[Federal Register Volume 62, Number 132 (Thursday, July 10, 1997)]
[Notices]
[Pages 37111-37112]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-17985]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38808; File No. SR-Phlx-97-25]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Philadelphia Stock Exchange, Inc. Relating to Elimination 
of the Enhanced Parity Split for the Specialist in the 3D German Mark 
Foreign Currency Options

July 1, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 29, 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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to eliminate the enhanced split applicable to the 
specialist trading cash/spot German Mark (``3D'') foreign currency 
options \3\ (``FCOs'') in Exchange Rule 1014(h). The text of the 
proposed rule change is available at the Office of the Secretary, Phlx 
and at the Commission.
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    \3\ 3D FCOs are cash-settled, European-style, cash/spot FCO 
contracts on the German mark that trade in one-week and two-week 
expirations. See Securities Exchange Act Release No. 33732 (Mar. 8, 
1994), 59 FR 12023 (Mar. 15, 1994).
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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, 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

[[Page 37112]]

of these statements may be examined at the places specified in Item IV 
below. The self-regulatory organization 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
    In January, 1995, the Exchange adopted an enhanced split for its 
specialist in 3D FCOs in order to encourage the specialist to make 
deeper markets to attract order flow.\4\ The rule provides that the 
Foreign Currency Option Committee (``the Committee'') would conduct a 
review of the entitlement to the enhanced parity split at the end of 
the first year and then every 6 months thereafter. Pursuant to the most 
recent review, the Committee determined to eliminate the enhanced split 
which was only applicable to this one product traded on the Foreign 
Currency Option Floor of the Exchange. The specialist in the product 
has not objected to the elimination of the entitlement. In fact, the 
specialist firm trading this product has indicated that the enhanced 
split is not particularly useful to the firm and that the firm does not 
generally take advantage of it.\5\ In addition, the Exchange has 
represented that the order size in this product is generally not large 
enough to trigger the enhanced split.\6\ The Exchange is proposing to 
eliminate the enhancement at this time in order to study the issue of 
enhanced splits for the Foreign Currency Option Floor on a broader 
basis.\7\ By eliminating this enhanced split, parity and priority will 
be determined in accordance with Exchange Rule 119 and the remainder of 
section (h) to Rule 1014.
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    \4\ See Securities Exchange Act Release No. 35177 (Dec. 29, 
1994), 60 FR 2419 (Jan. 9, 1995).
    \5\ See letter from Michele R. Weisbaum, Vice President and 
Associate General Counsel, Phlx to David Sieradzki, Attorney, 
Commission (June 30, 1997).
    \6\ Telephone conversation between Michele R. Weisbaum, Vice 
President and Associate General Counsel, Phlx, James T. McHale, 
Special Counsel, Commission and David Sieradzki, Attorney, 
Commission (June 19, 1997). Rule 1014(h) provides that ``[t]his 
enhanced split will not apply where a customer bid/offer for under 
100 contracts has time priority.''
    \7\ The Exchange represents that it is in the process of 
considering new and different types of parity splits that, if 
adopted, would be applicable to all products traded by specialists 
on the foreign currency option floor or at least to a broader range 
of specialist traded products. Supra note 5.
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2. Statutory Basis
    The Exchange represents that the proposed rule change is consistent 
with Section 6 of the Act \8\ in general, and in particular, with 
Section 6(b)(5),\9\ 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.
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    \8\ 15 U.S.C. Sec. 78f.
    \9\ 15 U.S.C. Sec. 78f(b)(5).
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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 either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the 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 the 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 the File No. SR-Phlx-97-25 and 
should be submitted by August 1, 1997.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 97-17985 Filed 7-9-97; 8:45 am]
BILLING CODE 8010-01-M