[Federal Register Volume 61, Number 142 (Tuesday, July 23, 1996)]
[Notices]
[Pages 38234-38235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18563]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37441; File Nos. SR-Amex-96-24; SR-CBOE-96-41; SR-NYSE-
96-19; SR-PSE-96-18; and SR-Phlx-96-22]
Self-Regulatory Organizations; Notice of Filing and Order
Granting Accelerated Approval of Proposed Rule Changes by the American
Stock Exchange, Inc., Chicago Board Options Exchange, Inc., New York
Stock Exchange, Inc., Philadelphia Stock Exchange, Inc., and Pacific
Stock Exchange, Inc., Relating to an Extension of the 2\1/2\ Point
Strike Price Pilot Program
July 15, 1996.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 3, 1996, the Philadelphia Stock Exchange, Inc. (``Phlx''); on
June 11, 1996, the Pacific Stock Exchange, Inc. (``PSE''); on June 28,
1996, the Chicago Board Options Exchange, Inc. (``CBOE''); on July 3,
1996, the American Stock Exchange, Inc. (``Amex''); and on July 12,
1996, the New York Stock Exchange, Inc. (``NYSE'') (collectively the
``Exchanges'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule changes as described in Items I and
II below, which Items have been prepared by the Exchanges. The PSE
submitted to the Commission Amendment No. 1 to its proposal on July 2,
1996.\3\ The Phlx submitted to the Commission Amendment No. 1 to its
proposal on July 9, 1996.\4\ The Commission is publishing this notice
to solicit comments on the proposed rule changes from interested
persons, and to grant accelerated approval of the proposed rule
changes.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, PSE withdraws its request for permanent
approval of the pilot program, and requests a one-year extension of
the pilot program, so that it will continue through July 18, 1997.
See Letter from Michael Pierson, Senior Attorney, PSE, to John
Ayanian, Attorney, Office of Market Supervision (``OMS''), Division
of Market Regulation (``Market Regulation''), Commission, Dated July
1, 1996 (``PSE Amendment No. 1'').
\4\ In Amendment No. 1, the Phlx indicated that the pilot period
extension will expire on July 18, 1997. See Letter from Edith
Hallahan, Special Counsel, Regulatory Services, Phlx, to John
Ayanian, Attorney, OMS, Market Regulation, Commission, dated July 9,
1996 (``Phlx Amendment No. 1'').
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I. Self-Regulatory Organizations' Statement of the Terms of
Substance of the Proposed Rule Changes
The Exchanges propose to extend for one-year (i.e., July 18, 1997)
the Exchanges' pilot program whereby the Exchanges may select a certain
number of their listed options for inclusion in a pilot program for the
listing of strike prices at 2\1/2\ point intervals. The text of the
proposed rule changes is available at the Office of the Secretary, the
Exchanges, and at the Commission.
II. Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In their filings with the Commission, the Exchanges included
statements concerning the purpose of and basis for the proposed rule
changes. The text of these statements may be examined at the places
specified in Item IV below. The Exchanges have prepared summaries, set
forth in Sections (A), (B), and (C) below, of the most significant
aspects of such statements.
(A) Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
The Commission has previously approved a pilot program proposed by
the Exchanges to list selected options trading at a strike price
greater than $25 but less than $50 at 2\1/2\ point intervals (i.e.,
27\1/2\, 32\1/2\, 37\1/2\, 42\1/2\ and 47\1/2\).\5\ Pursuant to the
pilot program, the Exchanges are permitted to use such 2\1/2\ point
strike price intervals for a joint total of up to 100 option issues.
Each exchange may select 10 options plus a percentage of the remaining
50 options equal to that exchange's pro rata share of the total number
of equity options listed by the Exchanges.\6\
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\5\ See Securities Exchange Act Release No. 35993 (July 19,
1995), 60 FR 38073 (July 25, 1995) (File Nos. SR-Phlx-08, SR-Amex-
95-12, SR-PSE-95-07, SR-CBOE-95-19, SR-NYSE-95-12) (``2\1/2\ Point
Strike Price Approval Order'').
\6\ The actual allotment of option issues for each exchange is:
CBOE (28), Amex (22), Phlx (18), PSE, PSE (18), and NYSE (14).
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When more than one exchange selects a multiply-traded option for
its allotment, the Options Clearing Corporation (``OCC'') will
determine which exchange will be deemed to have selected the option
according to the procedures agreed upon by the Exchanges. They have
agreed that an exchange (``Selecting Exchange'') intending to list 2\1/
2\ point strikes on an option will inform OCC of its selection by
submitting a notice (``Selection Notice'') to OCC between the hours of
8:30 a.m. and 12:00 Noon (Central Time). In the event that more than
one exchange submits a Selection Notice to the OCC for the same
multiple-traded option, the exchange which first submits a Section
Notice to the OCC will be deemed to be the Selecting Exchange for that
option. Such option will count toward the allotment of the Selecting
Exchange, but not toward the allotment of any other exchange submitting
a Selection Notice under the terms of the pilot program.
Each of the Exchanges has also submitted a report to the Commission
that includes data and written analysis regarding the operation of the
pilot program during the previous year, as required in the 2\1/2\
Strike Price Approval Order.\7\ The Exchanges generally believe that
the pilot program has provided customers greater opportunities and
flexibility to tailor their options positions, while enhancing the
depth and liquidity of the markets in the selected options classes.
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\7\ In the 2\1/2\ Point Strike Price Approval Order, the
Commission required that each Exchange submit a report before the
Commission would review a proposal to extend the pilot program
beyond the initial twelve-month period.
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Each exchange has stated that it believe its respective proposed
rule change is consistent with Section 6(b) of the Act in general and
furthers the objectives of Section 6(b)(5) in particular in that the
joint proposal is designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, and
is not designed to permit unfair discrimination between customers,
issuers, brokers or dealers.
(B) Self-Regulatory Organizations' Statement on Burden on Competition
The Exchanges believe that the proposed rule changes will impose no
burden on competition.
[[Page 38235]]
(C) Self-Regulatory Organizations' Statement on Comments on the
Proposed Rule Changes Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule changes.
III. Commission's Findings and Order Granting Accelerated Approval
The Commission finds that the proposed rule changes are 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) of the Act.\8\
Specifically, the Commission believes that the proposed extension of
the pilot program providing for the listing of 2\1/2\ point strike
price intervals in selected equity options will continue to provide
investors with more flexibility in the trading of equity options with a
strike price greater than $25 but less than $50, thereby furthering the
public interest by allowing investors to establish equity options
positions that are better tailored to meet their investment objectives.
The Commission also believes that the Exchanges' proposal strikes a
reasonable balance between the Exchanges' desire to accommodate market
participants by offering a wide array of investment opportunities and
the need to avoid excessive proliferation of options series. The
Commission expects the Exchanges to continue to monitor the applicable
equity options activity closely to detect any proliferation of illiquid
options series resulting from the narrower strike price intervals and
to act promptly to remedy this situation should it occur.
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\8\ 15 U.S.C. 78f(b)(5).
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In the event the Exchanges propose to (1) extend the pilot program
beyond the twelve month period, (2) expand the pilot program beyond the
initial 100 option classes, or (3) seek permanent approval of the pilot
program, they should submit a report to the Commission with such
proposal. The report should cover the period from May 20, 1996 to one
expiration month prior to the filing of the proposal, and should
include data and written analysis on the open interst and trading
volume in affected series, and delisted options series (for all strike
price intervals) on the selected pilot program option classes. The
report should also discuss any capacity problems that may have arisen
during the pilot program and any other data relevant to the analysis of
the pilot program, including an assessment of the appropriateness of
the 2\1/2\ point strike price intervals for the options selected by the
reporting exchange.
The Commission finds good cause for approving the proposed rule
changes and Phlx Amendment No. 1 and PSE Amendment No. 1 prior to the
thirtieth day after the date of publication of notice of filing thereof
in the Federal Register. As mentioned above, the Exchanges submitted
separate reports to the Commission that include data and written
analysis regarding the operation of the pilot program as required in
the 2\1/2\ Strike Price Approval Order. The Commission notes that the
Exchanges have not reported any significant problems with the pilot
program since its inception and that the Exchanges will continue to
monitor the pilot program to ensure that no problems arise. Finally, no
adverse comments have been received by the Exchanges or the Commission
concerning the pilot program. Based on the above, the Commission
believes good cause exists to approve the extension of the pilot
program through July 18, 1997, on an accelerated basis. Accordingly,
the Commission believes that granting accelerated approval of the
proposals is appropriate and consistent with Sections 6(b)(5) and
19(b)(2) 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, 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 in 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 Exchanges.
All submissions should refer to File Nos. SR-Amex-96-24; SR-CBOE-96-41;
SR-NYSE-96-19; SR-PSE-96-18; and SR-Phlx-96-22 and should be submitted
by August 13, 1996 the date of this publication.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the pilot program proposed by the Exchange (File Nos. SR-
Amex-96-24; SR-CBOE-96-41; SR-NYSE-96-19; SR-PSE-96-18; and SR-Phlx-96-
22) is approved through July 18, 1997, on an accelerated basis.
\9\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursaunt to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-18563 Filed 7-22-96; 8:45 am]
BILLING CODE 8010-01-M
