[Federal Register Volume 60, Number 235 (Thursday, December 7, 1995)]
[Notices]
[Pages 62910-62911]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29776]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36539; International Series Release No. 895; File No. 
SR-Phlx-95-47]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Order Approving Proposed Rule Change Relating to Japanese Yen Quote 
Spread Parameters

November 30, 1995.

I. Introduction

    On August 22, 1995, the Philadelphia Stock Exchange, Inc. (``Phlx'' 
or ``Exchange'') submitted to 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 
proposal to widen the quote spread parameters applicable to Japanese 
yen options. The proposed rule change was published for comment in the 
Federal Register on September 21, 1995.\3\ No comments were received on 
the proposed rule change. This order approves the proposal.

    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\17 CFR 240.19b-4 (1994).
    \3\See Securities Exchange Act Release No. 36239 (September 15, 
1995), 60 FR 49032.
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II. Description of the Proposal

    The Phlx seeks to widen the quotation spread parameters (bid/ask 
differentials) applicable to Japanese yen options in light of the 
increased volatility and value of the underlying currency, the Japanese 
yen.\4\ The Exchange proposes to change the parameters in Rule 
1014(c)(ii) and Floor Procedure Advice (``Advice'') F-6, Option Quote 
Parameters, from $.000004, $.000006, and $.000008 to $.000006, 
$.000009, and $.000012. Under the proposal, the new quote spread 
parameters will be reflected in Rule 1014 as follows: no more than 
$.000006 between the bid and the offer for each option contract for 
which the bid is $.000040 or less; no more than $.000009 where the bid 
is more than $.000040 but does not exceed $.000160; and no more than 
$.000012 where the bid is more than $.000160.

    \4\Option quote parameters govern the width of market 
quotations, establishing the maximum widths between the bid and the 
offer for an option contract.
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    In its proposal, the Phlx notes that as the yen spot value has 
risen, the spreads between the bid and the offer in the spot price also 
have risen. For example, a spot market of 101.50 (bid)-.60 (ask) yen in 
January 1995 represented $.009852-.009842 in American terms, which is 
ten ``ticks'' wide. Comparatively, a spot market of 85.10-.20 yen in 
May 1995 represented $.011751-.011737, which is 14 ticks wide. 
Similarly, the Exchange states that the spreads in Japanese yen 

[[Page 62911]]
futures and forward contracts also have widened.

III. Discussion

    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)\5\ that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
prevent fraudulent and manipulative acts, and, in general, protect 
investors and the public interest by providing a more efficient and 
competitive market for foreign currency options.

    \5\15 U.S.C. 78f(b)(5) (1988).
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    The Commission believes that the recent significant rise in the 
value of the yen in relation to the U.S. dollar justifies amending the 
present applicable quote spread parameters. As the Japanese yen spot 
value (in relation to the U.S. dollar) has increased, the U.S. dollar 
value of each yen option contract likewise has increased. However, the 
quote spread parameters have not previously been adjusted to account 
for this movement. Setting Japanese yen option quote spread parameters 
as proposed by the Phlx should continue to facilitate tightly quoted 
markets without impairing Phlx market makers' ability to provide market 
depth and liquidity. In addition, the new quote spread parameters 
should allow the Phlx and Phlx Japanese yen option market makers to 
compete more effectively with similar over-the-counter-based products.
    Finally, the Commission notes that under Phlx Rule 1014, 
``Obligations and Restrictions Applicable to Specialists and Registered 
Options Traders,'' Japanese yen market makers are required to maintain 
a fair and orderly market and are not permitted to enter into 
transactions or make bids or offers that are inconsistent with such 
obligations. Accordingly, the Commission expects the Phlx to monitor 
trading in Japanese yen options affected by the proposal to ensure that 
there is adequate market activity in those series and to ensure that 
market makers are meeting their obligations to maintain fair and 
orderly markets.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\6\ that the proposed rule change (SR-Phlx-95-47) is approved.

    \6\15 U.S.C. 78s(b)(2) (1988).

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

    \7\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-29776 Filed 12-6-95; 8:45 am]
BILLING CODE 8010-01-M