[Federal Register Volume 60, Number 114 (Wednesday, June 14, 1995)]
[Notices]
[Pages 31336-31337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14539]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35827; File No. SR-Phlx-95-36]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., Relating to Restrictions on Exercise and the Definition 
of a European Style Option Respecting Index Options

June 8, 1995.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 6, 1995, 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 Exchange. 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).
    \2\17 CFR 240.29b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the time period in Phlx Rule 1006A 
during which restrictions on the exercise of index options may be in 
effect, making Rule 1006A consistent with a joint circular issued by 
the options exchanges in 1991.\3\ Rule 1006A would be amended to 
substitute the words ``business day'' for the words ``trading day''. 
The Exchange also proposes to delete the remainder of Rule 1006A, which 
references restrictions on exercise respecting specific index options, 
namely the Bank Index, Big Cap Index and Value Line Index. Lastly, the 
Phlx proposes to amend Rule 1000A(b)(12) to correct the definition of 
``European style option'' to state that such option contracts can be 
exercised only on the day it expires. The text of the proposed rule 
change is available at the Office of the Secretary, the Exchange, and 
at the Commission.

    \3\See e.g., CBOE Regulatory Circular RG91-11, dated January 14, 
1991.
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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. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
section (A), (B), and (C) below, of the most significant aspects of 
such statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to amend Phlx Rule 1006A 
to make it consistent with a joint circular issued by the options 
exchanges in 1991 regarding exercise restrictions, and similar 
provisions imposed by the other options exchanges and the Options 
Clearing Corporation (``OCC''). The Exchange proposes to amend Rule 
1006A to state that restrictions on exercise may be in effect until the 
opening of business on the last business day (generally Friday) prior 
to expiration (Saturday). As a result of this proposed rule change, 
restrictions on exercise would be permissible on the 

[[Page 31337]]
last trading day (Thursday) for expiring Am-settled options.
    Currently, Rule 1006A provides that restrictions on exercise may be 
in effect until the opening of business on the last trading day before 
the expiration date. The last trading day before expiration is 
generally Friday, for PM-settled options and Thursday for AM-settled 
options. Thus, the current language would permit restrictions on 
exercise to remain in effect until the opening of business on Friday 
for PM-settled options, but only until Thursday for AM-settled options. 
The Exchange proposes to amend Rule 1006A to state that restrictions on 
exercise may be in effect until the opening of business on the last 
business day before expiration, which is generally Friday for all index 
options, whether AM or PM-settled. As a result, restrictions on 
exercise would be permissible for all index options on Thursday, but 
not Friday.
    In support of this proposal, the Exchange notes that OCC Rules 
permit such restrictions on Thursday, because OCC provisions refer to 
the last ``business'' day.\4\ Additionally, the proposed rule change is 
consistent with a recent proposal by the Chicago Board Options 
Exchange, Incorporated (``CBOE'').\5\

    \4\SEE OCC By-Laws, Article VI, Section 17, Exercise 
Restrictions.
    \5\See Securities Exchange Act, Release No. 35307 (January 31, 
1995), 60 FR 7606 (February 8, 1995).
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    The Exchange also proposes to delete the remainder of Rule 1006A, 
which references restrictions on exercise respecting specific index 
options, namely the Bank Index, Big Cap Index and Value Line Index. 
These index options are European style, such that exercise is 
prohibited, by definition, until its expiration date. Any restrictions 
on exercise which may be imposed cannot be in effect on expiration 
(Saturday), because Rule 1006A would only permit such restriction until 
the opening on Friday. Thus, the restrictions on exercise in Rule 1006A 
have no effect on the ability to exercise a European style index 
option, which by definition, cannot be exercised until Saturday.
    Following a review of index rules, the Phlx has determined that 
Rule 1000A requires an amendment to correct the definition of 
``European style option'' to correspond to the comparable equity option 
provision in Rule 1000(b)(35), as well as the rules of the other 
options exchanges and the OCC.\6\ Specifically, a European style option 
can only be exercised on its expiration date.

    \6\See OCC By-Laws, Article XVII, Section 2(b), General Rights 
and Obligations of Holders and Writers of Index Options.
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    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act, in general, and furthers the objectives of 
Section 6(b)(5), in particular, in that it is designed to promote just 
and equitable principles of trade, and protect investors and the public 
interest, by coordinating the Exchange's ability to impose restrictions 
on the exercise of index options with the provisions of other options 
exchanges and the OCC.
(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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

    Because the foregoing rule change constitutes a stated policy, 
practice or interpretation with respect to the meaning, administration 
or enforcement of an existing rule of the Exchange, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and subparagraph 
(e) of Rule 19b-4 thereunder. At any time within 60 days of the filing 
of the proposed rule change, the Commission may summarily abrogate such 
rule change if it appears to the Commission that such action is 
necessary or appropriate in the public interest, for the protection of 
investors, or otherwise in furtherance of the purposes of the Act.

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 at the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of the Phlx. All 
submissions should refer to SR-Phlx-95-36 and should be submitted by 
July 5, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\

    \7\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14539 Filed 6-13-95; 8:45 am]
BILLING CODE 8010-01-M