[Federal Register Volume 61, Number 32 (Thursday, February 15, 1996)]
[Notices]
[Pages 6054-6056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-3360]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36822; Filed No. SR-Phlx-95-88]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change and Amendment 
Nos. 1 and 2 to the Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., Relating to Trading Rotations, Halts or Reopenings

February 8, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 12b-4 thereunder,\2\ notice is hereby given that 
on December 26, 1995, the (``Phlx'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Exchange submitted Amendment No. 1 to the 
Commission on January 29, 1996.\3\ The Exchange submitted Amendment No. 
2 to the Commission on February 8, 1996.\4\ The Commission is approving 
this proposal, as amended, on an accelerated basis.

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange proposes to further amend 
Phlx Rule 1047A and Floor Procedure Advice G-2 to state that in 
addition to the requirement that 75% of the current index value must 
be open for trading on the primary market before an opening rotation 
in Super Cap Index options can commence, at least 3 stocks 
underlying the Super Cap Index must also be open for trading on the 
primary market. See Letter from Edith Hallahan, Special Counsel, 
Phlx, to Michael Walinskas, Branch Chief, Office of Market 
Supervision (``OMS''), Division of Market Regulation (``Market 
Regulation''), Commission, dated January 29, 1996 (``amendment No. 
1'').
    \4\ The Exchange proposes to further amend both Rule 1047A and 
Floor Procedure Advice G-2 by incorporating the opening rotation 
requirements for Super Cap Index options into Exchange Requirements 
regarding re-openings. See Letter from Gerald O'Connell, First Vice 
President, Market Regulation and Trading Operations, Phlx, to 
Michael Walinskas, Branch Chief, OMS, Market Regulation, Commission, 
dated February 8, 1996 (``amendment No. 2'').
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I. Self-Regulatory Organization's Statement of the terms of 
Substance of the Proposed Rule Change

    The Exchange proposed to amend Floor Procedure Advice (``Advice'') 
G-2, Trading Rotations, Halts or Reopenings, to add reference to Super 
Cap Index (``Index'') options to correspond to recent amendments to 
Rule 1047A. Specifically, paragraph (a)(i) is proposed to be amended to 
add Super Cap Index options, providing that the opening rotation for 
Super Cap Index options may be held after underlying securities 
representing 75% of the current index value of all securities 
underlying the Index have opened for trading on the primary market, and 
at least 3 stocks underlying the Index are open for trading on the 
primary market.\5\ The second paragraph will continue to require that 
an opening rotation be held as soon as practicable, respecting both 
industry index and Super Cap Index options, once underlying securities 
representing 90% of the current index value of all the securities 
underlying the index have opened for trading on the primary market.

    \5\ See Amendment no. 1, supra note 3.
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    The Exchange also proposes to amend provisions regarding reopenings 
in both Rule 1047A and Floor Procedure Advice G-2 by incorporating the 
requirements for a Super Cap Index opening rotation. Thus, the 
underlying securities representing 75% of the current Index value and 
three stocks must be open for trading on the primary market before 
Super Cap Index options may reopen after a trading halt.\6\

    \6\ See Amendment No. 2, supra note 4.
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    The Exchange also proposes to correct the recently approved text to 
Rule 1047A respecting Super Cap Index options opening rotations to 
state that 90% of the ``current index value'' of all the securities 
underlying the index must have opened for trading on the primary market 
in order for an opening to be required. Currently, the text incorrectly 
refers to 90% of the securities. The entire sentence referring to Super 
Cap Index options is proposed to be deleted, thus deleting the 
incorrect text, and replacing it with new language pertaining to the 
new ``75% of the current Index value, and 3 underlying stocks'' 
requirements. The text of the proposed rule change is available at the 
Office of the Secretary, the Exchange, and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In this 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.

[[Page 6055]]


(A) Self-Regulatory Organization's Statement of the Propose of, and 
Statutory Basis for, the Proposed Rule Change

    The Commission recently approved the listing and trading of Phlx 
Super Cap Index options, noting that the Index is not classified as 
either an ``industry'' or a ``market'' index.\7\ Thus, the Exchange 
amended various rules, including Rule 1047A, respecting trading 
rotations, halts and reopenings. Currently, Rule 1047A, and the 
corresponding Advice G-2, provide that the opening rotation for 
industry index options may be held after underlying securities 
representing 50% of the current index value of all the securities 
underlying the index have opened for trading on the primary market. 
Further, once underlying securities representing 90% of the current 
index value of all the securities underlying the index have opened for 
trading on the primary market, the opening rotation shall be held as 
soon as practicable. With respect to a market index, the opening 
rotation shall be held at or as soon as practicable after the opening 
of business on the Exchange.

    \7\ See Securities Exchange Act Release No. 36369 (October 13, 
1995), 60 FR 54274 (October 20, 1995) (SR-Phlx-95-22) (``Super Cap 
Index Options Approval Order'').
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    Rule 1047A was amended to state that the opening rotation for Super 
Cap Index options may be held only after underlying securities 
representing 74% of the current index value of all securities 
underlying the index have opened for trading on the primary market.\8\ 
Moreover, an opening rotation is required to be held as soon as 
practicable, respecting both industry index and Super Cap Index 
options, once underlying securities representing 90% of the current 
index value of all the securities underlying the index have opened for 
trading on the primary market.

    \8\ In addition to the 75% requirement for Super Cap Index 
options, the Exchange will also require that at least 3 stocks 
underlying the Super Cap Index must also be open for trading on the 
primary market before the opening rotation may commence. See 
Amendment No. 1, supra note 3.
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    The Exchange is proposing at this time to incorporate these changes 
into Advice G-2. At the time Rule 1047A was being amended, the 
corresponding change to Advice G-2 was inadvertently omitted.\9\ The 
Exchange is also proposing to correct a portion of Rule 1047A, which 
states that once 90% of the securities of the Super Cap Index are open 
for trading, the opening rotation for the options must be held. The 
corrected text would require that 90% of the current index value of the 
Index must be open.

    \9\ See Super Cap Index Options Approval Order, supra note 7.
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    The Exchange also proposes to amend provisions regarding reopenings 
in both Rule 1047A and Floor Procedure Advice G-2 by incorporating the 
requirements for a Super Cap Index opening rotation. Thus, the 
underlying securities representing 75% of the current Index value and 
three stocks must be open for trading on the primary market before 
Super Cap Index options may reopen after a trading halt.\10\

    \10\ See Amendment No. 2, supra note 4.
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    The Exchange notes that the remainder of Rule 1047A continues to 
apply to Super Cap Index options. For instance, modified rotations/SORT 
procedures are governed by paragraph (b), halts by paragraph (c), and 
closing rotations are not required for expiring options, pursuant to 
paragraph (e).
    The Exchange believes that 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 in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and is not designed to permit unfair 
discrimination between customers, issuers, brokers or dealers.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
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. Commission's Findings and Order Granting Accelerated Approval 
of the Proposed Rule Change

    The Exchange has requested that the proposed rule change be given 
accelerated effectiveness pursuant to Section 19(b)(2) of the Act in 
order to promptly correct both Rule 1047A and Advice G-2 respecting 
Super Cap Index options. 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) thereunder. 
Specifically, the Commission believes that the proposed rule change is 
appropriate because it makes Floor Procedure Advice G-2 consistent with 
recent amendments to Phlx Rule 1047A. The Commission notes further that 
the proposed rule change ensures that in addition to requiring that at 
least 75% of the current Super Cap Index value is open for trading on 
the primary market, the Exchange will require that at least 3 of the 5 
components will be open for trading. Given the small number of Index 
components, the Commission believes that this requirement is important 
to ensure that trading in the Index options only commences, or reopens 
following a trading halt, if at least a majority of the Index 
components are also open for trading.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of the notice thereof in the Federal Register. For reasons 
discussed above, the Commission notes that the proposed rule change 
does not raise any new or unique regulatory issues and is consistent 
with changes recently approved by the Commission for the Super Cap 
Index in Phlx Rule 1047A. The addition of the minimum 3 stock 
requirement also will strengthen the ``75% of current index value'' 
requirement by ensuring that trading in the Super Cap Index only 
commences, or reopens following a trading halt, when a sufficient 
number of component stocks have opened, or reopened for trading. 
Accordingly, the Commission believes that it is consistent with 
Sections 6(b) (5) and 19(b)(2) of the Act to approve this proposed rule 
change on an accelerated basis.

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 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, NW., 
Washington, DC 20549. Copies of such filing will also be available for 

[[Page 6056]]
inspection and copying at the principal office of the Phlx. All 
submissions should refer to File No. SR-Phlx-95-88 and should be 
submitted by March 7, 1996.
    It is therefore ordered, pursuant to Section 19(b) (2) of Act,\11\ 
that the proposed rule change (File No. SR-Phlx-95-88), as amended, is 
hereby approved on an accelerated basis.

    \11\ 15 U.S.C. 78s(b) (2).
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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).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-3360 Filed 2-14-96; 8:45 am]
BILLING CODE 8010-01-M