[Federal Register Volume 70, Number 161 (Monday, August 22, 2005)]
[Notices]
[Pages 49004-49006]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4549]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52261; File No. SR-Phlx-2005-51]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Extension of a Pilot Program Concerning Option Position 
Limits

August 15, 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 August 12, 2005, the Philadelphia Stock

[[Page 49005]]

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 has filed the proposal as a ``non-
controversial'' rule change pursuant to section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders it effective upon 
filing with the Commission. 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\ 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 extend, for a six-month period, a pilot 
program applicable to Exchange Rule 1001, Position Limits, which 
increases the standard position and exercise limits for equity option 
contracts and options on the Nasdaq-100 Index Tracking Stock \5\ 
(``QQQQ'') (``Pilot Program''). The text of the proposed rule change is 
available on the Phlx's Web site (http://www.phlx.com), at the Phlx's 
principal office, and at the Commission's Public Reference Room.
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    \5\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg], The 
Nasdaq Stock Market[reg], Nasdaq-100 Shares SM, Nasdaq-
100 Trust SM, Nasdaq-100 Index Tracking Stock 
SM, and QQQ SM are trademarks or service marks 
of The Nasdaq Stock Market, Inc. (``Nasdaq'') and have been licensed 
for use for certain purposes by the Phlx pursuant to a License 
Agreement (``License'') with Nasdaq. The Nasdaq-100 Index[reg] 
(``Index'') is determined, composed, and calculated by Nasdaq 
without regard to the Licensee, the Nasdaq-100 Trust SM, 
or the beneficial owners of Nasdaq-100 Shares SM. 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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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 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 is to extend the Pilot 
Program, which is scheduled to expire September 2, 2005,\6\ for an 
additional six-month period, through March 3, 2006. Position limits 
impose a ceiling on the number of option contracts in each class on the 
same side of the market relating to the same underlying security that 
can be held or written by an investor or group of investors acting in 
concert. Exchange Rule 1002 (not proposed to be amended herein) 
establishes corresponding exercise limits. Exercise limits prohibit an 
investor or group of investors acting in concert from exercising more 
than a specified number of puts or calls in a particular class within 
five consecutive business days.
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    \6\ See Securities Exchange Act Release No. 51322 (March 4, 
2005), 70 FR 12260 (March 11, 2005) (notice of filing and immediate 
effectiveness of File No. SR-Phlx-2005-17).
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    Exchange Rule 1001 subjects equity options to one of five different 
position limits depending on the trading volume and outstanding shares 
of the underlying security. Exchange Rule 1002 establishes exercise 
limits for the corresponding options at the same levels as the 
corresponding security's position limits.\7\
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    \7\ Exchange Rule 1002 states, in relevant part, `` * * * no 
member or member organization shall exercise, for any account in 
which such member or member organization has an interest or for the 
account of any partner, officer, director or employee thereof or for 
the account of any customer, a long position in any option contract 
of a class of options dealt in on the Exchange (or, respecting an 
option not dealt in on the Exchange, another exchange if the member 
or member organization is not a member of that exchange) if as a 
result thereof such member or member organization, or partner, 
officer, director or employee thereof or customer, acting alone or 
in concert with others, directly or indirectly, has or will have 
exercised within any five (5) consecutive business days aggregate 
long positions in that class (put or call) as set forth as the 
position limit in Rule 1001, in the case of options on a stock or on 
an Exchange-Traded Fund Share * * *.''
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Standard Position and Exercise Limit

    The Pilot Program increases the standard position and exercise 
limits for equity options traded on the Exchange and for options 
overlying QQQQ to the following levels:\8\
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    \8\ Except when the Pilot Program is in effect.

------------------------------------------------------------------------
                                             Pilot Program equity option
   Current equity option contract limit            contract limit
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13,500 contracts..........................  25,000 contracts.
22,500 contracts..........................  50,000 contracts.
31,500 contracts..........................  75,000 contracts.
60,000 contracts..........................  200,000 contracts.
75,000 contracts..........................  250,000 contracts.
-------------------------------------------
Current QQQQ Option Contract Limit........  Pilot Program QQQQ Option
                                             Contract Limit
-------------------------------------------
300,000 contracts.........................  900,000 contracts.
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    To date, the Exchange believes that there have been no adverse 
effects on the market as a result of these increases in the limits for 
equity option contracts and options overlying QQQQ.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \9\ in general, and furthers the objective of section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
perfect the mechanisms of a free and open market and the national 
market system, protect investors and the public interest and promote 
just and equitable principles of trade, by extending the pilot for an 
additional six months.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 forgoing rule change does not: (1) Significantly affect 
the protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
after the date of this filing, or such shorter time as the Commission 
may designate, it has become effective pursuant to section 19(b)(3)(A) 
of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date

[[Page 49006]]

of filing.\13\ However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is 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 pre-operative delay. The Commission is 
exercising its authority to waive the five-day pre-filing requirement 
and believes that waiver of the 30-day pre-operative delay is 
consistent with the protection of investors and in the public interest. 
Waiving the five-day pre-filing requirement and 30-day pre-operative 
delay will allow the Pilot Program to continue uninterrupted.\15\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii).
    \14\ Id.
    \15\ For the purposes only of waiving 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 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 Act.

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 No. SR-Phlx-2005-51 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File No. SR-Phlx-2005-51. 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, 100 F Street, NE., 
Washington, DC 20549. Copies of such filing will also 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 No. SR-Phlx-2005-51 and should be 
submitted on or before September 12, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4549 Filed 8-19-05; 8:45 am]
BILLING CODE 8010-01-P