[Federal Register Volume 60, Number 174 (Friday, September 8, 1995)]
[Notices]
[Pages 46879-46880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22325]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36176; International Series Release No. 847; File No. 
SR-Phlx-95-43]


Self-Regulatory Organizations; Order Approving a Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc., Relating to Customized 
Foreign Currency Options Transaction Size

August 31, 1995.
    On June 21, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to reduce the minimum transaction size for 
customized foreign currency options (``Customized FCOs'') from 200 to 
100 contracts. Notice of the proposed rule change appeared in the 
Federal Register on July 12, 1995.\3\ No comment letters were received 
on the proposed rule change. This order approves the Exchange's 
proposal.

    \1\ 15 U.S.C. 78s(b)(1) (1988).
    \2\ 17 CFR 240.19b-4 (1994).
    \3\ See Securities Exchange Act Release No. 35928 (June 30, 
1995), 60 FR 35978 (``Exchange Act Release No. 35928'').
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    On November 1, 1994, the Commission approved the Exchange's 
proposal to trade Customized FCOs.\4\ The Exchange originally imposed a 
300 contract minimum opening transaction size pursuant to Rule 
1069(a)(6). Earlier this year, the Exchange reduced the minimum size of 
opening transactions in Customized FCOs to 200 contracts.\5\ The 
Exchange believes, however, that 200 contracts is still too large for a 
significant segment of mid-sized corporations (i.e., $1-10 billion in 
market capitalization) that wish to hedge their currency risk in a 
cost-effective manner using an exchange-traded Customized FCO. The 
Exchange, therefore, now proposes to reduce the minimum opening 
transaction size for Customized FCOs to 100 contracts. At the 100 
contract level, this will still provide for substantial minimum opening 
transaction values for Customized FCOs involving all Phlx approved 
currencies.\6\ Specifically, the values for opening transactions will 
range from a low of approximately $3.6 million for Customized FCOs 
based on the Australian dollar to a high of approximately $8.0 million 
for Customized FCOs based on the ECU.\7\

    \4\ See Securities Exchange Act Release No. 34925 (November 1, 
1994), 59 FR 55720 (November 8, 1994) (``Exchange Act Release No. 
34925'').
    \5\ See Securities Exchange Act Release No. 35464 (March 9, 
1995), 60 FR 14043 (March 15, 1995).
    \6\ The currencies for which the Phlx is currently approved to 
trade FCOs are the Australian dollar, British pound, Canadian 
dollar, European currency unit (``ECU''), French franc, German mark, 
Japanese yen, Swiss franc, and U.S. dollar. Additionally, the Phlx 
has proposed to be able to trade Customized FCOs on the Italian lira 
and Spanish peseta. See Securities Exchange Act Release Nos. 35678 
(May 4, 1995), 60 FR 24945 (May 10, 1995) (notice of proposal to 
trade Customized FCOs on the Italian lira), and 35677 (May 4, 1995), 
60 FR 24941 (May 10, 1995) (notice of proposal to trade Customized 
FCOs on the Spanish peseta).
    \7\ Based on prevailing exchange rates as of May 16, 1995. See 
Exchange Act Release No. 35928, supra note 3.
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    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) \8\ in that the 
proposal is designed to promote just and equitable principles of trade, 
to prevent fraudulent and manipulative acts and practices, and to 
protect investors and the public interest. Specifically, the Commission 
believes that the proposed rule change is designed to make the 
Customized FCO market accessible to smaller corporate FCO users while 
maintaining the focus of this market towards institutional investors. 
As a result, the Commission believes that the proposal may serve to add 
liquidity to this market which would benefit all users of Customized 
FCOs.

    \8\ 15 U.S.C. 78f(b)(5) (1988).
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    Moreover, even with lowering the minimum opening transaction size 
to 100 contracts, the minimum value of an opening Customized FCO 
transaction involving any approved currency will be greater than $3 
million.\9\ The Commission believes that these levels are sufficient to 
ensure that the 

[[Page 46880]]
Customized FCO market continues to be used almost exclusively by 
institutional investors. As a result, the Commission believes that this 
proposal does not raise any regulatory concerns that were not 
adequately addressed by the Exchange when the Commission approved the 
trading of Customized FCOs.\10\

    \9\ See supra note 7 and accompanying text.
    \10\ See Exchange Act Release No. 34925, supra note 4.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-Phlx-95-43) is hereby 
approved.

    \11\ 15 U.S.C. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\

    \12\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-22325 Filed 9-7-95; 8:45 am]
BILLING CODE 8010-01-M