[Federal Register Volume 62, Number 25 (Thursday, February 6, 1997)]
[Notices]
[Pages 5662-5663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2912]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38218; File No. SR-Phlx-97-04]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Philadelphia Stock Exchange, 
Inc. Relating to a 4:02 p.m. Closing Time for Equity Options Trading

January 30, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on January 8, 1997, 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 and III below, which Items have been prepared by the self-
regulatory organization.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. Sec. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On January 29, 1997, the Exchange filed Amendment No. 1 to 
its proposal. Amendment No. 1 is a technical amendment, correcting 
rule language in Rule 1047, Commentary .03(c), which was submitted 
as Exhibit B with the rule filing. See Letter from Edith Hallahan, 
Phlx, to Janice Mitnick, Division of Market Regulations, SEC, dated 
January 29, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 101, Hours of Business, and 
Rule 1047, Trading Rotations, Halts and Suspensions, to close equity 
options trading at 4:02 p.m. Currently, equity options trade until 4:10 
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 self-regulatory organization 
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 self-regulatory organization 
has prepared summaries, set froth 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
    Since 1978, equity options have traded ten minutes longer than the 
primary market. At that time, significant delays in the reporting of 
stock prices were common; therefore, the additional ten minute period 
was necessary to receive final stock prices. These delays have now been 
reduced due to technological advances. Currently, the extra time period 
for options trading after closing prices are reported in the underlying 
equities results in equity options trading without the pricing benefit 
of continuing stock trading. The additional ten minutes also results in 
repeated automatic executions at outdated equity options prices. 
Further, not all market participants are able to respond quickly to 
changes in equity options prices between 4:00 and 4:10 p.m. In summary, 
the Exchange, in balancing the benefits of an extended trading session 
with the difficulties of trading after the underlying stock has closed, 
has determined that the benefits do not outweigh the difficulties; 
therefore, a 4:02 p.m. close for equity options is appropriate.
    The purpose of the rule change is to reduce the amount of time 
equity options trade after the close of the primary market for the 
underlying security. Under the proposal, there will be a two minute 
time period for equity options traders and investors to respond to late 
reports of closing security prices and, where warranted, to bring 
closing equity option prices in line with stock prices. The proposed 
changes to Rule 101 establish a 4:02 p.m. close for equity options, and 
expressly except index options. Reference to narrow-based (industry) 
index options trading until 4:10 p.m. is being added to Rule 101, and 
reference to broad-based index options is replacing the listing of 
specific such index options by name. Broad-based index options will 
continue to trade until 4:15 p.m. The Exchange understands that other 
option exchanges have proposed a 4:02 p.m. close for certain index 
options as well as for equity options; however, the Exchange is not 
proposing to change the closing time for its index options.
    The proposed change to Rule 1047 merely substitutes reference to 
the current close of 4:10 p.m. with the proposed 4:02 p.m. close. The 
Exchange notes that pursuant to Commentary .03 of this Rule, in unusual 
market conditions, a closing rotation after the 4:02 p.m. close may be 
conducted in an option, whether or not expiring, with the approval of 
the Options Committee. Further, the Exchange proposes to amend the rule 
to begin the closing rotation five minutes after the notice is 
disseminated. Currently under Rule 1047, Commentary .03(b), the closing 
rotation begins 10 minutes after the notice is disseminated.
2. Statutory Basis
    The proposed rule change is consistent with Section 6 of the Act in 
general, and in particular, with Section 6(b)(5), in that it is 
designed to promote just and equitable principles of trade, prevent 
fraudulent and manipulative acts and practices, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in

[[Page 5663]]

securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, as well as to 
protect investors and the public interest, consistent with Section 
6(b)(5).

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

    No written comments were 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 date of 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 self-regulatory organization consents, the Commission will:
    (A) By order approve such 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, 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 Room. Copies of such filing will also 
be available for inspection and copying at the principal office of the 
Exchange. All submissions should refer to File No. SR-Phlx-97-04, and 
should be submitted by February 27, 1997.

    For the Commission, by the Division of Market Regulations, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-2912 Filed 2-5-97; 8:45 am]
BILLING CODE 8010-01-M