Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change To Increase Position Limits and Exercise Limits for Options on Standard and Poor's Depositary Receipts, 3415-3416 [E5-253]

Download as PDF Federal Register / Vol. 70, No. 14 / Monday, January 24, 2005 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51039; File Nos. SR–NYSE– 2004–12; SR–NASD–2003–140] Self-Regulatory Organizations; Notice of Extension of the Comment Period for the Proposed Rule Changes by the New York Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Relating to the Prohibition of Certain Abuses in the Allocation and Distribution of Shares in Initial Public Offerings January 14, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 the New York Stock Exchange, Inc. (‘‘NYSE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change (SR–NYSE– 2004–12), and Amendment No. 1 thereto, and the National Association of Securities Dealers, Inc. (‘‘NASD’’) filed a proposed rule change (SR–NASD– 2003–140), and Amendments Nos. 1 and 2 thereto, relating to the prohibition of certain abuses in the allocation and distribution of shares in initial public offerings. A complete description of the proposed rule changes and the amendments thereto is found in the notice of filing, which was published in the Federal Register on December 28, 2004.3 The comment period expires on January 18, 2005. To give the public additional time to comment on the proposed rule changes, the Commission has decided to extend the comment period pursuant to Section 19(b)(2) of the Act.4 Accordingly the comment period shall be extended until February 15, 2005. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rules are consistent with the Act and whether there are any differences between the NYSE and NASD proposals that present compliance or interpretive issues. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. Comments also may be submitted electronically at the following e-mail address: rule-comments@sec.gov. All comment letters should refer to File 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 50896 (December 20, 2004), 69 FR 77804 (December 28, 2004). 4 15 U.S.C. 78s(b)(2). 2 17 VerDate jul<14>2003 18:04 Jan 21, 2005 Jkt 205001 Nos. SR–NYSE–2004–12 and SR– NASD–2003–140. These file numbers should be included on the subject line if e-mail is used. To help us process and review comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. 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 filings will also be available for inspection and copying at the principal offices of the NYSE and NASD. All submissions should be submitted by February 15, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.5 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5–215 Filed 1–21–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51044; File No. SR–PCX– 2005–05] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change To Increase Position Limits and Exercise Limits for Options on Standard and Poor’s Depositary Receipts January 14, 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 January 12, 2005, the Pacific Exchange, Inc. (‘‘PCX’’ 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 Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. In addition, the Commission is granting PO 00000 5 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 Frm 00061 Fmt 4703 Sfmt 4703 3415 accelerated approval of the proposed rule change. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend PCX Rule 6.8 to increase position limits and exercise limits for options on the Standard and Poor’s Depositary Receipts (‘‘SPY’’). The text of the proposed rule change is available on the PCX’s Web site (https://www.pacificex.com), at the PCX’s Office of the Secretary, and at the Commission’s Public Reference Room. 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 had received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The PCX 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 began trading options on SPY on January 10, 2005 on the Exchange’s electronic trading platform, PCX Plus. The Exchange proposes to amend PCX Rule 6.8, Commentary .06 to increase position limits and exercise limits for options on SPY from 75,000 to 300,000 contracts on the same side of the market. Given the expected institutional demand for options on SPY, the PCX believes the current equity position limit of 75,000 contracts to be too low and a deterrent to the successful trading of the product. Options on SPY are 1⁄10th the size of options on the Standard and Poor’s 500 Index (‘‘SPX’’). Thus, a position limit of 75,000 contracts in SPY options is equivalent to a 7,500 contract position limit in SPX options. Traders who trade SPY options to hedge positions in SPX options are likely to find a position limit of 75,000 contracts in SPY options too restrictive, which may adversely affect the Exchange’s ability to provide liquidity in this product. Comparable products, such as options on the Nasdaq-100 Index Tracking Stock (‘‘QQQ’’), are subject to a 300,000 E:\FR\FM\24JAN1.SGM 24JAN1 3416 Federal Register / Vol. 70, No. 14 / Monday, January 24, 2005 / Notices contract limit.3 The Exchange proposes that options on SPYs similarly be subject to position limits and exercise limits of 300,000 contracts.4 The Exchange believes that increasing position limits and exercise limits for SPY options would lead to a more liquid and competitive market environment for SPY options that would benefit customers interested in this product. Consistent with the reporting requirement for QQQ options, the Exchange would require that each OTP Holder and OTP Firm that maintains a position on the same side of the market in excess of 10,000 contracts in the SPY option class, for its own account or for the account of a customer report certain information.5 This data would include, but would not be limited to, the option position, whether such position is hedged and if so, a description of the hedge and if applicable, the collateral used to carry the position. Exchange market-makers would continue to be exempt from this reporting requirement as market-maker information can be accessed through the Exchange’s market surveillance systems. In addition, the general reporting requirement for customer accounts that maintain a position in excess of 200 contracts would remain at this level for SPY options.6 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act,7 in general, and furthers the objectives of Section 6(b)(5) of the Act,8 in particular, in that it is designed to facilitate transactions in securities, to promote just and equitable principles of trade, to enhance competition and to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 3 See PCX Rule 6.8, Commentary .06(f). to PCX Rule 6.9, Commentary .01, the exercise limit for SPY options under PCX Rule 6.9 would be equivalent to the position limit established in PCX Rule 6.8, Commentary .06(f). 5 See PCX Rule 6.6. 6 See PCX Rule 6.6. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 4 Pursuant VerDate jul<14>2003 18:04 Jan 21, 2005 Jkt 205001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. IV. Commission’s Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations III. Solicitation of Comments thereunder, applicable to a national securities exchange,9 and, in particular, Interested persons are invited to the requirements of Section 6(b)(5) of submit written data, views, and arguments concerning the foregoing, the Act.10 Specifically, the Commission including whether the proposed rule finds that the proposed rule change change is consistent with the Act. should ensure that the Exchange’s Comments may be submitted by any of position limits and exercise limits on the following methods: SPY options provide its OTP Holders and OTP Firms with sufficient Electronic Comments flexibility to participate in the market • Use the Commission’s Internet for such options in a manner that comment form (https://www.sec.gov/ should provide greater depth and rules/sro.shtml); or liquidity for all market participants. • Send an e-mail to rulecomments@sec.gov. Please include File The Commission finds good cause for Number SR–PCX–2005–05 on the approving this proposed rule change subject line. prior to the thirtieth day after publication of notice thereof in the Paper Comments Federal Register. Specifically, the • Send paper comments in triplicate Commission believes that granting to Jonathan G. Katz, Secretary, accelerated approval to the proposed Securities and Exchange Commission, rule change should permit greater depth 450 Fifth Street, NW., Washington, DC and liquidity in the SPY options market 20549–0609. that should benefit all market All submissions should refer to File participants, including retail investors. Number SR–PCX–2005–05. This file Because the higher position limits and number should be included on the subject line if e-mail is used. To help the exercise limits mirror those that the Commission has previously approved Commission process and review your comments more efficiently, please use for like products, the Commission only one method. The Commission will believes it is consistent with Sections post all comments on the Commission’s 6(b)(5) 11 and 19(b)(2) 12 of the Act to Internet Web site (https://www.sec.gov/ approve the PCX’s proposed rule change rules/sro.shtml). Copies of the on an accelerated basis. submission, all subsequent V. Conclusion amendments, all written statements with respect to the proposed rule It is therefore ordered, pursuant to change that are filed with the Section 19(b)(2) of the Act,13 that the Commission, and all written proposed rule change (SR–PCX–2005– communications relating to the 05) is hereby approved on an proposed rule change between the Commission and any person, other than accelerated basis. those that may be withheld from the For the Commission, by the Division of public in accordance with the Market Regulation, pursuant to delegated provisions of 5 U.S.C. 552, will be authority.14 available for inspection and copying in Margaret H. McFarland, the Commission’s Public Reference Deputy Secretary. Section, 450 Fifth Street, NW., [FR Doc. E5–253 Filed 1–21–05; 8:45 am] Washington, DC 20549. Copies of such BILLING CODE 8010–01–P filing also will be available for inspection and copying at the principal office of the PCX. All comments received will be posted without change; the Commission does not edit personal 9 In approving this proposal, the Commission has identifying information from considered its impact on efficiency, competition, submissions. You should submit only and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(5). information that you wish to make 11 15 U.S.C. 78f(b)(5). publicly available. All submissions 12 15 U.S.C. 78s(b)(2). should refer to File Number SR–PCX– 13 15 U.S.C. 78s(b)(2). 2005–05 and should be submitted on or 14 17 CFR 200.30–3(a)(12). before February 14, 2005. PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 E:\FR\FM\24JAN1.SGM 24JAN1

Agencies

[Federal Register Volume 70, Number 14 (Monday, January 24, 2005)]
[Notices]
[Pages 3415-3416]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-253]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51044; File No. SR-PCX-2005-05]


Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of 
Filing and Order Granting Accelerated Approval to a Proposed Rule 
Change To Increase Position Limits and Exercise Limits for Options on 
Standard and Poor's Depositary Receipts

January 14, 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 January 12, 2005, the Pacific Exchange, Inc. (``PCX'' 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 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons. In addition, the 
Commission is granting accelerated approval of the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 PCX Rule 6.8 to increase position 
limits and exercise limits for options on the Standard and Poor's 
Depositary Receipts (``SPY''). The text of the proposed rule change is 
available on the PCX's Web site (https://www.pacificex.com), at the 
PCX's Office of the Secretary, and at the Commission's Public Reference 
Room.

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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The PCX 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 began trading options on SPY on January 10, 2005 on 
the Exchange's electronic trading platform, PCX Plus. The Exchange 
proposes to amend PCX Rule 6.8, Commentary .06 to increase position 
limits and exercise limits for options on SPY from 75,000 to 300,000 
contracts on the same side of the market.
    Given the expected institutional demand for options on SPY, the PCX 
believes the current equity position limit of 75,000 contracts to be 
too low and a deterrent to the successful trading of the product. 
Options on SPY are \1/10\th the size of options on the Standard and 
Poor's 500 Index (``SPX''). Thus, a position limit of 75,000 contracts 
in SPY options is equivalent to a 7,500 contract position limit in SPX 
options. Traders who trade SPY options to hedge positions in SPX 
options are likely to find a position limit of 75,000 contracts in SPY 
options too restrictive, which may adversely affect the Exchange's 
ability to provide liquidity in this product.
    Comparable products, such as options on the Nasdaq-100 Index 
Tracking Stock (``QQQ''), are subject to a 300,000

[[Page 3416]]

contract limit.\3\ The Exchange proposes that options on SPYs similarly 
be subject to position limits and exercise limits of 300,000 
contracts.\4\ The Exchange believes that increasing position limits and 
exercise limits for SPY options would lead to a more liquid and 
competitive market environment for SPY options that would benefit 
customers interested in this product.
---------------------------------------------------------------------------

    \3\ See PCX Rule 6.8, Commentary .06(f).
    \4\ Pursuant to PCX Rule 6.9, Commentary .01, the exercise limit 
for SPY options under PCX Rule 6.9 would be equivalent to the 
position limit established in PCX Rule 6.8, Commentary .06(f).
---------------------------------------------------------------------------

    Consistent with the reporting requirement for QQQ options, the 
Exchange would require that each OTP Holder and OTP Firm that maintains 
a position on the same side of the market in excess of 10,000 contracts 
in the SPY option class, for its own account or for the account of a 
customer report certain information.\5\ This data would include, but 
would not be limited to, the option position, whether such position is 
hedged and if so, a description of the hedge and if applicable, the 
collateral used to carry the position. Exchange market-makers would 
continue to be exempt from this reporting requirement as market-maker 
information can be accessed through the Exchange's market surveillance 
systems. In addition, the general reporting requirement for customer 
accounts that maintain a position in excess of 200 contracts would 
remain at this level for SPY options.\6\
---------------------------------------------------------------------------

    \5\ See PCX Rule 6.6.
    \6\ See PCX Rule 6.6.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act,\7\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act,\8\ in particular, in that it is designed to 
facilitate transactions in securities, to promote just and equitable 
principles of trade, to enhance competition and to protect investors 
and the public interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose 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 on the proposed rule change were neither solicited 
nor received.

III. 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 (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-PCX-2005-05 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-PCX-2005-05. 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 (https://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 Section, 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 
PCX. 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 
publicly available. All submissions should refer to File Number SR-PCX-
2005-05 and should be submitted on or before February 14, 2005.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder, applicable to a national securities 
exchange,\9\ and, in particular, the requirements of Section 6(b)(5) of 
the Act.\10\ Specifically, the Commission finds that the proposed rule 
change should ensure that the Exchange's position limits and exercise 
limits on SPY options provide its OTP Holders and OTP Firms with 
sufficient flexibility to participate in the market for such options in 
a manner that should provide greater depth and liquidity for all market 
participants.
---------------------------------------------------------------------------

    \9\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds good cause for approving this proposed rule 
change prior to the thirtieth day after publication of notice thereof 
in the Federal Register. Specifically, the Commission believes that 
granting accelerated approval to the proposed rule change should permit 
greater depth and liquidity in the SPY options market that should 
benefit all market participants, including retail investors. Because 
the higher position limits and exercise limits mirror those that the 
Commission has previously approved for like products, the Commission 
believes it is consistent with Sections 6(b)(5) \11\ and 19(b)(2) \12\ 
of the Act to approve the PCX's proposed rule change on an accelerated 
basis.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-PCX-2005-05) is hereby 
approved on an accelerated basis.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-253 Filed 1-21-05; 8:45 am]
BILLING CODE 8010-01-P
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