[Federal Register Volume 65, Number 241 (Thursday, December 14, 2000)]
[Notices]
[Pages 78235-78237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31802]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43683; File No. SR-PHLX-00-67]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval to a Proposed Rule Change and Amendment 
Nos. 1 and 2 to the Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc., Related to PHLX Rule 1009A

December 6, 2000.
    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 September 7, 2000, 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 and II below, which Items have been prepared by the PHLX.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change and Amendment Nos. 1 and 2 from interested persons 
and is simultaneously approving the proposal, as amended, on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On September 18, 2000, the PHLX amended the proposal to 
reflect the PHLX Rule 1009A(b)(6)(i), which established a 
concentration requirement for the Gold/Silver Index. See letter from 
Nandita Yagnik, PHLX, to Nancy Sanow, Senior Special Counsel, 
Division of Market Regulation (``Division''), Commission, dated 
September 15, 2000 (``Amendment No. 1''). The Commission approved 
the adoption of PHLX Rule 1009A(b)(6)(i) on July 25, 2000. See 
Securities Exchange Act Release No. 43070 (July 25, 2000), 65 FR 
47551 (August 2, 2000) (order approving File No. SR-PHLX-00-69) 
(``July 25 Order''). On November 30, 2000, the PHLX amended the 
proposal to indicate that the PHLX will use Rule 19b-4(e) under the 
Act in accordance with the terms and conditions set forth in the 
order approving Rule 19b-4(e) under the Act. See letter from Carla 
Behnfeldt, Director, Legal Department New Product Development Group, 
PHLX, to Nancy Sanow, Division, Commission, dated November 30, 2000 
(``Amendment No. 2'').
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The PHLX proposes to amend PHLX Rule 1009A, ``Designation of the 
Index,'' provide for the listing and trading of narrow-based stock 
index options pursuant to Rule 19b-4(e) under the Act.\4\
---------------------------------------------------------------------------

    \4\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

    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 PHLX 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 III below. The 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

(1) Purpose
    The PHLX proposes to amend PHLX Rule 1009A(b) to provide for the 
listing and trading of narrow-based stock index options pursuant to 
Rule 19b-4(e) under the Act. The purpose of the proposal is to allow 
the PHLX to list and trade narrow-based index options immediately 
without filing a proposed rule change with the Commission under Section 
19(b)(3)(A) of the Act prior to trading the product, as PHLX Rule 
1009A(b) currently requires.
    Currently, PHLX Rule 1009A(b) allows the PHLX to list and trade 
options on a narrow-based index 30 days after the Exchange files a 
proposal under Section 19(b)(3)(A) of the Act describing the index 
option, provided that the index meets the generic listing criteria set 
forth in PHLX Rule 1009A(b). The Commission release adopting Rule 19b-
4(e) under the Act (``New Products Release''),\5\ however, no longer 
requires a Section 19(b)(3)(A) filing and subsequent waiting period so 
long as the exchange relying on Rule 19b-4(e) under the Act has generic 
listing criteria approved by the Commission and meets certain other 
requirements.
---------------------------------------------------------------------------

    \5\ See Amendment to Rule Filing Requirements for Self-
Regulatory Organizations Regarding New Derivative Securities 
Products, Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998).
---------------------------------------------------------------------------

    The New Products Release indicated that products meeting the 
listing criteria

[[Page 78236]]

approved by the Commission in its 1994 Generic Narrow-Based Index 
Options Approval Order (as set forth in PHLX Rule 1009A(b)) \6\ 
qualified for filing under Rule 19b-4(e) under the Act, so long as the 
exchange eliminated the Section 19(b)(3)(A) rule filing requirement 
from its existing rules.\7\ Therefore, the PHLX proposes to eliminate 
the Section 19(b)(3)(A) rule riling requirement in PHLX Rule 1009A(b) 
the instead incorporate the provisions of new Rule 19b-4(e) under the 
Act. The PHLX represents that the Exchange will use Rule 19b-4(e) under 
the Act in accordance with the terms and conditions set forth in the 
order approving Rule 19b-4(e) under the Act.\8\ The PHLX believes that 
the proposal should allow the Exchange to list and trade narrow-based 
index options that comply with the PHLX Rule 1009A(b) standards 
immediately, thereby providing a more expeditious method of offering 
these products in the marketplace.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 34157 (June 3, 
1994), 59 FR 30062 (June 10, 1994) (order approving File Nos. SR-
Amex-92-35; SR-CBOE-93-59; SR-NYSE-94-17; SR-PSE-94-07; and SR-PHLX-
94-10) (``Generic Index Narrow-Based Index Options Approval 
Order''). The Generic Narrow-Based Index Options Approval Order 
established generic listing standards for options on narrow-based 
indexes and adopted streamlined procedures for introducing trading 
in options satisfying the generic listing standards.
    \7\ See New Products Release at note 89.
    \8\ See Amendment No. 2, supra note 3.
---------------------------------------------------------------------------

(2) Basis
    For these reasons, the PHLX believes that the proposed rule change 
is consistent with Section 6(b) 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, to prevent fraudulent and 
manipulative acts and practices and to facilitate 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 providing a quicker method 
of putting important hedging tools in the marketplace.

(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. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether it is consistent 
with the Act. Persons making written submissions should file six copies 
thereof with the Secretary, Securities and Exchange Commission, 450 
Fifth Street, NW., Washington, DC 20549-0609. 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 at the Commission's Public 
Reference Section, 450 Fifth Street, NW., Washington, DC. 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-00-67 and should be submitted by January 4, 2000.

IV. Commission's Findings and Order Grating Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulation thereunder applicable to a national securities 
exchange and, in particular, with the requirements of section 6(b)(5) 
\9\ in that it is designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.\10\ Specifically, the Commission 
finds that the proposal furthers the objectives of the New Products 
Release, which indicated, among other things, that a self-regulatory 
organization (``SRO'') could submit a proposal to eliminate the 
19(b)(3)(A) rule filing requirement from an existing SRO rule, such as 
PHLX Rule 1009A(b), that permits the listing and trading of narrow-
based index options that satisfy the criteria approved in the Generic 
Index Narrow-Based Index Options Approval Order.\11\ The Commission 
notes that the Chicago Board Options Exchange, Inc. (``CBOE'') and the 
American Stock Exchange LLC (``Amex'') have eliminated the 19(b)(3)(A) 
rule filing requirement from their rules permitting the listing and 
trading of options pursuant to the Generic Narrow-Based Index Options 
Approval Order,\12\ and that the PHLX's proposal is substantially 
identical to the CBOE and Amex proposals. Accordingly, Commission finds 
that the PHLX's proposal does not raise new regulatory issues.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(5).
    \10\ In approving the proposed rule, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \11\ See New Products Release at note 89.
    \12\ See Securities Exchange Act Release Nos. 41374 (May 5, 
1999), 64 FR 25936 (May 13, 1999) (File No. SR-CBOE-99-16); and 
41091 (February 23, 1999), 64 FR 10515 (March 4, 1999) (File No. SR-
Amex-99-07).
---------------------------------------------------------------------------

    The Commission finds good cause for approving the proposal and 
Amendment Nos. 1 and 2 prior to the thirtieth day after the date of 
publication of notice thereof in the Federal Register pursuant to 
section 19(b)(2) of the Act. As noted above, the PHLX's proposal is 
consistent with the New Products Release and is substantially identical 
to rule changes adopted previously by the CBOE and the Amex. In 
addition, the Commission believes that approving the proposal on an 
accelerated basis will help to ensure that PHLX is not disadvantaged in 
the listing of new index option products vis-a-vis the Amex and the 
CBOE. Because Amendment No. 1 reflects the adoption of PHLX Rule 
1009A(b)(6)(i), which the Commission approved previously,\13\ Amendment 
No. 1 does not raise new regulatory issues. Amendment No. 2 strengthens 
the PHLX's proposal by indicating that the PHLX will use rule 19b-4(e) 
under the Act in accordance with the terms and conditions set forth in 
the order approving Rule 19b-4(e) under the Act. Accordingly, the 
Commission finds that it is consistent with sections 6(b) and 19(b)(2) 
of the Act to approve the proposal and Amendment Nos. 1 and 2 on an 
accelerated basis.
---------------------------------------------------------------------------

    \13\ See July 25 Order, supra note 3.
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-PHLX-00-67), as amended, is 
approved on an accelerated basis.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).

---------------------------------------------------------------------------

[[Page 78237]]

    For the Commission, by the Division of Market Regulation, pursuant 
to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31802 Filed 12-13-00; 8:45 am]
BILLING CODE 8010-01-M