[Federal Register Volume 59, Number 199 (Monday, October 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25557]


[[Page Unknown]]

[Federal Register: October 17, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34814; International Series Release No. 727; File No. 
SR-Phlx-94-42]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to an Enhanced 
Parity Split for the Specialist in 3D Foreign Currency Options

October 7, 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 August 
15, 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. 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, pursuant to Rule 19b-4 of the Act, proposes to amend 
Exchange Rule 1014(h) in order to permit an enhanced parity split for 
the specialist in the cash/spot foreign currency options (``FCOs'') on 
the German mark, commonly referred to as 3D FCOs. 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 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 Commission approved the 3D FCOs for trading on March 8, 
1994.\1\ The product is an Options Clearing Corporation issued, 
European-style\2\ option that will be listed, initially, in one-week 
and two-week expirations. As an inducement for the 3D FCO specialist to 
make deep and liquid markets in this new options product, the Phlx has 
determined to provide the 3D FCO specialist with an enhanced parity 
split in all 3D FCO trades.
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    \1\See Securities Exchange Act Release No. 33732 (March 8, 
1994), 59 FR 12023 (March 15, 1994).
    \2\A European-style option may only be exercised during a 
specified time period immediately prior to expiration of the option.
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    Recently, the Commission approved two different enhanced parity 
split rules with respect to Phlx equity option specialists.\3\ The Phlx 
now proposes to amend Exchange Rule 1014(h) to adopt an enhanced parity 
split for the 3D FCO specialist. Specifically, the 3D FCO specialist 
would be entitled to receive a 50% split of the first 500 contracts in 
any trade in which the 3D FCO specialist and one or more crowd 
participants are on parity as defined in Rule 1014(h).
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    \3\See Securities Exchange Act Release Nos. 34109 (May 25, 
1994), 59 FR 28570 (June 2, 1994) (providing an enhanced parity 
split for new specialist units trading newly listed options 
classes), and 34606 (August 26, 1994), 59 FR 45741 (September 2, 
1994) (providing an enhanced parity split applying to specialists, 
other than new specialist units, for certain assigned classes).
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    The Exchange represents that customers, as they are defined in Rule 
1014(h), will not be disadvantaged by this rule. The benefits accorded 
customers under subsection (i) of that rule will not change. 
Specifically, customer bids/offers for under 100 contracts will have 
time priority over all other bids/offers. In that instance, the 3D FCO 
specialist cannot be on parity with such customer so the enhanced split 
will not apply.
    The purpose of the proposed enhanced parity split, according to the 
Phlx, is to encourage the 3D FCO specialist to make deeper markets in 
order to attract order flow to the Exchange. At the end of the first 
year, the Foreign Currency Option Committee (``Committee'') will 
conduct a review of the entitlement to the enhanced parity split and 
additional reviews will be conducted by the Committee every six months 
thereafter.
    The Exchange believes that the foregoing rule change proposal is 
consistent with Section 6 of the Act, in general, and with Section 
6(b)(5), in particular, in that it is designed to promote just and 
equitable principles of trade, prevent fraudulent and manipulative acts 
and practices, facilitate transactions in securities, remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, as well as to protect investors and the 
public interest.

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

    The Phlx does not believe that the proposed rule change will 
imposed 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

    With 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, 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. 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-94-42 and should be 
submitted by November 7, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-25557 Filed 10-14-94; 8:45 am]
BILLING CODE 8010-01-M