[Federal Register Volume 60, Number 219 (Tuesday, November 14, 1995)]
[Notices]
[Pages 57257-57259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-27992]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36461; File No. SR-Phlx-95-38]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc., Relating to an 
Increase in Position and Exercise Limits on the Phlx National Over-the-
Counter Index

November 6, 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 September 25, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') filed with the Securities Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.

    \1\ 15 U.S.C. Sec. 78s (b)(1) (1988).
    \2\ 17 CFR 240.19b-4 (1994).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx, pursuant to Rule 19b-4 of the Act, proposes to increase 
the 

[[Page 57258]]
position \3\ and exercise limits \4\ for options (``XOC'') on its 
National Over-the-Counter Index (``Index'') \5\ from 17,000 to 25,000 
contracts.

    \3\ Position limits impose a ceiling on the aggregate number of 
option contracts on the same side of the market that an investor, or 
group of investors acting in concert, may hold or write. See Phlx 
Rule 100A(a)(ii).
    \4\ Exercise limits impose a ceiling on the aggregate long 
positions in option contracts that an investor, or group of 
investors acting in concert, can or will have exercised within five 
consecutive business days. See Phlx Rule 1002A.
    \5\ The Index is a capitalization-weighted market index composed 
of the 100 largest capitalized stocks trading over-the-counter.
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    The text of the proposed rule change is available at the Phlx and 
at the Commission.

I. 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 Exchange 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

1. Purpose
    The purpose of the proposed rule change is to raise XOC position 
and exercise limits to 25,000 contracts in order to increase liquidity, 
which should be enhanced by the ability to hold a higher position. In 
addition, the Exchange seeks to remain competitive with broad-based 
index option products traded on other exchanges.
    Currently, the position limit for XOC options is 17,000 contracts. 
In early 1994, the Commission approved a 70% increase to the Phlx's 
position limit from 10,000 to 17,000 contracts.\6\ The Exchange notes 
that a proposal was recently filed by the Pacific Stock Exchange, Inc. 
(``PSE'') to raise the position limit on its Technology Index to 37,500 
contracts.\7\ In addition, most market (broad-based) index options have 
position limits of at least 25,000 contracts,\8\ with certain products 
trading with even higher limits.\9\ Thus, the proposed rule change is 
intended to keep the Phlx in line with position limits of index options 
traded on other exchanges.

    \6\ Securities Exchange Act Release No. 33634 (February 17, 
1994), 59 FR 9263 (February 25, 1994) (File No. SR-Phlx -93-07). 
This increase corresponded to the listing of options on the Nasdaq 
100 Index (``NDX'') on the Chicago Board Options Exchange, Inc. 
(``CBOE'') with a position limit of 25,000 contracts.
    \7\ See Securities Exchange Act Release No. 36146 (August 23, 
1995), 60 FR 45509 (August 31, 1995) (File No. SR-PSE-95-18).
    \8\ See, e.g., American Stock Exchange, Inc.'s (``Amex'') EUR-
25,000 contracts, HKO-25,000 contracts, JPN-25,000 contracts; and 
CBOE's NDX-25,000 contracts.
    \9\ See, e.g., CBOE's SPX-45,000 contracts, RUT-50,000 
contracts; Amex's XII-45,000 contracts, XMI-34,000 contracts; New 
York Stock Exchange, Inc.'s (``NYSE'') NYA and NNA--45,000 contracts 
each.
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    XOC options have been trading on the Exchange since 1985.\10\ The 
Index value is currently at 868,\11\ with volume having increased 
sharply since 1991, and consistently since 1993.\12\ At the current 
position limit, the aggregate dollar value of the maximum permissible 
XOC position is approximately $1.5 billion.\13\ With the limit raised 
to 25,000 contracts, the aggregate dollar value would be increased to 
approximately $2 billion.\14\ The Exchange believes that this compares 
with the values of other exchanges' broad-based index options,\15\ as 
well as its own.\16\

    \10\ Securities Exchange Act Release No. 22044 (May 17, 1985), 
50 FR 21532 (May 24, 1985).
    \11\ This value was recorded on September 14, 1995.
    \12\ XOC volume January-June 1995 was 167,894 contracts, 
compared to 158,228 contracts January-June 1993.
    \13\ The aggregate dollar value of the maximum position is 
calculated by multiplying the Index value by the multiplier by the 
position limit as follows: 868  x  100  x  17,000 = $1,475,600,000.
    \14\ 868  x  100  x  25,000 = $2,170,000,000.
    \15\ These values were recorded on June 27, 1995:

    CBOE: OEX 520  x  100  x  25,000 = $1,300,000,000
    CBOE: SPX 545  x  100  x  45,000 = $2,452,500,000
    CBOE: RUT 281  x  100  x  50,000 = $1,405,000,000
    CBOE: NDX 534  x  100  x  25,000 = $1,335,000,000
    Amex: XMI 477  x  100  x  34,000 = $1,621,800,000
    PSE: WSX 363  x  100  x  37,500 = $1,361,250,000
    NYSE: NYA 292  x  100  x  45,000 = $1,314,000,000
    \16\ VLE: 518  x  100  x  25,000 = $1,295,000,000.
    TPX: 482  x  100  x  25,000 = $1,205,000,000.
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    Recently, the Exchange filed a separate proposed rule change to 
conduct a ``two-for-one split'' of the Index, such that the value will 
be reduced by one-half.\17\ For example, with the Index at 868, the new 
Index value after the split would be 434. At the current position 
limit, the aggregate dollar value of the maximum permissible post-split 
XOC position would be approximately $700 million.\18\ With the limit 
raised to 25,000 contracts, the aggregate dollar value of a post-split 
position would be approximately $1 billion.\19\ The Exchange believes 
that these post-split values also compare with the values of other 
exchanges' broad-based index options,\20\ as well as its own.\21\

    \17\ See File No. SR-Phlx-95-61.
    \18\ 434 x 100 x 17,000=$737,000,000.
    \19\ 434 x 100 x 25,000=$1,085,000,000.
    \20\ See supra note 15. The Exchange notes that post-split the 
maximum size of the proposed XOC position would be lower than most 
other broad-based index options.
    \21\ See supra note 16.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act in general and furthers the objectives of 
Section 6(b)(5) in particular \22\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, and to promote just and 
equitable principles of trade, as well as to protect investors and the 
public interest.

    \22\ 15 U.S.C. Sec. 78f(b)(5) (1988).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx does not believe that the 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 either 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 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 Phlx consents, the Commission will:
    (A) By order approve the 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, 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 

[[Page 57259]]
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. Sec. 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 also will be available for inspection and copying at the 
principal office of the Phlx. All submissions should refer to File No. 
SR-Phlx-95-38 and should be submitted by December 5, 1995.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\

    \23\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-27992 Filed 11-13-95; 8:45 am]
BILLING CODE 8010-01-M