[Federal Register Volume 62, Number 153 (Friday, August 8, 1997)]
[Notices]
[Pages 42848-42849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20911]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-38894; File No. SR-Phlx-97-30]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Doubling the Value 
for the Phlx Oil Service Index

August 1, 1997.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on June 27, 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 July 29, 1997, Phlx amended the proposed 
rule change (``Amendment No. 1'').\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, New Product Development, Phlx, 
to Margaret Blake, Division of Market Regulation, Commission (July 
29, 1997).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx proposes to change the index value for the Phlx Oil Service 
Index (``OSX'') by reducing the base market divisor to half of its 
current value.\3\ Options trading with the new index value (``new index 
options'') will trade with the current symbol OSX. The Exchange will 
convert the existing index options (``existing index options'' or ``OSB 
Options'') to the symbol OSB. The existing index options using the old 
index value will continue to trade until expiration or until no open 
interest remains, at which time the series will be delisted. The 
Exchange will not open any new series in the existing index options 
after the new index options begin trading.
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    \3\ The prices, weightings and the divisor change for the Index 
are attached as Exhibit B to File No. SR-Phlx-97-30.
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II. Self-Regulatory Organization's Statement of the Purpose of, 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Phlx included statements 
concerning the purpose of an 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 section 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 began trading the OSX on February 24, 1997.\4\ The 
Index is a price-weighted industry index composed of 15 stocks involved 
in the oil service industry. In an effort to enhance the trading 
activity, OSX was initially indexed to a Value of $75.00 on December 
31, 1996.\5\ Since the commencement of trading, the OSX has traded an 
average of 1000 contracts daily garnering steady volume and open 
interest. However, the exchange has received numerous comments from OSX

[[Page 42849]]

investors regarding the value of the existing index options. Phlx notes 
that OSX investors believe the value of the index ($101.46 as of July 
16, 1997) is a detriment to attracting order flow, because, (1) hedgers 
are required to purchase (or sell) a larger number of options against a 
lower priced index thereby increasing transaction costs, and (2) given 
that the Index was priced to resemble a share of common stock, order 
flow is being lost to equity options on these individual issues due to 
their higher reflection of volatility.
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    \4\ See Securities Exchange Act Release No. 38207 (January 27, 
1997), 62 FR 5268 (order approving the listing and trading of 
options and LEAPS on the Phlx Oil Service Index).
    \5\ Amendment No. 1 indicates that the index value was set at 
$75.00 as an experiment to attract order flow from the retail 
investment community.
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    The purpose of this proposal is to allow the Exchange to offer for 
trading options on the Phlx Oil Service Index which has an index value 
twice the value of the current index. The proposed new index options 
would have the same contract specifications as the existing index 
options with the exception that the index value would be doubled.\6\ 
The new index options would trade under the current symbol OSX. The 
symbol for the existing index options would be changed to OSB. The new 
index would be subject to the same maintenance standards that were 
approved for the existing index in accordance with the generic 
maintenance standards set forth in Phlx Rule 1009A.
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    \6\ Amendment No. 1 indicates that while doubling the price of 
the Index will not impact the volatility of the Index, it will serve 
to increase the absolute price movements of the Index.
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    The Exchange will allow the OSB options to continue to trade until 
the listed series expire or no longer have open interest but trading 
will be limited to closing only transactions. No new options series of 
OSB options will be opened after the new index options begin trading. 
Options on OSX and options on OSB will not be fungible, however, 
positions will be aggregated for position limit and exercise limit 
purposes. The Exchange will provide notice to its membership and the 
public prior to the effectiveness of this filing by way of 
memoranda.\7\
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    \7\ Phlx will issue a circular to its membership one week prior 
to the effective date of the change, which will advise members of 
the increase in value of the OSX. Telephone conversation with 
Nandita Yagnick, Phlx, and Margaret Blake, Division of Market 
Regulation, Commission (July 31, 1997).
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    Phlx believes 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, facilitate transactions in securities while 
protecting investors and the public interest. Specifically, the 
Exchange believes that providing a higher valued index will allow 
option traders and investors to take advantage of the higher 
volatility. In addition the Exchange believes that current OSX 
investors will not be disadvantaged by this proposal, because the 
Exchange will provide adequate notice and an orderly procedure, in 
order to phase out the existing index options which are currently 
trading.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 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, 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 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-97-30 and should be 
submitted by August 29, 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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-20911 Filed 8-7-97; 8:45 am]
BILLING CODE 8010-01-M