[Federal Register Volume 59, Number 93 (Monday, May 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11800]


[[Page Unknown]]

[Federal Register: May 16, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34024; File No. SR-PHLX-93-51]

 

Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc., Relating to Excessive 
Trading

May 9, 1994.
    On December 30, 1993, the Philadelphia Stock Exchange, Inc. 
(``PHLX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission''), pursuant to section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend PHLX Rule 1015, 
``Excessive Dealing in Options,'' to delete the phrase ``in view of his 
financial resources'' from the rule and to renumber the rule as PHLX 
Rule 1021.
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    \1\15 U.S.C. 78s(b0(1) (1988).
    \2\17 CFR 240.19b-4 (1993).
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    The proposed rule change was noticed for comment in Securities 
Exchange Act Release No. 33804 (March 22, 1994), 59 FR 14699 (March 29, 
1994). No comments were received on the proposal.\3\
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    \3\Originally, the PHLX also proposed to amend Exchange Rule 
771, ``Excessive Trading of Members,'' to delete the phrase ``or in 
view of the market for such security'' from the rule. Subsequently, 
the PHLX submitted a letter returning that phrase to Exchange Rule 
771. See Letter from Gerald D. O'Connell, Vice President, Market 
Surveillance, PHLX, to Michael Walinskas, Branch Chief, Options 
Regulation, Division of Market Regulation (``Division''), 
Commission, dated April 13, 1994. This change is non-substantive.
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    Currently, PHLX Rule 1015, ``Excessive Dealing in Options,'' 
prohibits a member from effecting purchases or sales in options which 
are excessive in view of his financial resources or in view of the 
market for such security. The PHLX proposes to amend PHLX Rule 1015 by 
deleting the phrase ``in view of his financial resources'' and by 
renumbering the rule as PHLX Rule 1021. The PHLX proposes to delete the 
reference to the financial resources of a member from current PHLX Rule 
1015 because this phrase is already appropriately included in Exchange 
Rule 771, ``Excessive Trading of Members.''\4\ The PHLX indicates that 
the financial responsibility reference included in the trade practice 
rule (PHLX Rule 1015) was recently the source of confusion, which will 
be corrected by the PHLX's proposal. Specifically, under the proposed 
rule change, PHLX Rule 771 will govern the financial aspect of 
excessive options trading and PHLX Rule 1021 will govern the trade 
practice aspect of excessive options trading.\5\
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    \4\PHLX Rule 771 states that ``No member, member organization, 
partner or stockholder therein shall effect on the Exchange 
purchases or sales for any account in which he or it is directly or 
indirectly interested, which purchases or sales are excessive in 
view or his or its financial resources or in view of the market for 
such security.''
    \5\Telephone conversation between Edith Hallahan, Attorney, 
PHLX, and Yvonne Fraticelli, Staff Attorney, Options Branch, 
Division, Commission, on April 26, 1994.
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    The Exchange believes that the proposed rule change is consistent 
with section 6 of the Act, in general, and, in particular with section 
6(b)(5), in that it is designed to prevent fraudulent and manipulative 
acts and practices, as well as to protect investors and the public 
interest.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange, and, in 
particular, with the requirements of Section 6(b)(5) in that it is 
designed to protect investors and the public interest.\6\ specifically, 
the proposal will help to clarify the PHLX's rules by deleting the 
phrase ``in view of his financial resources'' from PHLX Rule 1015, so 
that PHLX Rule 1015 will apply solely to the trade practice aspect of 
excessive options trading and PHLX Rule 771 will apply to the financial 
aspect of excessive options trading. In its proposal, the PHLX states 
that the financial responsibility reference in PHLX Rule 1015 has been 
a source of confusion. Because PHLX Rule 771, which applies to both 
equities and options, contains the same financial responsibility 
provision as that provided currently in PHLX Rule 1015, the Commission 
believes that it is reasonable for the PHLX to delete the redundant 
financial responsibility reference in PHLX Rule 1015 in order to 
eliminate confusion. Because PHLX Rule 771 applies to both equities and 
options, the proposal to delete the financial responsibility reference 
from PHLX Rule 1015 will clarify PHLX Rule 1015 without affecting the 
substance of the PHLX's prohibition of excessive options trading. In 
addition, the Commission believes that the increased clarity of PHLX 
Rule 1015 will help to facilitate compliance with the rule.
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    \6\15 U.S.C. 78f(b)(5) (1988).
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    It is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-PHLX-93-51) is approved.

    \7\15 U.S.C. 78s(b)(2) (1982).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\17 CFR 200.30-3(a)(12) (1988).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-11800 Filed 5-13-94; 8:45 am]
BILLING CODE 8010-01-M