[Federal Register Volume 62, Number 104 (Friday, May 30, 1997)]
[Notices]
[Pages 29385-29386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14121]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38667; International Series Release No. 1084; File No.
SR-Phlx-97-22]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change Relating to the Trading of
Customized Foreign Currency Options on the Mexican Peso
May 22, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on May 2, 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 Phlx. On May 21, 1997, Phlx amended the
filing.\2\ 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. 78s(b)(1).
\2\ Letter from Nandita Yagnick, CBOE, to Margaret Blake,
Division of Market Regulation, Commission (May 21, 1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to Rule 19b-4 of the Act,\3\ Phlx proposes to amend its
rules to accommodate the trading of customized foreign currency options
on the Mexican peso.\4\
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\3\ 17 CFR 240.19b-4.
\4\ The text of the proposed changes to Exchange Rules 722,
1000(b) (13) and (15), 1009, 1014, 1033, 1034 and 1069 is attached
as Exhibit B to File No. SR-Phlx-97-22, and is available for review
in the principal office of Phlx and in the Public Reference Room of
the Commission.
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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
The Exchange presently offers listed foreign currency option
contracts on the British pound, French franc, Swiss franc, Japanese
yen, Canadian dollar, Australian dollar, German mark and the European
Currency Unit. Since November 1994, the Exchange has offered the
ability to trade customized contracts on all currencies in relation to
the U.S. dollar or in relation to each other.\5\ In 1995, the Exchange
listed for trading customized options on the Italian lira and the
Spanish peseta.\6\ The Exchange now proposes to list and trade
[[Page 29386]]
customized options on the Mexican Peso pursuant to Phlx Rule 1069. The
Exchange requests approval to trade the peso only against the U.S.
dollar and the Canadian dollar. The Exchange wishes to capitalize upon
Mexico's position near the forefront of the world's emerging markets,
as well as the increased activity in Mexican equities and derivative
securities based on Mexican markets.
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\5\ See Securities Exchange Act Release No. 34925 (November 1,
1994), 59 FR 55720 (November 8, 1994).
\6\ See Securities Exchange Act Release No. 36255 (September 20,
1995), 60 FR 50229 (September 28, 1995).
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Because the peso would only trade as a customized contract, there
would be no continuously quoted series of peso contracts. Rule
1069(a)(1) provides that customized options contracts may be traded on
any approved underlying foreign currency pursuant to Rule 1009.
Therefore, the Exchange proposes to amend Rule 1009 to add the Mexican
peso to the list of approved underlying foreign currencies. Pursuant to
Rule 1069(a)(1)(B), users would be able to trade customized contracts
between the Mexican peso (``MXP'') and the U.S. dollar (``USD'') in
U.S. terms (USD/MXP), or as an inverse contract (MXP/USD). The contract
size for the customized contract in U.S. terms would be 250,000 MXP.
The premium will be .00001 USD per unit or 2.50 USD for an option
contract having a unit of trading of 250,000 of MXP. The contract size
for the inverse would be 50,000 USD. The premium will be .0001 MXP per
unit or 5.00 MXP for an option contract having a unit of trading of
50,000 USD.
No cross rate on the peso would be offered at this time except for
the Mexican peso against the Canadian dollar (``CAD''). The contract
size for the cross-rate (CAD/MXP) would be 250,000 MXP. The premium
will be .00001 CAD per unit or 2.50 CAD for an option contract having a
unit of trading of 250,000 MXP. The contract size for the cross-rate
(MXP/CAD) would be 50,000 CAD. The premium will be .0001 MXP per unit
or 5.00 MXP for an option contract having a unit of trading of 50,000
CAD.
Consistent with Exchange Rule 1069(j), no quote spread parameters
will apply to these contracts. The Exchange also proposes to amend
Rules 1033 and 1034 to explain how premiums will be quoted and what the
minimum fractional change will be for USD/MXP.
The Exchange believes that the customer margin requirements for the
MXP contracts should be 8%. The Exchange represents that this margin
level covers at least 97.5% of all seven day price movements over the
last three years.\7\
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\7\ The frequency distributions to support this determination
are attached as Exhibit C to File No. SR-Phlx-97-22.
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The Exchange believes the proposed rule change is consistent with
Section 6(b)(5) of the Act,\8\ 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, and processing information
with respect to and facilitating transactions in securities to remove
impediments to and perfect the mechanism of free and open market and a
national market system. The Exchange believes the proposed rule change
will also protect investors and the public interest by offering
investors the ability to trade options on a major international
currency in an auction market environment with all of the attendant
protections as an alternative to trading it over-the-counter. In
addition the Exchange believes the proposed rule filing provides an
additional tool for hedgers to reduce additional risk of currency
volatility in the Mexican markets.
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\8\ 15 U.S.C. Sec. 78f(b)(5).
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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
Comments were neither solicited nor 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 or 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:
(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. 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-97-22 and should be submitted by June
20, 1997.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
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\9\ CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-14121 Filed 5-29-97; 8:45 am]
BILLING CODE 8010-01-M