[Federal Register Volume 60, Number 137 (Tuesday, July 18, 1995)]
[Notices]
[Pages 36851-36852]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17580]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35957; International Series Release No. 827 File No.
SR-Phlx-95-44]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Relating to Enhanced Specialist Participation in 3D
Foreign Currency Options
July 12, 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 July 3,
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 Exchange. 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 1014(h) and Floor
Procedure Advice (``Advice'') B-7 (Time Priority of Bids/Offers in
Foreign Currency Options) regarding the enhanced parity participation
for the specialist (``Enhanced Split'') in the dollar denominated
delivery (``3D'') cash-spot deutsche mark foreign currency option
(``FCO'') contract.\1\ Specifically, the Exchange proposes to correct
certain language pertaining to the Enhanced Split contained in Rule
1014(h) and to incorporate the procedures applicable to the Enhanced
Split, as amended, into advice B-7. In addition, violations of the
Enhanced Split would become subject to fines administered pursuant to
the Exchange's minor rule violation enforcement and reporting plan.\2\
\1\ 3D FCOs are cash-settled, European-style, cash-spot FCO
contracts on the German mark that were originally approved to trade
in one-week and two-week expirations. See Securities Exchange Act
Release No. 33732 (March 8, 1994), 59 FR 52337 (March 15, 1994). The
Exchange subsequently obtained Commission approval to also list 3D
FCOs with longer-term expirations. See Securities Exchange Act
Release No. 35756 (May 24, 1995), 60 FR 28638 (June 1, 1995).
\2\ The Minor Rule Plan, codified in Phlx Rule 970, contains
floor procedure advices with accompanying fine schedules. Rule 19d-
1(c)(2) under the Act authorized national securities exchanges to
adopt minor rule violation plans for summary discipline and
abbreviated reporting and Rule 19d-1(c)(1) under the Act required
prompt filing with the Commission of any final disciplinary actions.
Minor Rule Plan violations not exceeding $2,500, however, are deemed
not final, thereby permitting periodic, as opposed to immediate
reporting.
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The Enhanced Split provisions in Rule 1014 currently provide that
for all orders in excess of 500 contracts, the 3D FCO specialist is
entitled to receive 50% of the first 500 contracts in any trade in
which the 3D FCO specialist and one or more crowd participants are on
parity, with the remaining 50% of the first 500 contracts allocated on
a pro rata basis among the other crowd participants on parity. All
contracts in excess of the first 500 contracts are split pro rata among
the 3D FCO specialist and the other crowd participants on parity.
The Exchange represents that Rule 1014(h) was intended to apply to
all 3D FCO orders, not just those in excess of 500 contracts.\3\
Accordingly, the Exchange proposes to amend Rule 1014(h) to clarify
that the Enhanced Split is activated by parity situations where parties
compete to fill orders of any size, rather than the current language
that states that the Enhanced Split only applies where the ``trade
involves 500 or more contracts.''
\3\ See Securities Exchange Act Release No. 35177 (December 29,
1994), 60 FR 2419 (January 9, 1995) (``Exchange Act Release No.
35177'').
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In addition to amending Rule 1014(h), the Exchange also proposes to
amend Advice B-7 to incorporate the provisions applicable to the 3D FCO
Enhanced Split, as amended, and to make violations of the Enhanced
Split subject to fines administered pursuant to the Exchange's Minor
Rule Plan.\4\
\4\ See supra note 2.
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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 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. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Section (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
In 1994, the Commission approved the Enhanced Split for the 3D FCO
specialist.\5\ The Exchange represents that the approved language in
Rule 1014(h) erroneously limits the provision to situations where more
than 500
[[Page 36852]]
contracts are traded when, in fact, the intent of the proposal was for
the Enhanced Split to apply to all parity 3D FCO trades. The Exchange
represents that this intent was reflected in the Exchange's description
of the proposal and in the Commission's approval of the Enhanced
Split.\6\
\5\ See Exchange Act Release No. 35177, supra note 3.
\6\ Id.
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The Exchange represents that there are two purposes for the
amendment to Advice B-7: (1) To incorporate the terms of the Enhanced
Split, as amended, into the options floor procedure advice handbook for
ease of reference on the trading floor; and (2) to make violations of
the Enhanced Split subject to the fines under the Exchange's Minor Rule
Plan.
The Phlx represents that the proposed rule change is consistent
with Section 6(b) of the Act in general and furthers the objectives of
Section 6(b)(5) \7\ in particular in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and to protect investors and the public
interest, by correcting the application of the Enhanced Split,
incorporating the provisions of the Enhanced Split, as amended, into
Advice B-7, and making violations of the Enhanced Split subject to the
Exchange's Minor Rule Plan.
\7\ 15 U.S.C. Sec. 78f(b)(5) (1988).
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any 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
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
(3) does not become operative for 30 days from July 3, 1995, the date
on which it was filed; and (4) the Exchange provided the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and the text of the proposed rule
change, at least five days prior to the filing date,\8\ it has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(e)(6) thereunder.\9\
\8\ See Letter from Edith Hallahan, Special Counsel, Phlx, to
Michael Walinskas, Branch Chief, Office of Market Supervision,
Division of Market Regulation, Commission, dated May 31, 1995.
\9\ 17 CFR 240.19b-4(e)(6) (1994).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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 at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 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-95-44 and should be
submitted by August 8, 1995.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
\10\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-17580 Filed 7-17-95; 8:45 am]
BILLING CODE 8010-01-M
