[Federal Register Volume 62, Number 12 (Friday, January 17, 1997)]
[Notices]
[Pages 2707-2708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1217]
[[Page 2707]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38157; File No. SR-PHLX-96-46]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Listing and Trading of European-Style Options on the
Philadelphia Stock Exchange Semiconductor Index
January 10, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),1 notice is hereby given that on December 18, 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, II, III below, which Items have
been prepared by PHLX. On December 30, 1996, and January 6, 1997, PHLX
amended the filing (``Amendment No. 1'' and ``Amendment No. 2,''
respectively).2 The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Letters from Nandita Yagnik, Esq., New Product Development,
PHLX, to Margaret Blake, Office of Supervision, Division of Market
Regulation, Commission (December 23, 1996 and January 2, 1997).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
PHLX proposes to list and trade European-style index options 3
and LEAPS4 on the PHLX Semiconductor index. The European-style
index options would trade side-by-side with the existing American-style
Semiconductor index options.5 With the exception of the exercise
style, the two indices are otherwise identical.6
---------------------------------------------------------------------------
\3\ A European-style option may be exercised only during a
specified period before the option expires.
\4\ LEAPS are long-term index options having up to 36 months to
expire.
\5\ See Securities Exchange Act Release No. 34546 (August 4,
1994) 59 FR 43881 (order approving the listing and trading of
options and long term options on the PHLX Semiconductor Index).
\6\ A list of the specific stocks together with their price,
market value, and weight in the index is attached as Exhibit B to
the filing and is available for review in the Public Reference
Section of the Commission, or the principal office of the PHLX.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, PHLX 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. 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
PHLX proposes to list and trade European-style options on PHLX's
Semiconductor index.7 This index would trade side-by-side with the
American-style Semiconductor index options presently listed and trading
on the Exchange. The proposed index options would have the same
specifications as the American-style index options with the exception
of the exercise style.8 PHLX would differentiate the proposed
European-style Semiconductor index options by using the symbol SXE,
while the symbol for the American-style index options would remain SOX.
The Exchange will provide notice to its membership and the public prior
to the effectiveness of this filing emphasizing the difference between
the symbols and the exercise style of both index options. Following
Commission approval, the Exchange agrees that on a quarterly basis, it
will notify its membership of the differentiation between the two index
options, their exercise styles, and the aggregation of position limits
for European-style and American-style options on PHLX's Semiconductor
index.
---------------------------------------------------------------------------
\7\ The Semiconductor index is a price weighted index consisting
of 16 stocks of companies listed on the New York or NASDAQ stock
exchanges which are primarily involved in the design, manufacture,
sale and distribution of Semiconductors used in computer and other
electronic device manufacturing. As of the close of trading on
October 14, 1996 the index had a value at 195.70. The Semiconductor
index had a two for one split on July 24, 1995.
\8\ The European-style options on PHLX's Semiconductor index
will be a.m. settled like the American-style options currently
trading on the Semiconductor index.
---------------------------------------------------------------------------
The Exchange received numerous customer requests for a European-
style Semiconductor Index option indicating that many investors prefer
to trade index options that cannot be exercised except on the last
trading day prior to expiration. European-style index options have
certain advantages, including the elimination of the risk of early
exercise. For example, investors holding spread positions would not
have to be concerned that one leg of a short position can be exercised
prior to expiration. The elimination of the early exercise also allows
the investor to engage in long range planning and long range
strategies. However, the Exchange also recognizes the great success of
the existing American-style option which allows those investors who
like the early exercise feature to have that ability.
The exercise price of the options will be set at 5 point intervals.
Additional exercise prices will be added in accordance with PHLX Rule
1101A(a). The last trading day for expiring contracts will be the
Thursday before the third Friday of the expiration month. PHLX will
trade consecutive and cycle month series of the options pursuant to
Rule 1101A. Specifically, there will be three expiration months from
the March, June, September, December cycle plus at least two additional
near term months. LEAPS will also be traded on the Index pursuant to
Exchange Rule 1101A(b)(iii). The Semiconductor index is an industry
index, and therefore the PHLX will employ position limits and exercise
limits pursuant to PHLX Rules 1001A(b)(i) and 1002A respectively. The
position and exercise limits will be aggregated with the American-style
index options presently trading on the Semiconductor index. Therefore,
the aggregated position limit will be 15,000 contracts.9 The
options will trade during the hours of 9:30 a.m. and 4:10 p.m. eastern
time.
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 37863 (October 28,
1996), 61 FR 56599 (order approving an increase in Narrow-Based
index option position and exercise limits).
---------------------------------------------------------------------------
The options will be traded pursuant to current PHLX rules governing
the trading of the index options, particularly PHLX Rules 1000A through
1102A and generally, PHLX Rules 1000 to 1072. The Exchange also
represents that surveillance procedures currently used to monitor the
trading in each of the Exchange's other index options will also be used
to monitor trading in options on the Index. These procedures include
having complete access to the trading activity in the underlying
securities which are all traded on either the NYSE or NASDAQ. In
addition, the Intermarket Surveillance Group Agreement (``ISG
Agreement'') dated July 14, 1983, as amended on January 29, 1990, will
be applicable to the trading of options on the index.
PHLX believes the proposed rule change is consistent with Section 6
of the Act in general, and in particular, with Section 6(b)(5),10
in that it is designed to promote just and equitable principles of
trade, facilitate transactions in securities, while protecting
investors and the public
[[Page 2708]]
interest. Specifically the Exchange believes that the proposal provides
investors with a choice that allows the investor to choose the exercise
style most suitable to their investment needs. In addition, the
Exchange believes that the proposal will not create investor confusion
regarding the two indices because of the difference in the symbols
representing the two index options.
---------------------------------------------------------------------------
\10\ 15 U.S.C. Sec. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
PHLX believes that the proposal does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change shall become operative 30 days after the
date of filing the amended proposal,\11\ or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest pursuant to section 19(b)(3) of the Securities
Exchange Act of 1934 and subparagraph (e) of Securities Exchange Act
Rule 19b-4. At any time within 60 days of the filing of such proposed
rule change, the Commission may summarily abrogate such rule change if
it appears to the Commission that such action is necessary or
appropriate in the public interest for the protection of investors or
otherwise in furtherance of the purposes of the Securities Exchange Act
of 1934.
---------------------------------------------------------------------------
\11\ PHLX submitted the last amendment on January 6, 1997 and
therefore the 30 days will be calculated from this date.
---------------------------------------------------------------------------
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 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 in
the Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of PHLX. All submissions
should refer to File No. SR-PHLX-96-46 and should be submitted by
February 7, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\12\
---------------------------------------------------------------------------
\12\ 17 CFR 200.30-3(a)(12) (1996).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-1217 Filed 1-16-97; 8:45 am]
BILLING CODE 8010-01-M