[Federal Register Volume 69, Number 230 (Wednesday, December 1, 2004)]
[Notices]
[Pages 69974-69976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3409]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50727; File No. SR-Phlx-2004-66]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Concentration 
Limit Listing Standards in Phlx Rule 1009A

November 23, 2004.
    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 October 7, 2004, 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 Phlx. 
On October 25, 2004, the Exchange filed Amendment No. 1 to the proposed 
rule change.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Carla Behnfeldt, Director, Legal Department 
New Product Development Group, Phlx to Nancy Sanow, Assistant 
Director, Division of Market Regulation (``Division''), Commission, 
dated October 22, 2004 (``Amendment No. 1''), in which the Phlx 
provided rationale for and requested accelerated approval of the 
proposed rule change.
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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 Phlx Rule 1009A, Designation of the 
Index, which applies to the listing of index options. Specifically, the 
Exchange proposes to increase certain concentration limit listing 
standards set forth in Phlx Rule 1009A(b) pursuant to which the 
Exchange may list certain narrow-based index options pursuant to 
Commission Rule 19b-4(e).\4\ The text of the proposed rule change is 
set forth below. Proposed new language is italicized; proposed 
deletions are [in brackets].
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    \4\ 17 CFR 240.19b-4(e).
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Rule 1009A

    (a) No Change.
    (b) Notwithstanding paragraph (a) above, the Exchange may trade 
options on a narrow-based index pursuant to Rule 19b-4(e) of the 
Exchange Act, if each of the following conditions is satisfied:
    (1)-(5) No Change.
    (6) No single component security represents more than [25%] 30% of 
the weight of the index, and the five highest weighted component 
securities in the index do not in the aggregate account for more than 
50% ([60%] 65% for an index consisting of fewer than 25 component 
securities) of the weight of the index;
    (i) With respect to the Gold/Silver Index, no single component 
shall account for more than 35% of the weight of the Index and the 
three highest weighted components shall not account for more than 65% 
of the weight of the Index. If the Index fails to meet this 
requirement, the Exchange shall reduce position limits to 8000 
contracts on the Monday following expiration of the farthest-out, then 
trading, non-LEAP series.
    (7)-(12) No Change.

[[Page 69975]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, as amended, 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 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 increase certain 
concentration limit listing standards in Phlx Rule 1009A. On December 
6, 2000, the Commission approved a Phlx proposed rule change adopting 
Phlx Rule 1009A(b) \5\ that provides generic listing standards for the 
listing and trading of narrow-based index options in accordance with 
the Commission's New Product Release.\6\ Under Phlx Rule 1009A(b) the 
Exchange may trade options on a narrow-based index without filing a 
proposed rule change under Section 19(b)(2) of the Act if certain 
conditions are satisfied.\7\ One of these conditions is set forth in 
Phlx Rule 1009A(b)(6), which prescribes certain concentration limits 
applicable to the most highly weighted component of the index and to 
the top five most highly weighted components combined. Specifically, 
the rule currently requires that no single component security 
represents more than 25% of the weight of the index, and that the five 
highest weighted component securities in the index do not in the 
aggregate account for more than 50% (60% for an index consisting of 
fewer than 25 component securities) of the weight of the index. The 
Exchange is now proposing to amend Phlx Rule 1009A(b)(6) by increasing 
the 25% concentration limit for the highest weighted component stock to 
30%. The amendment would also increase the 60% concentration limit for 
the five mostly highly weighted stocks in an index consisting of fewer 
than 25 component securities from 60% to 65%.
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    \5\ See Securities Exchange Act Release No. 43683 (December 6, 
2000), 65 FR 78235 (December 14, 2000).
    \6\ See Securities Exchange Act Release No. 40761 (December 8, 
1998), 63 FR 70952 (December 22, 1998) (``New Product Release'').
    \7\ The Commission approved an amendment to Phlx Rule 1009A to 
provide that certain narrow-based index options that meet generic 
listing standards may be listed and traded on the Exchange without a 
filing pursuant to Rule 19b-4(e) under the Act. See Securities 
Exchange Act Release No. 43683 (December 6, 2000), 65 FR 78235 
(December 14, 2000) (SR-Phlx-2000-67).
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    The proposed rule change would result in increased flexibility in 
the Exchange's ability to list narrow-based index options. The proposal 
will also reduce the instances in which the addition of new series is 
restricted pursuant to Phlx Rule 1009A(c), the maintenance listing 
standards applicable to options listed under Phlx Rule 1009A(b), 
because changes in the market value of underlying index components has 
caused them to exceed the current 25% or 60% limits by a very slight 
amount as has occasionally occurred in the past. The Exchange believes 
that these changes are appropriate because they are minor in nature, 
such that the concentration limit listing standards will continue to 
serve the purpose for which they were originally intended of not 
permitting a single security or small number of securities to dominate 
the index.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act\9\ in particular, in that it should increase the 
availability for listing of narrow-based index options, thus enhancing 
the number of investment choices for investors.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

    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 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 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, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Phlx-2004-66 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Phlx-2004-66. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 the 
filing also will be available for inspection and copying at the 
principal office of the Phlx. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2004-66 and should

[[Page 69976]]

be submitted on or before December 22, 2004.

    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. E4-3409 Filed 11-30-04; 8:45 am]
BILLING CODE 8010-01-P