 
    shares) of the relevant issues.
        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 this 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 the capitalization, liquidity, 
    and volatility of a particular stock.
        Index options will be traded pursuant to the current Phlx rules 
    governing the trading of index options, particularly Phlx Rules 1000A 
    through 1103A, and generally, Phlx Rules 1000 through 1070.
        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 pursuant 
    to Phlx Rule 1001A(b) (i) and 1002A, respectively. Exercise price 
    intervals will be initially set at 5 point intervals and additional 
    exercise prices will be added in accordance with Phlx Rule 1101A(a).
        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, December cycle plus two additional 
    near-term months so that the three nearest term months will always be 
    available.
        The Exchange believes that the proposed rule change is consistent 
    with Section 6 of the Act, in general, and with Section 6(b)(5),\5\ 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
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        \5\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, NW., Washington, DC 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, NW., 
    Washington, DC. 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-94-02 and should be 
    submitted by August 2, 1994.
    
        For the Commission, by the Division of Market Regulation, 
    pursuant to delegated authority.\6\
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        \6\17 CFR 200.30-3(a)(12) (1993).
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    Margaret H. McFarland,
    Deputy Secretary.
    [FR Doc. 94-16754 Filed 7-11-94; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
07/12/1994
Department:
Securities and Exchange Commission
Entry Type:
Uncategorized Document
Document Number:
94-16754
Pages:
0-0 (1 pages)
Docket Numbers:
Federal Register: July 12, 1994, Release No. 34-34307, File No. SR-Phlx-94-02