[Federal Register Volume 67, Number 8 (Friday, January 11, 2002)]
[Notices]
[Pages 1532-1533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-808]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45250; File No. SR-Phlx-2001-119]


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

January 7, 2002.
    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 December 26, 2001, 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 Exchange. The 
Exchange filed this proposal pursuant to Section 19(b)(3)(A) of the 
Act, \3\ and Rule 19b-4(f)(6) \4\ thereunder, which renders the 
proposal effective upon filing with the Commission.\5\ 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
    \5\ The Phlx asked the Commission to waive the five-day pre-
filing notice requirement and the 30-day operative delay. See Rule 
19b-4(f)(6). 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 Exchange proposes to amend Supplementary Material .01 to Phlx 
Rule 101, Hours of Business, to eliminate the requirement that options 
on Nasdaq-100 Index Tracking Stock \6\ will end at 4:04 PM. on the last 
trading day of each calendar month, and to add language regarding the 
trading hours of options on Exchange-Traded Fund Shares (``ETF 
Options'').\7\ As amended, Phlx Rule 101, Supplementary material .01 
would provide that the hours of trading of ETF Options designated by 
the Exchange may continue until 4:15 P.M. However, the revised rule 
would also provide that the Exchange may close trading in such options 
at an early time to coincide with the close of trading in a related 
futures contract when trading in a related futures contract closes 
earlier than 4:15 P.M. The text of the proposed rule change is below. 
Additions are in italics; deletions are in brackets.
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    \6\ 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.
    \7\ Phlx Rule 1000(b)(42) defines ``Exchange-Traded Fund 
Shares'' as including Exchange-listed securities representing 
interests in open end unit investment trusts or pen-end management 
investment companies that hold securities based on an index or a 
portfolio of securities. The Exchange received approval by the 
Commission to trade options on Exchange-Traded Fund Shares on 
February 2, 2001. See Securities Exchange Act Release No. 43921 
(February 2, 2001), 66 FR 9739 (February 9, 2001) (order approving 
SR-Phlx-00-107).
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Hours of Business
Rule 101.

* * * * *
    Supplementary Material:
    .01 Options Trading after 4:02 P.M. 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 4:04 PM.] 
Options on any series of Exchange-Traded Fund Shares so designated by 
the Exchange may be traded on the Exchange until 4:15 P.M. each 
business day. The Exchange may close trading at an early time to 
coincide with the close of trading in a related futures contract on the 
last business day of the month, or any other day when a related futures 
contract closes earlier than 4:15 P.M.
* * * * *

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 Exchange 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 IV below. The Exchange 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 eliminate the requirement that trading in 
options on Nasdaq-100 Index Tracking Stock shall close at 4:05 P.M. on 
the last trading day of the calendar month, and to add new language to 
the rule regarding trading hours for ETF Options generally. Currently, 
Phlx Rule 101, Hours of Business, Supplementary Material .01 provides 
that options on Nasdaq-100 Index Tracking Stock shall commence at 9:30 
A.M. and end at 4:15 P.M., 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 P.M.\8\
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    \8\ See Securities Exchange Act Release No. 44055 (March 8, 
2001), 66 FR 15310 (March 16, 2001) (SR-Phlx-2001-32).
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    The Exchange proposes to extend trading in all ETF Options so 
designated by the Exchange at 4:15 P.M.\9\ The proposed new language 
would also permit the Exchange to close trading before 4:15 P.M. to 
coincide with the close of trading in a related futures contract on the 
last business day of the month, or any other day when trading in a 
related futures contract closes earlier than 4:15 P.M. ETF Options not 
designated by the Exchange as eligible for trading until 4:15 P.M. 
would continue to trade until 4:02 P.M. The Exchange expects that it 
would

[[Page 1533]]

designate ETF Options for trading until 4:15 P.M. only where the 
underlying ETF is based on an index on which futures contracts trade.
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    \9\ An ETF Option would be so designated by the Vice President 
of the Regulatory Services Department or his or her designee. The 
Exchange would notify members by issuance of a memorandum.
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    The Phlx believes that the proposed rule change will bring its 
practices in line with current practice on the Chicago Board Options 
Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \10\ in general, and in particular, with 
Section 6(b)(5),\11\ in that it is designed to promote just and 
equitable principles of trade; 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; and, in general, to 
protect investors and the public interest; and is not designed to 
permit unfair discrimination between customers, issuers, brokers or 
dealers. By adopting the proposed rule change, the Exchange should 
facilitate competition in the trading of ETF Options across markets.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 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

    Because the foregoing proposed rule change does not:
    (i) significantly affect the protection of investors or the public 
interest;
    (ii) impose any significant burden on competition; and
    (iii) become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \12\ and 
Rule 19b-4(f)(6) thereunder.\13\ At any time within 60 days of the 
filing of the proposed rule change, the Commission may summarily 
abrogate such rule change if it appears to the Commission that such 
action is necessary or appropriate in the public interest, for the 
protection of investors, or otherwise in furtherance of the purposes of 
the Act.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission accelerate the 
operative date. The Commission finds good cause to designate the 
proposal to be effective on filing with the Commission because such 
designation is consistent with the protection of investors and the 
public interest. The Commission believes that the proposal should be 
effective and operative immediately upon filing to help facilitate 
competition in the trading of ETF Options across markets. For these 
reasons, the Commission finds good cause to designate that the proposal 
is both effective and operative upon filing with the Commission.\14\
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    \14\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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IV. Solicitation of Comments

    Interested persons are invit4ed to submit written data, views, and 
arguments concerning the foregoing, including whether the proposal 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 Exchange. All 
submissions should refer to file number SR-Phlx-2001-119, and should be 
submitted by February 1, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-808 Filed 1-10-02; 8:45 am]
BILLING CODE 8010-01-M