[Federal Register Volume 59, Number 62 (Thursday, March 31, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7605]


[[Page Unknown]]

[Federal Register: March 31, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33810; File No. SR-Phlx-93-45]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. (``Phlx''), Relating to 
the Listing and Trading of Quarterly Index Expiration Options on All 
Stock Indexes for Which Index Options are Listed for Trading by the 
Phlx

March 24, 1994.
    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 November 
24, 1993, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with 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.\1\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\On March 21, 1994, the Exchange filed Amendment No. 1 to the 
proposed rule change. Amendment No. 1 amends (1) certain Phlx rules 
to add references to quarterly index expiration (``QIX'') options, 
and (2) Rule 1001A(d) to state that positions in QIX options will be 
aggregated with full-value, reduced-value, and long-term index 
options based on the same index. The Phlx also represents that at 
the present time, it will not list QIX options with more than 12 
months to expiration. See Letter from Catherine Humphrey, Law Clerk, 
Phlx, to Sharon Lawson, Office of Derivatives and Equity Oversight, 
Division of Market Regulation, Commission, dated March 18, 1994 
(``Amendment No. 1'').
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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 a rule change 
to provide for the listing and trading of quarterly index expiration 
(``QIX'') options on the Gold and Silver (``XAU'') Index, the Utility 
(``UTY'') Index, the National Over-the-Counter (``XOC'') Index, the 
Value Line (``VLE'') Index, and the Bank (``BKX'') Index. 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 Exchange 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 a rule change to list QIX options on the XAU, 
VLE, UTY, XOC, and BKX Indexes. The proposed QIX options would expire 
on the first business day of the calendar quarter for p.m.-settled 
index options and on the second business day of the calendar quarter 
for a.m.-settled index options. Accordingly, the XAU, UTY, VLE, and XOC 
index options, whose settlement values are currently determined using 
closing values of the component securities, would have their QIX 
settlement values determined on the close of the last business day of 
the calendar quarter and would expire on the first business day of the 
next quarter. The BKX index options, whose settlement value is 
currently determined using the opening values of the component 
securities, would have its QIX settlement value determined on the 
opening of the first business day of the next calendar quarter and 
would expire on the second business day of that quarter.
    The Exchange's proposal would allow for the listing of up to eight 
quarterly expirations at any given time, however, at the present time, 
the Exchange will not list or trade QIX options with more than 12 
months to expiration.\2\ For example, if Phlx began listing QIX options 
in April 1994, there could be QIX options series listed with 
expirations in July 1994, October 1994, January 1994, and April 1995. 
Finally, in reference to position and exercise limits, Phlx proposes to 
aggregate QIX options based on a particular index with existing options 
contracts based on the same index.\3\ With respect to all other 
contract features, the proposed QIX options will be subject to the same 
rules that presently govern the trading of existing options contracts 
including: Contract terms; sales practice rules; margin requirements; 
and floor trading procedures.
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    \2\Id. The Commission notes that any proposal to list or trade 
QIX options with more than twelve months to expiration must be filed 
with the Commission for review under Section 19(b)(2) of the Act.
    \3\Id.
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    According to the Exchange, portfolio managers and institutional 
investors frequently engage in ``quarterly hedging strategies'' as 
their performance is often judged on a quarterly basis. The Phlx 
believes the proposed rule change will provide investment managers and 
other institutional investors with a strategic tool to accommodate 
their hedging and investment needs.
    The Phlx also notes that other options exchanges already list and 
trade QIX options on various stock indexes\4\ and in this respect, the 
Phlx represents that the Options Clearing Corporation (``OCC'') will 
accommodate the proposed Phlx QIX options.
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    \4\See, e.g., Securities Exchange Act Release No. 32693 (July 
29, 1993), 58 FR 41817 (August 5, 1993) (QIX options on the Russell 
2000 Index listed and traded on the Chicago Board Options Exchange).
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    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act in general, and with Section 6(b)(5), in 
particular, in that it is designed to facilitate transactions in 
securities, to perfect the mechanism of a free and open market, and to 
protect investors and the public interest. Specifically, the Exchange 
believes that consistent with Section 6(b)(5) of the Act, the proposal 
would extend the benefits of a valuable new product to the investing 
public and provide competition to other similar products already 
available in the securities markets.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx 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

    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-93-45 and should be 
submitted April 21, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-7605 Filed 3-30-94; 8:45 am]
BILLING CODE 8010-01-M