[Federal Register Volume 70, Number 146 (Monday, August 1, 2005)]
[Notices]
[Pages 44144-44146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4077]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52102; File No. SR-Phlx-2005-38]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Disclaimer of Warranties by 
Lehman Brothers Inc.

July 21, 2005.
    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 June 14, 2005, 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. On July 13, 2005, 
the Exchange amended the proposed rule change (``Amendment No. 1'').\3\ 
The Exchange has filed the proposal pursuant to Section 19(b)(3)(A) of 
the Act,\4\ and Rule 19b-4(f)(6) thereunder,\5\ which renders the 
proposal effective upon filing with the Commission. 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\ In Amendment No. 1, the Exchange made minor technical 
changes to the proposed rule text.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 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 adopt Phlx Rule 1106A (Lehman Brothers 
Inc. Indexes) to add a disclaimer regarding data from Lehman Brothers 
Inc. Indexes (``Indexes''),\6\ express or implied warranties of 
merchantability or fitness, and liability for damages or claims. The 
Phlx has designated this proposal as non-controversial and has 
requested that the Commission waive the 30-day pre-operative waiting 
period contained in Rule 19b-4(f)(6)(iii) under the Act.\7\ The text of 
the proposed rule change, as amended, is below. Proposed new language 
is italicized.
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    \6\ Lehman and Lehman Brothers Inc. are marks owned by Lehman 
Brothers Inc.
    \7\ 17 CFR 240.19b-4(f)(6)(iii).
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* * * * *
    Rule 1106A.

Lehman Brothers Inc. Indexes

    Lehman Brothers Inc. makes no warranty, express or implied, as to 
the results to be obtained by any person or entity from the use of any 
Lehman Brothers Inc. index, any opening, intra-day or closing value 
therefor, or any data included therein or relating thereto in 
connection with the trading of any option contract on exchange traded 
funds based thereon, or for any other purpose. Lehman Brothers Inc. 
does not guarantee the accuracy and/or completeness of any Lehman 
Brothers Inc. index, or any opening, intra-day or closing value 
therefor, or any data included therein or related thereto. Lehman 
Brothers Inc. makes no express or implied warranties, and disclaims all 
warranties of merchantability or fitness for a particular purpose with 
respect to

[[Page 44145]]

any Lehman Brothers Inc. index, any opening, intra-day or closing value 
therefor, any data included therein or relating thereto, or any option 
contract on exchange traded funds based thereon. In no event shall 
Lehman Brothers Inc. have any liability for any damages, claims, losses 
(including any indirect or consequential losses), expenses or delays, 
whether direct or indirect, foreseen or unforeseen, suffered by any 
person arising out of any circumstance or occurrence relating to the 
person's use of any Lehman Brothers Inc. index, any opening, intra-day 
or closing value therefor, any data included therein or relating 
thereto, or any option contract on exchange traded funds based thereon, 
or arising out of any errors or delays in calculating or disseminating 
any such index.
* * * * *

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

    In its filing with the Commission, Phlx included statements 
concerning the purpose of, and basis for, the proposed rule change, as 
amended, 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 purpose of the proposed rule change, as amended, is to adopt 
new Phlx Rule 1106A, which applies to Indexes that were recently 
licensed by Lehman Brothers Inc. (``Lehman'') to the Exchange. The 
Exchange is proposing to establish new Phlx Rule 1106A as required by 
the licensing agreement with Lehman that allows the Exchange to 
license, trade, and market options on five iShares products.\8\
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    \8\ Pursuant to the licensing agreement and Exchange Rule 1009, 
the Exchange currently lists options on iShares Lehman 1-3 Year 
Treasury Bond Fund (SHY), iShares Lehman 7-10 year Treasury Bond 
Fund (IEF), iShares Lehman 20+ Year Treasury Bond Fund (TLT), 
iShares Lehman Aggregate Bond Fund (AGG), and iShares Lehman TIPS 
Bond Fund (TBK). The products are sponsored by Barclays Global 
Investors.
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    Proposed Phlx Rule 1106A, which is similar in nature to disclaimers 
of index providers at current Phlx Rules 1104A (SIG Indices, LLLP) and 
1105A (Standard and Poor's[supreg] Index),\9\ establishes, among other 
things, disclaimers regarding data from the Indexes including no 
guarantee of accuracy and/or completeness, regarding express or implied 
warranties of merchantability or fitness for a particular purpose, and 
regarding liability for damages, claims, losses or delays.
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    \9\ The Exchange noted in its filings to adopt Phlx Rules 1104A 
and 1105A that the proposed disclaimers were appropriate given that 
they were similar to disclaimer provisions of American Stock 
Exchange (``Amex'') Rule 902C relating to indexes underlying options 
listed on that exchange. See Securities Exchange Act Release Nos. 
48135 (July 7, 2003), 68 FR 42154 (July 16, 2003) (SR-Phlx-2003-21) 
(adopting Phlx Rule 1004A regarding SIG indices) and 51664 (May 6, 
2005), 70 FR 25641 (May 13, 2005) (SR-2005-24) (adopting Phlx Rule 
1105A regarding S&P 500 and expanding Phlx Rule 1104A).
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    The Exchange believes that proposed Phlx Rule 1106A, being similar 
in concept to current Phlx Rules 1104A and 1105A as well as rules of 
other options exchanges,\10\ should put Lehman on similar footing with 
other licensors of options on indexes to the Exchange.
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    \10\ See disclaimers and limitation of liability at Amex Rule 
902C and at Chicago Board Options Exchange, Inc. Rule 24.14.
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2. Statutory Basis
    The Exchange believes that the proposed rule change, as amended, is 
consistent with the provisions of Section 6(b) of the Act,\11\ in 
general, and with Section 6(b)(5) of the Act,\12\ in particular, in 
that it is designed 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. The Exchange believes that the proposed rule should 
encourage Lehman to continue to maintain Indexes so that options on the 
respective indexes may be traded on the Exchange, thereby providing 
investors with enhanced investment opportunities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 
result in 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

    Written comments were neither solicited nor received.

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

    The foregoing proposed rule change is subject to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder \14\ 
because the proposal: (i) Does not significantly affect the protection 
of investors or the public interest; (ii) does not impose any 
significant burden on competition; and (iii) does not become operative 
prior to 30 days after 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 Exchange has given the 
Commission 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 of the proposed rule 
change, or such shorter time as designated by the Commission. Phlx 
satisfied the five-day pre-filing requirement.
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(b)(iii), the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay.\16\ The Commission 
believes that such waiver is consistent with the protection of 
investors and the public interest because it would allow for the 
immediate implementation of a rule similar to rules already in place at 
the Phlx and at other options exchanges. For this reason, the 
Commission designates the proposed rule change, as amended, to be 
effective upon filing with the Commission.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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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    At any time within 60 days of the filing of such 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

[[Page 44146]]

interest, for the protection of investors or otherwise in furtherance 
of the purposes of the Act.\18\
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    \18\ The effective date of the original proposal is June 14, 
2005, and the effective date of the amendment is July 13, 2005. For 
purposes of calculating the 30-day operative delay and the 60-day 
period within which the Commission may summarily abrogate the 
proposed rule change under Section 19(b)(3)(C) of the Act, the 
Commission considers that period to commence on July 13, 2005, the 
date the Exchange filed Amendment No. 1 to the proposed rule change. 
See 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, 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-2005-38 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Phlx-2005-38. 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-2005-38 and should be submitted on or before August 
22, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4077 Filed 7-29-05; 8:45 am]
BILLING CODE 8010-01-P