[Federal Register Volume 66, Number 52 (Friday, March 16, 2001)]
[Notices]
[Pages 15310-15312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6541]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44055; 
File No. SR-Phlx-01-32]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to Trading of Options on Exchange Traded Fund 
Shares

March 8, 2001.
    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 March 5, 2001, 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 Phlx. The 
proposed rule change has been filed by the Phlx as a ``non-
controversial'' rule change under Rule 19b-4(f)(6) \3\ under the Act. 
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\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Phlx proposes to amend Phlx Rule 1012, Commentary .05 by 
creating one point strike price intervals for options on Exchange-
Traded Fund Shares. In addition, the Phlx proposes to amend Phlx Rule 
101 to establish the hours of trading for options on the Nasdaq-100 
Index Tracking Stock, a particular class of options on Exchange-Traded 
Fund Shares,\4\ from 9:30 AM to

[[Page 15311]]

4:15 PM Eastern Standard Time (``EST''), except the last trading day of 
each calendar month, when trading in options on Nasdaq-100 Index 
Tracking Stock will end at 4:05 PM EST. Below is the text of the 
proposed rule change. Proposed new language is italicized; proposed 
deletions are in brackets.
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    \4\ The Nasdaq-100, Nasdaq-100 Index, and 
Nasdaq are trade or service marks of The Nasdaq Stock 
Market, Inc. (with its affiliates, the ``Corporations'') and are 
licensed for use by the Exchange. Options on Nasdaq-100 Index 
Tracking Stock (the ``Products'') have not been passed on by the 
Corporations as to their legality or suitability. The Products are 
not issued, endorsed, sold, or promoted by the Corporations. The 
Corporations make no warranties and bear no liability with respect 
to the Products. The Corporations do not guarantee the accuracy and/
or uninterrupted calculation of the Nasdaq-100 Index or 
any data included therein. The Corporations make no warranty, 
express or implied, as to results to be obtained by Licensee, owners 
of the Products, or any other person or entity from the use of the 
Nasdaq-100 Index or any data included therein. The 
Corporations make no express or implied warranties, and expressly 
disclaim all warranties of merchantability or fitness for a 
particular purpose or use with respect to the Nasdaq-100 
Index or any data included therein. Without limiting any 
of the foregoing, in no event shall the Corporations have any 
liability for any lost profits or special, incidental, punitive, 
indirect, or consequential damages, even if notified of the 
possibility of such damages.
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* * * * *

Rule 101. Hours of Business

Supplementary Material

    .01  Options Trading after 4:02 PM. A trading rotation in any class 
of option contracts may be effected even though employment of the 
rotation will result in the transaction on the Exchange after 4:02 P.M. 
provided such rotation is conducted pursuant to Rule 1047 or Rule 
1047A. The hours of trading for Options on Nasdaq-100 Index Tracking 
Stock shall commence at 9:30 AM and end at 4:15 PM, each business day, 
except the last trading day of each calendar month, when trading in 
Options on Nasdaq-100 Index tracking Stock will end at 4:05 PM.
    .02-.03  No Change.

Rule 1012. Series of Options Open for Trading

    (a)-(d) No Change.

Commentary

    .01-.04  No Change.
    .05.
    (a) The interval of strike prices of series of options on 
individual stocks [or Exchange-Traded Fund Shares] will be $2.50 or 
greater where the strike price is $25 or less, $5.00 or greater where 
the strike price is greater than $25 but less than $200, and $10 or 
greater where the strike price is $200 or more, except as provided in 
paragraph (b) below. The interval of strike prices of series of options 
on Exchange-Traded Fund Shares will be $1 or greater where the strike 
price is $200 or less.\5\
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    \5\ As per a telephone conversation between Edith Hallahan, 
First Vice President, Deputy General Counsel, Phlx, and Heather 
Traeger and Lisa Jones, Attorneys, Division of Market Regulation, 
Commission, March 8, 2001, the Commission corrected a typographical 
error that appeared in the proposed rule language.
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    (b) The Exchange may select up to a specified number of its listed 
options on individual stocks [or Exchange-Traded Fund Shares] for which 
the interval of strike prices will be $2.50 where the strike price is 
greater than $25 but less than $50. In addition to those options 
selected by the Exchange, the strike price interval may be $2.50 in any 
multiply-traded option once another exchange trading that option 
selects such option, as part of this program.
* * * * *

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. The 
text of these statements may be examined at the places specified in 
Item IV 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 purpose of the proposed rule change is to provide one point 
strike price intervals for options on Exchange-Traded Fund Shares and 
to establish the hours of trading in options on the Nasdaq-100 Index 
Tracking Stock from 9:30 AM to 4:15 PM EST, except the last trading day 
of each calendar month, when trading in options on the Nasdaq-100 Index 
Tracking Stock will end at 4:05 PM EST.
    The Phlx received approval by the Commission to trade options on 
Exchange-Traded Fund Shares on February 2, 2001.\6\ The Phlx proposes 
to amend Rule 1012, Commentary .05 regarding strike price intervals for 
options on Exchange-Traded Fund Shares to bracket the Fund Shares at 
one point intervals up to a share price of $200. This proposed 
amendment is consistent with the strike price interval established for 
options on Exchange-Traded Fund Shares on the American Stock Exchange 
LLC (``Amex'').\7\
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    \6\ See Securities Exchange Act Release No. 43921 (February 2, 
2001), 65 FR 9739 (February 9, 2001) (Order approving SR-Phlx-00-
107).
    \7\ See Securities Exchange Act Release No. 40157 (July 1, 
1998), 63 FR 37426 (July 10, 1998) (Order approving SR-Amex-96-44).
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    Additionally, the Phlx proposes to amend its hours of business \8\ 
to trade options on the Nasdaq-100 Index Tracking Stock from 9:30 AM to 
4:15 PM EST, except that last trading day of a calendar month, when 
trading in Options on the Nasdaq-100 Index Tracking Stock will end at 
4:05 PM EST. These hours are consistent with the trading of Options on 
Nasdaq-100 Index Tracking Stock on Amex.
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    \8\ Phlx Rule 101.
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    The Phlx believes that these amendments should increase investor 
protection by allowing Options on Exchange-Traded Fund Shares and, in 
particular, options on the Nasdaq-100 Index Tracking Stock to trade at 
the same strike price intervals and trading hours on the Phlx as on 
other exchanges. Further, the Phlx believes that these amendments do 
not impose any significant burden on competition because these 
amendments further enable the Phlx to compete with other exchanges in 
these products.
2. Statutory Basis
    The Phlx believes that the proposed amendments should assist in 
allowing the Exchange to offer investors another choice of venue to 
conduct trading in these products. Thus, the Phlx believes that the 
proposed rule change is consistent with Section 6(b)(5) of the Act \9\ 
in that it is designed 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.
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    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Phlx believes that the proposed rule change does not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Phlx has neither solicited nor received any written comments on 
the proposed rule change.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) does not become operative for 30 days from the date of filing, 
or such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
Phlx has given written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the date of filing the 
rule change, or such shorter time as

[[Page 15312]]

designated by the Commission, the proposed rule change has become 
effective pursuant to section 19(b)(3)(A) \10\ of the Act and Rule 19b-
4(f)(6) \11\ thereunder.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ The Phlx has requested and the Commission has agreed to 
waive the five day pre-filing notice equipment.
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    A proposed rule change filed under Rule 19b-4(f)(6) may not become 
operative prior to 30 days after the date of filing. However, Rule 19b-
4(f)(6)(iii) permits the Commission to designate a shorter time if such 
action is consistent with the protection of investors and the public 
interest. The Phlx has requested that the Commission accelerate the 
operative date to March 8, 2001. The Commission finds that accelerating 
the operative date of the proposed rule change to enable the Phlx to 
compete with other exchanges in these products and provide investors 
with an additional venue to trade these products is consistent with the 
protection of investors and the public interest, and thus designates 
March 8, 2001 as the operative date of this filing.\13\
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    \13\ For the purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rules 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 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-01-32 and should 
be submitted by April 6, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-6541 Filed 3-15-01; 8:45 am]
BILLING CODE 8010-01-M