[Federal Register Volume 69, Number 242 (Friday, December 17, 2004)]
[Notices]
[Pages 75582-75584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3707]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50833; File No. SR-Phlx-2004-86]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. Relating to the Definition of an Exchange-Traded Fund 
Share

December 10, 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 December 1, 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 and II, below, which Items have been prepared by the Phlx. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ 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)(iii).
    \4\ 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 Phlx Rule 1000(b)(42) to include the 
Nasdaq-100 Index Tracking Stock \5\ in its definition of ``Exchange-
Traded Fund

[[Page 75583]]

Share.'' The text of the proposed rule change is set forth below.
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    \5\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg], The 
Nasdaq Stock Market[reg], Nasdaq-100 SharesSM, Nasdaq-100 
TrustSM, Nasdaq-100 Index Tracking StockSM, 
and QQQSM are trademarks or service marks of The Nasdaq 
Stock Market, Inc. (``Nasdaq'') and have been licensed for use for 
certain purposes by the Exchange pursuant to a License Agreement 
with Nasdaq. The Nasdaq-100 Index[reg] (``Index'') is determined, 
composed, and calculated by Nasdaq without regard to Phlx, the 
Nasdaq-100 TrustSM, or the beneficial owners of Nasdaq-
100 SharesSM. Nasdaq has complete control and sole 
discretion in determining, comprising, or calculating the Index or 
in modifying in any way its method for determining, comprising, or 
calculating the Index in the future.
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    Proposed new language is in italics.
* * * * *

Applicability, Definitions and References

    Rule 1000. (a) No change.
    (b) 1.-41. No change.
    42. Exchange-Traded Fund Share--For purposes of these Rules, the 
term Exchange-Traded Fund Share shall include the Nasdaq-100 Index 
Tracking Stock and Exchange-listed securities representing interests in 
open end unit investment trusts or open-end management investment 
companies that hold securities based on an index or a portfolio of 
securities.
    (c)-(d) No change.
* * * * *

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 statutory 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 Exchange proposes to amend the definition of an Exchange Traded 
Fund Share (``ETF'') to include the Nasdaq-100 Index Tracking Stock 
(``QQQ'') in order to preserve the Exchange's ability to trade options 
overlying QQQ until 4:15 p.m. ET and to be clear that throughout the 
Exchange's options rules, QQQ continues to be, by definition, an ETF.
    As of December 1, 2004, the QQQ has been listed and has begun 
trading on the Nasdaq under the new symbol QQQQ.
    Under the Exchange's current rule, because Nasdaq is not a national 
securities exchange as defined under the Act, QQQ does not qualify as 
an ETF, currently defined in Exchange Rule 1000(b)(42) as an 
``exchange-listed'' security. The fact that QQQ is no longer an 
``exchange-listed'' security (and therefore under the current rule is 
not by definition an ETF) affects the hours of trading in options 
overlying QQQ. The trading session for most equity options ends at 4:02 
p.m. ET. However, pursuant to Exchange Rule 101, options overlying 
indexes and ETFs (such as QQQ) trade on the Phlx until 4:15 p.m. ET. 
Because QQQ is no longer included in the definition of an ETF, it would 
not be eligible for trading past 4:02 p.m. ET under current Exchange 
rules.
    In order to preserve the Exchange's ability to trade options 
overlying QQQ until 4:15 p.m. ET, the proposed rule change would 
specifically include reference to the Nasdaq-100 Index Tracking Stock 
in the definition of an ETF.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ in particular, 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.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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 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

    No written comments were either solicited or received.

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

    The Exchange has designated the proposed rule change as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A)(iii) of the 
Act \8\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\9\ The 
Exchange represents that the foregoing 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) by its terms, does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest. The Exchange has requested that the Commission waive the 
five-day pre-filing notice requirement and the 30-day operative delay 
period for ``non-controversial'' proposals and make the proposed rule 
change effective and operative upon filing.
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
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    The Commission has determined to waive the five-day pre-filing 
notice requirement and the 30-day operative delay period.\10\ The 
Commission notes that accelerating the operative date will allow the 
trading hours for options overlying the QQQ to remain unchanged and 
provide continuity to the marketplace. Therefore, the foregoing rule 
change has become immediately effective and operative upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \10\ 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).
    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
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    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.\13\
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    \13\ 15 U.S.C. 78s(b)(3)(C).
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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. 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-2004-86 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-2004-86. This 
file number should be included on the

[[Page 75584]]

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, 450 Fifth Street, NW., Washington, DC 20549. Copies of 
such filing also will be available for inspection and copying at the 
principal office of the Exchange. 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-2004-86 and should be submitted on or before 
January 7, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-3707 Filed 12-16-04; 8:45 am]
BILLING CODE 8010-01-P