[Federal Register Volume 60, Number 167 (Tuesday, August 29, 1995)]
[Notices]
[Pages 44927-44928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21357]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36131; International Series Release No. 844 File No. 
SR-Phlx-95-52]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Customized 
Expiration Dates for Customized Foreign Currency Options

August 22, 1995.
    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 July 27, 
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 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 proposes to amend Exchange Rule 1069(a) in order to offer 
the ability to trade customized foreign currency options (``Customized 
FCOs'') with any expiration date up to two years from the date of 
issuance. 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 

[[Page 44928]]
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 
Statutory Basis for, the Proposed Rule Change

    On November 1, 1994, the Commission approved the Exchange's 
proposal to trade Customized FCOs.\1\ Customized FCOs provide users of 
the Exchange's foreign currency options (``FCOs'') markets with the 
ability to customize the strike price and quotation method and to 
choose any underlying and base currency combination out of all 
Exchange-listed currencies, including the U.S. dollar, for their FCO 
transactions. The Phlx represents that Customized FCOs were introduced 
to attract institutional customers who enjoy the flexibility and 
variety offered in the over-the-counter foreign currency market but who 
prefer the benefits attributed to an exchange auction market for 
hedging their exchange rate risks.

    \1\See Securities Exchange Act Release No. 34925 (November 1, 
1994), 59 FR 55720 (November 8, 1994).
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    The Exchange now proposes to add a new feature to Customized FCOs--
customized expiration dates. Presently, users can only trade Customized 
FCO contracts with expiration dates corresponding to those for non-
Customized FCOs pursuant to Exchange Rule 1012. Thus, Customized FCO 
contracts with mid-month and end-of-month expirations at 1, 2, 3, 6, 9, 
12, 18, and 24 months may be traded.
    Under this proposal, Customized FCO contracts expiring on any 
business day (excluding Exchange holidays (e.g., Memorial Day) and 
Exchange-designated holidays (e.g., Boxing Day)) in any month up to two 
years from the date of issuance would be available. The Exchange 
represents that institutions and multinational corporations will thus 
be able to hedge their exchange rate exposure more accurately by 
trading a contract that expires on any trading day that they choose.
    Under the proposal, any Customized FCO contract opened with a 
customized expiration date will cease trading at 9:00 a.m., 
Philadelphia time, on its expiration date and will expire at 10:15 
a.m., Philadelphia time, on that date. Customized FCOs with expiration 
dates pursuant to Phlx Rule 1012 (i.e., Customized FCOs with expiration 
dates corresponding to the expiration dates for non-Customized FCOs) 
will not follow this procedure. These option contracts will still cease 
trading at 2:30 p.m., Philadelphia time, on their expiration dates, and 
expire at 11:59 p.m., Philadelphia time, on those dates, even if 
intentionally or unintentionally designated as a Customized FCO with a 
customized expiration date. New series of Customized FCOs with ``same 
day'' expiration dates may not be opened, but open positions can be 
reduced or increased on their expiration date. The Exchange represents 
that the Options Clearing Corporation (OCC) will use a pro rata 
assignment process instead of the current random assignment process for 
Customized FCOs with customized expiration dates.
    The Exchange believes that the proposed rule change 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, and protect investors and the public interest by 
offering users of FCOs the ability to customize the expiration dates of 
the Customized FCOs in order to better hedge their exchange rate risks.
(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that this 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, 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-95-52 and should be 
submitted by September 19, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\

    \2\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-21357 Filed 8-28-95; 8:45 am]
BILLING CODE 8010-01-M