[Federal Register Volume 61, Number 45 (Wednesday, March 6, 1996)]
[Notices]
[Pages 9001-9002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5219]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36903; File No. SR-Phlx-96-01]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the 
Philadelphia Stock Exchange, Inc. Relating to Restrictions on Exercise 
for A.M-Settled Index Options

February 28, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. Sec. 78s(b)(1), notice is hereby given that on 
January 17, 1996, 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 and 
II below, which Items have been prepared by the self-regulatory 
organization. The Phlx has requested accelerated approval for the 
proposal. This Order approves the Phlx proposal on an accelerated basis 
and solicits comments 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 Rules 1042A (and corresponding 
Options Floor Procedure Advice G-1) and 1101A to clarify their 
application to a.m.-settled index options. In addition, Phlx also 
proposes to clarify in its applicable Rule Commentary that Phlx Super 
Cap Index options trading hours extend until 4:15 p.m. The text of the 
proposed rule change is available at the Office of the Secretary, 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 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

1. Purpose
    The Exchange recently amended Rule 1006A, ``Other Restrictions on 
Options Transactions and Exercises,'' to replace the term ``business 
day'' with ``trading day'' in order to correct the application of that 
rule to a.m.-settled index options.\1\ As a result, restrictions on 
exercise are only in effect until the opening of business on the last 
business day before expiration, which is generally Friday for all index 
options. Following further review of the index options rules, however, 
the Exchange has identified two additional changes necessary to clarify 
the application of restrictions on exercise to a.m.-settled index 
options.

    \1\ See Securities Exchange Act Release No. 35827 (June 8, 
1995), 60 FR 31336 (June 14, 1995).
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    First, the Exchange proposes to amend Rule 1042A, ``Exercise of 
Option Contracts,'' to replace the term ``trading day'' with ``business 
day'' in paragraph (b).\2\ Paragraph (a) to Rule 1042A requires members 
to follow certain procedures when tendering exercise advices. Paragraph 
(b), however, states that the provisions of paragraph (a) do not apply 
on the last trading day before expiration. Although all index options 
expire on Saturday, the last trading day for a.m.-settled index options 
is Thursday. Under the current Rule, therefore, an investor who 
exercises an a.m.-settled option on Saturday by notifying his broker on 
Friday would be required to submit an exercise advice. Changing the 
term ``trading day'' to ``business day'' allows the Exchange to correct 
an unintended result and more clearly reflects that an exercise advice 
is not required for exercises of index options submitted on expiration 
Friday, whether a.m.-settled or p.m.-settled.

    \2\ Phlx proposes to make the same change in Options Floor 
Procedure Advice G-1, Exercise Requirements.
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    Second, the Exchange proposes to amend Commentary .01 to Rule 
1101A, Terms of Option Contracts, to replace the language ``including 
the business day prior to expiration'' with ``through the last trading 
day prior to expiration.'' This change is necessary because the old 
language implies that expiring a.m.-settled index options may trade on 
the Friday prior to expiration. By changing this language, the Exchange 
notes that broad-based index options to which the Commentary is 
applicable will be able 

[[Page 9002]]
to trade until 4:15 p.m. each business day, through the last trading 
day prior to expiration, which would be Friday for p.m.-settled index 
options and Thursday for a.m.-settled index options.
    The Phlx notes that Rule 1101A(c) establishes that index options 
shall trade until 4:10 p.m.. Commentary .01 to this Rule extends the 
trading session to 4:15 p.m. for certain broad-based index options. 
Accordingly, the Phlx also proposes to amend the language in Rule 
1101A(c) from ``business day'' to ``trading day'' in order to clarify 
that a.m.-settled index options which trade until 4:10 p.m. may not 
trade on the Friday prior to expiration.
    Finally, the Exchange proposes to clarify in Commentary .01 to Rule 
1101A that Super Cap Index options trade until 4:15 p.m.
2. Statutory Basis
    The Exchange believes the proposed rule changes are consistent with 
Section 6(b) of the Act in general and further the objectives of 
Section 6(b)(5) in particular in that they are designed to prevent 
fraudulent and manipulative acts and practices and to promote just and 
equitable principles of trade, and are not designed to permit unfair 
discrimination between customers, issuers, brokers and dealers.

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

    The Exchange 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Findings and Conclusions

    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).\3\ Specifically, the 
Commission notes that the change in terminology to Rules 1042A and 
1101A achieves conformity with the language contained in Phlx Rule 
1006A with respect to restrictions on exercise. As a result, exercise 
advices will not be required on the Friday before expiration, 
regardless of whether an option is a.m. or p.m.-settled, or whether it 
trades until 4:10 p.m. or 4:15 p.m. Furthermore, implementation of the 
proposal is necessary to effect the Exchange's intended procedures 
regarding exercise requirements and restrictions for index options.

    \3\ 15 U.S.C. Sec. 78f(b)(5) (1988).
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    The Commission also believes that the Exchange's proposed rule text 
clarification that trading hours for Super Cap Index options extend 
until 4:15 p.m. is reasonable. The Commission has previously approved 
the trading of Super Cap Index options to 4:15 p.m.\4\ Therefore, the 
amendment is technical in nature and does not raise any new or unique 
regulatory issues.

    \4\ See Securities Exchange Act Release No. 36369 (Oct. 13, 
1995).
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    The Commission finds good cause to approve the proposed rule 
changes prior to the thirtieth day after the date of publication of 
notice of filing thereof in the Federal Register. Specifically, the 
Commission finds that because the changes in terminology to Rules 1042A 
and 1101A simply bring these Rules into conformity with Phlx Rule 1006A 
and other options exchanges, and the Phlx rule text clarification that 
Super Cap Index Options trade until 4:15 p.m. is technical in nature, 
they do not raise any new or unique regulatory issues. Accordingly, the 
Commission believes it is consistent with the Act to approve the 
proposal 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, 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. Sec. 552, will be available for inspection and copying at 
the Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. 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-96-01 and should be 
submitted March 27, 1996.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\5\ that the proposed rule change (SR-Phlx-96-01) is hereby approved on 
an accelerated basis.

    \5\ 15 U.S.C. Sec. 78s(b)(2) (1988).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\

    \6\ 17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-5219 Filed 3-5-96; 8:45 am]
BILLING CODE 8010-01-M