[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]


-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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
---------------------------------------------------------------------------

    \5\15 U.S.C. 78f(b)(5) (1988).
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \6\17 CFR 200.30-3(a)(12) (1993).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-16754 Filed 7-11-94; 8:45 am]
BILLING CODE 8010-01-M