[Federal Register Volume 62, Number 79 (Thursday, April 24, 1997)]
[Notices]
[Pages 20055-20056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-10614]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38527; International Series Release No. 1075; File No. 
SR-PHLX-97-07]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Regarding 3D Foreign 
Currency Option Holiday Expirations

April 18, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 14, 1997, the 
Philadelphia Stock Exchange, Inc. (``PHLX'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``SEC'' or ``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The PHLX proposes not to list any 3D foreign currency options that 
would expire during the period December 20 through and including 
January 2 of each year. Additionally, the Exchange proposes to adopt a 
list of holidays and bank holidays which, if they fall on a Monday, 
would cause the 3D foreign currency options scheduled to expire that 
day to expire the next business day. The holidays are: Martin Luther 
King, Jr. Day; Memorial Day; Presidents Day; Independence Day; Easter 
Monday; Labor Day; May Day; Columbus Day and Veterans Day.

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 Exchange 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 Exchange 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

    3D Foreign Currency Options (``3D FCOs'') are presently traded on 
the PHLX on the German mark and the Japanese yen.\2\ These are cash 
settled options that have an expiration every Monday at 11:59 p.m. 
Eastern Time (or the following business day if Monday is a holiday). 
The settlement value is based on a formula which averages random 
samples of bids and offers from contributor banks. Experience with the 
3D FCO on the German mark over the last two years has shown that it is 
often difficult to gather enough updated quotes during the Christmas 
and New Year's weeks each year. Thus, the integrity of the derived 
settlement value may be called into question. Accordingly, the Exchange 
has determined not to list for trading any series of 3D FCOs which 
would expire between December 20 each year and January 2 of the 
following year. This year, the last expiration date of 3d FCOs in 
December would occur on December 15, 1997, and the next one would occur 
on January 5, 1998.
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    \2\ The Exchange has traded 3D German marks since September of 
1994. See Securities Exchange Act Release No. 33732 (March 8, 1994), 
59 FR 12023 (March 15, 1994). The Exchange recently started trading 
3D options on the Japanese yen on February 24, 1997. See Scurities 
Exchange Act Release No. 36505 (Nov. 22, 1995), International Series 
Release No. 889, 60 FR 61277 (Nov. 29, 1995).
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    The second purpose of this rule change is to adopt a permanent list 
of holidays, so that if any of these holidays occur on a Monday, it 
would cause the expiration of the 3D FCOs to occur on the following 
business day pursuant to Exchange Rule 1000(b)(21)(iii).\3\ By adopting 
a permanent schedule, it will allow the Exchange and investors to know 
for certain, in advance, when a holiday expiration will occur. The 
holidays on the list were chosen because they are either U.S. bank 
holidays or European bank holidays (May Day). On those days, the 
interbank foreign exchange participants which provide quotations for 
the settlement value are not open for business so it would be very 
difficult to obtain an adequate settlement value. This list of holidays 
will be published to the membership in a circular each year and weekly 
expiration memos also note when certain options expire on a day other 
than a Monday due to a holiday.
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    \3\ The rule originally required expirations to fall back to the 
preceding business day (usually Friday) when Monday was a holiday 
but was changed so that the options would still capture weekend 
risk. See Securities Exchange Act Release No. 35097 (Dec. 13, 1994), 
59 FR 65559 (Dec. 20, 1994).
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    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 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 by adopting 
policies regarding 3D foreign currency option expirations which allow 
the Exchange to forego or postpone expirations on days when the 
integrity of the settlement value may be in question.

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

    The PHLX 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 either solicited or received.

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 PHLX consents, the Commission will:

[[Page 20056]]

    (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, 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 Room. 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-97-07 and should 
be submitted by May 15, 1997.

    For the Commission, by the Division of Market Regulation, 
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. 97-10614 Filed 4-23-97; 8:45 am]
BILLING CODE 8010-01-M