[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