[Federal Register Volume 59, Number 234 (Wednesday, December 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30030]


[[Page Unknown]]

[Federal Register: December 7, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35028; File No. SR-Phlx-94-57]

 

Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. Relating to an Enhanced Parity Split 
for Index Option Trades

November 30, 1994.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 1, 1994, the 
Philadelphia Stock Exchange, Inc. (``Phlx'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I and II 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.
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    \1\15 U.S.C. Sec. 78s(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend Exchange Rule 1014(g) and Commentary .17 
thereunder in order to provide an enhanced parity split for specialists 
trading index options. The text of the proposed rule change is 
available at the Office of the Secretary, 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

    On May 25, 1994, the Commission approved the Exchange's proposal to 
provide new options specialists units (``New Units'') trading newly-
listed equity options classes with an enhanced participation in parity 
equity option transactions (``New Specialist Split'').\2\ On August 26, 
1994, the Commission approved, as a one-year pilot program, the 
Exchange's proposal to provide an enhanced parity split in certain 
assigned equity options classes for option specialists not qualifying 
for the New Specialist Split.\3\ In each of those filings, the Phlx 
indicated that the enhanced parity splits would be applicable to equity 
options specialists, however, the Phlx represents that the intent of 
the Exchange in proposing those rules was to limit the proposals to 
options traded on the Phlx's Equity Option Floor, which would 
specifically include index options but exclude foreign currency 
options. The Exchange represents that index options are traded on the 
Equity Options Floor and that index option specialists are not separate 
and distinct from equity options specialists trading at the Exchange. 
Accordingly, the Phlx hereby proposes to amend Phlx Rule 1014(g) and 
Commentary .17 thereunder in order to expand the enhanced parity split 
proposals discussed above to expressly include transactions in index 
options traded on the Exchange's Equity Options Floor. Because the 
Exchange represents that this was the original intent of the proposals 
discussed above, the Exchange does not expect any new objections to be 
raised by amending its rules to extend the enhanced parity split to 
trades in index options.
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    \2\Specifically, this proposal allows New Units to execute 50% 
of the contracts in transactions involving newly-listed equity 
options classes where the New Unit is on parity with one Registered 
Options Trader (``ROT'') and 40% of the contracts in such 
transactions where the New Unit is on parity with two or more ROTS. 
See Securities Exchange Act Release No. 34109 (May 25, 1994), 59 FR 
28570 (June 2, 1994).
    \3\Specifically, this proposal provides that in certain 
circumstances and for certain options classes, an equity option 
specialist is eligible to receive an enhanced participation in 
parity equity option trades by being counted as two crowd 
participants. See Securities Exchange Act Release No. 34606 (August 
26, 1994), 59 FR 45711 (September 2, 1994) (order approving proposal 
on a pilot basis until August 26, 1995).
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    The Phlx believes that the proposed rule change is consistent with 
Section 6(b) of the Act in general and furthers the objectives of 
Section 6(b)(5) of the Act in particular in that it is designed to 
prevent fraudulent and manipulative acts and practices and to promote 
just and equitable principles of trade by providing specialists with 
additional incentives to make deep and liquid markets in index options.

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

    The Phlx does not believe that the proposed rule change will impose 
a 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

    The Exchange has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act.
    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, the requirements of Section 6(b)(5).\4\ Specifically, the 
Commission finds that the Phlx proposal to expand its rules regarding 
enhanced parity splits for specialists to include index options, in 
addition to equity options, does not create any regulatory concerns 
that were not adequately addressed by the Phlx when the Commission 
approved the enhanced parity splits available to specialists trading 
equity options.\5\ Index options trade on the Exchange's Equity Options 
Floor and are subject to trading rules substantially similar to those 
applicable to equity options. Accordingly, the Commission believes that 
there is no regulatory reason to distinguish between equity and index 
options with regard the availability of an enhanced participation for 
specialists in parity option transactions.
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    \4\15 U.S.C. Sec. 78f(b)(5) (1988).
    \5\See supra notes 2 and 3.
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register in order to provide 
specialists trading index options with the same benefits available to 
specialists trading equity options. Additionally, because one of the 
enhanced parity split proposals was approved as a one-year pilot 
program,\6\ the Commission believes it is appropriate to accelerate 
approval of the proposed rule change to provide the Exchange with as 
much time as possible in order to gather data on the effect and utility 
of the pilot program prior to its expiration. Accordingly, the 
commission believes it is consistent with Sections 6(b)(5) and 19(b)(2) 
of the Act to approve the proposed rule change on an accelerated basis.
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    \6\See supra note 3.
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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-94-57 and should be 
submitted by December 28, 1994.
    It is therefore ordered, Pursuant to Section 19(b)(2) of the Act\7\ 
that the proposed rule change (SR-Phlx-94-57), as amended, is hereby 
approved.
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    \7\15 U.S.C. Sec. 78s(b)(2) (1988).

    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) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-30030 Filed 12-6-94; 8:45 am]
BILLING CODE 8010-01-M