Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Until June 5, 2006, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals, 33250-33252 [E5-2900]
Download as PDF
33250
Federal Register / Vol. 70, No. 108 / Tuesday, June 7, 2005 / Notices
Pursuant to Rule 19b–4(f)(6)(iii) under
the Act,11 the proposal does not become
operative for 30 days after the date of its
filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest. The PCX has requested
that the Commission waive the 30-day
operative delay so that the proposed
rule change will become immediately
effective upon filing.
The Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest.12
Accelerating the operative date will
allow for an immediately effective
mechanism for proscribing certain
customer-broker loans and monitoring
those that have been approved. For
these reasons, the Commission
designates that the proposed rule
change has become effective and
operative immediately.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–PCX–2005–33 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–2005–33. 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 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
available publicly. All submissions
should refer to File Number SR–PCX–
2005–33 and should be submitted on or
before June 28, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2896 Filed 6–6–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITITES AND EXCHANGE
COMMISSION
[Release No. 34–51768; File No. SR–Phlx–
2005–35]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Extend Until June 5, 2006,
a Pilot Program for Listing Options on
Selected Stocks Trading Below $20 at
One-Point Intervals
May 31, 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 May 16,
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. The Phlx
filed the proposal pursuant to Section
19(b)(3)(A) of the Act,3 and Rule 19b–
4(f)(6) thereunder,4 which renders the
proposal effective upon filing with the
13 17
11 Id.
12 For
purposes 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).
VerDate jul<14>2003
20:54 Jun 06, 2005
Jkt 205001
PO 00000
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
1 15
Frm 00196
Fmt 4703
Sfmt 4703
Commission.5 The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to amend
Commentary .05 to Phlx Rule 1012,
‘‘Series of Options Open for Trading,’’ to
extend until June 5, 2006, its pilot
program for listing options series on
selected stocks trading below $20 at
one-point intervals (‘‘Pilot Program’’).
As set forth in Phlx Rule 1012,
Commentary .05, the Pilot Program
allows the Phlx to list options classes
overlying five individual stocks with
strike price intervals of $1.00 where,
among other things, the underlying
stock closes below $20 on its primary
market on the day before the Phlx
selects the stock for the Pilot Program.
The Phlx also may list $1 strike prices
on any options classes selected by other
options exchanges that have adopted
similar pilot programs.6 The text of the
proposed rule change is available on the
Phlx’s Web site (https://www.phlx.com),
at the Phlx’s principal office, and at the
Commission’s Public Reference Room.
5 The Phlx has asked the Commission to waive
the five-day pre-filing notice requirement and the
30-day operative delay. See Rule 19b–4(f)(6)(iii), 17
CFR 240.19b–4(f)(6)(iii).
6 The Commission approved the Phlx’s Pilot
Program on June 11, 2003, and extended it through
June 5, 2005. See Securities Exchange Act Release
Nos. 48013 (June 11, 2003), 68 FR 35933 (June 17,
2003) (order approving File No. SR–Phlx–2002–55)
(approving the Pilot Program through June 5, 2004)
(‘‘Phlx Approval Order’’); and 49801 (June 3, 2004),
69 FR 32652 (June 10, 2004) (notice of filing and
immediate effectiveness of File No. SR–PHLX–
2004–38) (extending the Pilot Program through June
5, 2005) (‘‘Phlx Pilot Extension’’). The other options
exchanges have similar pilot programs that likewise
were extended through June 5, 2005. See, e.g.,
Securities Exchange Act Release Nos. 49813 (June
4, 2004), 69 FR 33088 (June 14, 2004) (notice of
filing and immediate effectiveness of File No. SR–
Amex–2004–45) (extending the $1 strike price pilot
program of the American Stock Exchange LLC,
through June 5, 2005); 49799 (June 3, 2004), 69 FR
32542 (June 10, 2004) (notice of filing and
immediate effectiveness of File No. SR–CBOE–
2004–34) (extending the $1 strike price pilot
program of the Chicago Board Options Exchange,
Incorporated, through June 5, 2005); 50060 (July 22,
2004), 69 FR 45864 (July 30, 2004) (notice of filing
and immediate effectiveness of File No. SR–ISE–
2004–26) (extending the $1 strike price pilot
program of the International Securities Exchange,
Inc., through June 5, 2005); and 50152 (August 5,
2004), 69 FR 49931 (August 12, 2004) (order
approving File No. SR–PCX–2004–61) (extending
the $1 strike price pilot program of the Pacific
Exchange, Inc., through June 5, 2005).
E:\FR\FM\07JNN1.SGM
07JNN1
Federal Register / Vol. 70, No. 108 / Tuesday, June 7, 2005 / Notices
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 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 extend the Pilot Program for
one year so that the Exchange may
continue to list options at $1 strike price
intervals within the parameters
specified in Phlx Rule 1012,
Commentary .05.
Because of the large number of stocks
that have precipitously declined in
price over the last four years and the
increasing number of options overlying
this lowest tier of stocks, the
Commission approved the Pilot Program
and extended it through June 5, 2005.7
The Exchange proposes to extend the
Pilot Program for a period of one year,
through June 5, 2006. The Pilot Program
will remain unchanged so that, under
the terms of the Pilot Program, the Phlx
may establish $1 strike price intervals
on options classes overlying no more
than five individual stocks designated
by the Exchange where the underlying
stock closes below $20 on its primary
market on the trading day before the
Exchange selects the stock for the Pilot
Program. Under the terms of the Pilot
Program, the strike prices listed
pursuant to the Pilot Program must be
between $3 and $20 and may be no
more than $5 above or below the closing
price of the underlying stock on the
preceding day. In addition, strike prices
listed pursuant to the Pilot Program may
not be listed within $.50 of an existing
$2.50 strike price, and $1 strike prices
are not applied to long term options
series (‘‘LEAPS’’). Pursuant to the Pilot
Program, the Exchange may list $1 strike
prices on options classes selected by
other options exchanges for inclusion in
their $1 strike price pilot programs.
In July 2003, the Phlx chose and listed
five options classes with $1 strike price
7 See
Phlx Approval Order and Phlx Pilot
Extension, supra note 6.
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20:54 Jun 06, 2005
Jkt 205001
intervals, and thereafter listed $1 strike
prices in options classes selected by
other options exchanges for inclusion in
their $1 strike price pilot programs. The
Phlx currently lists 22 options classes
with $1 strike prices.8 According to the
Phlx, the Exchange’s ability to list
options at $1 strike price intervals
pursuant to the Pilot Program has given
investors the opportunity to more
closely and effectively tailor their
options investments to the price of the
underlying stock, has allowed the
Exchange to take advantage of
competitive opportunities to list options
at $1 strike prices, and has stimulated
price competition among the options
exchanges in these options.
In its notice extending the Pilot
Program through June 5, 2005, the
Commission indicated that if the Phlx
sought to extend, expand, or request
permanent approval of the Pilot
Program, it would be required to
include a Pilot Program report with its
filing.9 The Phlx’s Pilot Program Report
(‘‘Pilot Program Report’’), included as
Exhibit 3 to the proposal, reviews the
Exchange’s experience with the Pilot
Program. According to the Phlx, the
Pilot Program Report clearly supports
the Exchange’s belief that extension of
the Pilot Program is proper. Among
other things, the Phlx believes that the
Pilot Program Report shows the strength
and efficacy of the Pilot Program on the
Exchange, as reflected by the increase in
the percentage of $1 strikes in
comparison to total options volume
traded on the Phlx (from 37.23% in the
2004 report to 51.59% in 2005 Pilot
Program Report) and the continuing
robust open interest of options traded
on the Phlx at $1 strike price intervals.
The Phlx believes that the Pilot Program
Report establishes that the Pilot Program
has not created and in the future should
not create capacity problems for the
systems of the Exchange or the Options
Price Reporting Authority (‘‘OPRA’’). In
addition, the Pilot Program Report
explains that most delistings of $1 strike
price options series occurred to ensure
that the chosen $1 strike price issues
remained within the parameters of the
Pilot Program.
33251
the objectives of Section 6(b)(5),11 in
particular, in that it is designed to
perfect the mechanism of a free and
open market and a national market
system, to protect investors and the
public interest, and to promote just an
equitable principles of trade. The Phlx
believes the proposal would achieve
this by allowing the continued listing of
options at $1 strike price intervals
within certain parameters, thereby
stimulating customer interest in options
overlying the lowest tier of stocks and
creating greater trading opportunities
and flexibility and providing customers
with the ability to more closely tailor
investment strategies to the precise
movement of the underlying stocks.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Phlx 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
The Phlx has filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 12 and subparagraph (f)(6) of
Rule 19b–4 thereunder.13 Because the
foregoing proposed 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 proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act and Rule
19b–4(f)(6) thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
2. Statutory Basis
designate a shorter time if such action
The Exchange believes the proposed
is consistent with the protection of
rule change is consistent with Section
investors and the public interest. In
6(b) of the Act,10 in general, and furthers addition, Rule 19b–4(f)(6)(iii) requires a
self-regulatory organization to provide
8 The Phlx continues to list the $1 strike prices
the Commission with written notice of
in the options classes that it initially chose for the
its intent to file the proposed rule
Pilot Program: TYCO International, LTD (TYC),
Micron Tech. (MU), Oracle Co. (ORQ), Brocade
Comm. (UBF), and Juniper Networks (JUP).
9 See Phlx Pilot Extension, supra note 6.
10 15 U.S.C. 78f(b).
PO 00000
Frm 00197
Fmt 4703
Sfmt 4703
11 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f)(6).
12 15
E:\FR\FM\07JNN1.SGM
07JNN1
33252
Federal Register / Vol. 70, No. 108 / Tuesday, June 7, 2005 / Notices
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. The Phlx has asked the
Commission to waive the five-day prefiling notice requirement and the 30-day
operative delay to allow the Exchange to
continue listing $1 strike prices without
a lapse in the operation of the Pilot
Program.
The Commission waives the five-day
pre-filing notice requirement. In
addition, the Commission believes that
waiving the 30-day operative delay is
consistent with the protection of
investors and the public interest
because it will permit the Pilot Program
to continue without interruption
through June 5, 2006.14 For this reason,
the Commission designates that the
proposal become operative on June 5,
2005.15
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.
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.
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
15 As set forth in the Commission’s initial
approval of the Pilot Program, if the Phlx proposes
to: (1) Extend the Pilot Program; (2) expand the
number of options eligible for inclusion in the Pilot
Program; or (3) seek permanent approval of the Pilot
Program, it must submit a Pilot Program report to
the Commission along with the filing of its proposal
to extend, expand, or seek permanent approval of
the Pilot Program. The Phlx must file any such
proposal and the Pilot Program report with the
Commission at least 60 days prior to the expiration
of the Pilot Program. The Pilot Program report must
cover the entire time the Pilot Program was in effect
and must include: (1) data and written analysis on
the open interest and trading volume for options (at
all strike price intervals) selected for the Pilot
Program; (2) delisted options series (for all strike
price intervals) for all options selected for the Pilot
Program; (3) an assessment of the appropriateness
of $1 strike price intervals for the options the Phlx
selected for the Pilot Program; (4) an assessment of
the impact of the Pilot Program on the capacity of
the Phlx’s, OPRA’s, and vendors’ automated
systems; (5) any capacity problems or other
problems that arose during the operation of the
Pilot Program and how the Phlx addressed them; (6)
any complaints that the Phlx received during the
operation of the Pilot Program and how the Phlx
addressed them; and (7) any additional information
that would help to assess the operation of the Pilot
Program. See Phlx Approval Order, supra note 6.
VerDate jul<14>2003
20:54 Jun 06, 2005
Jkt 205001
Comments may be submitted by any of
the following methods:
SMALL BUSINESS ADMINISTRATION
Electronic Comments
Wisconsin District Advisory Council;
Public Meeting
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–Phlx–2005–35 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
No. SR–Phlx–2005–35. 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
Room, 450 Fifth Street, NW.,
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–
35 and should be submitted on or before
June 28, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.16
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2900 Filed 6–6–05; 8:45 am]
BILLING CODE 8010–01–P
PO 00000
16 17
The U.S. Small Business
Administration, Wisconsin District
Advisory Council will be hosting its
first meeting to discuss such matters
that may be presented by members, and
staff of the U.S. Small Business
Administration, or others present. The
meeting will be held on Thursday, June
16, 2005, starting at 1:30 p.m. The
meeting will take place at the U.S. Small
Business Administration, Wisconsin
District—Milwaukee, 310 West
Wisconsin Avenue, Suite 400,
Milwaukee, Wisconsin.
Anyone wishing to attend must
contact Cindy Merrigan in writing or by
fax. Cindy Merrigan, Small Business
Administration, 740 Regent Street, Suite
100, Madison, Wisconsin 53715, phone
(608) 441–5560, fax (202) 481–0815, email: cindy.merrigan@sba.gov.
Matthew K. Becker,
Committee Management Officer.
[FR Doc. 05–11296 Filed 6–6–05; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Region III Regulatory Fairness Board;
Public Federal Regulatory
Enforcement Fairness Hearing
The U.S. Small Business
Administration (SBA), Region III
Regulatory Fairness Board and the SBA
Office of the National Ombudsman will
hold a public hearing on Friday, June
24, 2005, starting at 9 a.m. The meeting
will be held at the William J. Green
Federal Building, Ceremonial
Courtroom, located at 76 North 6th
Street, Philadelphia, PA 19106. Please
contact the office at (215) 580–2701, to
receive comments and testimony from
small business owners, small
government entities, and small nonprofit organizations concerning
regulatory enforcement and compliance
actions taken by Federal agencies.
Anyone wishing to attend or to make
a presentation must contact Ana
Gallardo in writing or by fax, in order
to be put on the agenda. Ana Gallardo,
Business Development Specialist, SBA
Philadelphia District Office, 900 Market
Street, 5th Floor, Philadelphia, PA
19107, phone (215) 580–2707, fax (202)
481–0193, e-mail: ana.gallardo@sba.gov.
CFR 200.30–3(a)(12).
Frm 00198
Fmt 4703
Sfmt 4703
E:\FR\FM\07JNN1.SGM
07JNN1
Agencies
[Federal Register Volume 70, Number 108 (Tuesday, June 7, 2005)]
[Notices]
[Pages 33250-33252]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2900]
-----------------------------------------------------------------------
SECURITITES AND EXCHANGE COMMISSION
[Release No. 34-51768; File No. SR-Phlx-2005-35]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Extend Until June 5, 2006, a Pilot Program for Listing Options on
Selected Stocks Trading Below $20 at One-Point Intervals
May 31, 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 May 16, 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. The Phlx filed
the proposal pursuant to Section 19(b)(3)(A) of the Act,\3\ and Rule
19b-4(f)(6) thereunder,\4\ which renders the proposal effective upon
filing with the Commission.\5\ The Commission is publishing this notice
to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ The Phlx has asked the Commission to waive the five-day pre-
filing notice requirement and the 30-day operative delay. See Rule
19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend Commentary .05 to Phlx Rule 1012,
``Series of Options Open for Trading,'' to extend until June 5, 2006,
its pilot program for listing options series on selected stocks trading
below $20 at one-point intervals (``Pilot Program''). As set forth in
Phlx Rule 1012, Commentary .05, the Pilot Program allows the Phlx to
list options classes overlying five individual stocks with strike price
intervals of $1.00 where, among other things, the underlying stock
closes below $20 on its primary market on the day before the Phlx
selects the stock for the Pilot Program. The Phlx also may list $1
strike prices on any options classes selected by other options
exchanges that have adopted similar pilot programs.\6\ The text of the
proposed rule change is available on the Phlx's Web site (https://
www.phlx.com), at the Phlx's principal office, and at the Commission's
Public Reference Room.
---------------------------------------------------------------------------
\6\ The Commission approved the Phlx's Pilot Program on June 11,
2003, and extended it through June 5, 2005. See Securities Exchange
Act Release Nos. 48013 (June 11, 2003), 68 FR 35933 (June 17, 2003)
(order approving File No. SR-Phlx-2002-55) (approving the Pilot
Program through June 5, 2004) (``Phlx Approval Order''); and 49801
(June 3, 2004), 69 FR 32652 (June 10, 2004) (notice of filing and
immediate effectiveness of File No. SR-PHLX-2004-38) (extending the
Pilot Program through June 5, 2005) (``Phlx Pilot Extension''). The
other options exchanges have similar pilot programs that likewise
were extended through June 5, 2005. See, e.g., Securities Exchange
Act Release Nos. 49813 (June 4, 2004), 69 FR 33088 (June 14, 2004)
(notice of filing and immediate effectiveness of File No. SR-Amex-
2004-45) (extending the $1 strike price pilot program of the
American Stock Exchange LLC, through June 5, 2005); 49799 (June 3,
2004), 69 FR 32542 (June 10, 2004) (notice of filing and immediate
effectiveness of File No. SR-CBOE-2004-34) (extending the $1 strike
price pilot program of the Chicago Board Options Exchange,
Incorporated, through June 5, 2005); 50060 (July 22, 2004), 69 FR
45864 (July 30, 2004) (notice of filing and immediate effectiveness
of File No. SR-ISE-2004-26) (extending the $1 strike price pilot
program of the International Securities Exchange, Inc., through June
5, 2005); and 50152 (August 5, 2004), 69 FR 49931 (August 12, 2004)
(order approving File No. SR-PCX-2004-61) (extending the $1 strike
price pilot program of the Pacific Exchange, Inc., through June 5,
2005).
---------------------------------------------------------------------------
[[Page 33251]]
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 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 extend the Pilot
Program for one year so that the Exchange may continue to list options
at $1 strike price intervals within the parameters specified in Phlx
Rule 1012, Commentary .05.
Because of the large number of stocks that have precipitously
declined in price over the last four years and the increasing number of
options overlying this lowest tier of stocks, the Commission approved
the Pilot Program and extended it through June 5, 2005.\7\ The Exchange
proposes to extend the Pilot Program for a period of one year, through
June 5, 2006. The Pilot Program will remain unchanged so that, under
the terms of the Pilot Program, the Phlx may establish $1 strike price
intervals on options classes overlying no more than five individual
stocks designated by the Exchange where the underlying stock closes
below $20 on its primary market on the trading day before the Exchange
selects the stock for the Pilot Program. Under the terms of the Pilot
Program, the strike prices listed pursuant to the Pilot Program must be
between $3 and $20 and may be no more than $5 above or below the
closing price of the underlying stock on the preceding day. In
addition, strike prices listed pursuant to the Pilot Program may not be
listed within $.50 of an existing $2.50 strike price, and $1 strike
prices are not applied to long term options series (``LEAPS'').
Pursuant to the Pilot Program, the Exchange may list $1 strike prices
on options classes selected by other options exchanges for inclusion in
their $1 strike price pilot programs.
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\7\ See Phlx Approval Order and Phlx Pilot Extension, supra note
6.
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In July 2003, the Phlx chose and listed five options classes with
$1 strike price intervals, and thereafter listed $1 strike prices in
options classes selected by other options exchanges for inclusion in
their $1 strike price pilot programs. The Phlx currently lists 22
options classes with $1 strike prices.\8\ According to the Phlx, the
Exchange's ability to list options at $1 strike price intervals
pursuant to the Pilot Program has given investors the opportunity to
more closely and effectively tailor their options investments to the
price of the underlying stock, has allowed the Exchange to take
advantage of competitive opportunities to list options at $1 strike
prices, and has stimulated price competition among the options
exchanges in these options.
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\8\ The Phlx continues to list the $1 strike prices in the
options classes that it initially chose for the Pilot Program: TYCO
International, LTD (TYC), Micron Tech. (MU), Oracle Co. (ORQ),
Brocade Comm. (UBF), and Juniper Networks (JUP).
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In its notice extending the Pilot Program through June 5, 2005, the
Commission indicated that if the Phlx sought to extend, expand, or
request permanent approval of the Pilot Program, it would be required
to include a Pilot Program report with its filing.\9\ The Phlx's Pilot
Program Report (``Pilot Program Report''), included as Exhibit 3 to the
proposal, reviews the Exchange's experience with the Pilot Program.
According to the Phlx, the Pilot Program Report clearly supports the
Exchange's belief that extension of the Pilot Program is proper. Among
other things, the Phlx believes that the Pilot Program Report shows the
strength and efficacy of the Pilot Program on the Exchange, as
reflected by the increase in the percentage of $1 strikes in comparison
to total options volume traded on the Phlx (from 37.23% in the 2004
report to 51.59% in 2005 Pilot Program Report) and the continuing
robust open interest of options traded on the Phlx at $1 strike price
intervals. The Phlx believes that the Pilot Program Report establishes
that the Pilot Program has not created and in the future should not
create capacity problems for the systems of the Exchange or the Options
Price Reporting Authority (``OPRA''). In addition, the Pilot Program
Report explains that most delistings of $1 strike price options series
occurred to ensure that the chosen $1 strike price issues remained
within the parameters of the Pilot Program.
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\9\ See Phlx Pilot Extension, supra note 6.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act,\10\ in general, and furthers the objectives of
Section 6(b)(5),\11\ in particular, in that it is designed to perfect
the mechanism of a free and open market and a national market system,
to protect investors and the public interest, and to promote just an
equitable principles of trade. The Phlx believes the proposal would
achieve this by allowing the continued listing of options at $1 strike
price intervals within certain parameters, thereby stimulating customer
interest in options overlying the lowest tier of stocks and creating
greater trading opportunities and flexibility and providing customers
with the ability to more closely tailor investment strategies to the
precise movement of the underlying stocks.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Phlx 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
The Phlx has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \12\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\13\ Because the foregoing proposed 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 proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a
self-regulatory organization to provide the Commission with written
notice of its intent to file the proposed rule
[[Page 33252]]
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. The Phlx has asked the Commission to waive the five-day
pre-filing notice requirement and the 30-day operative delay to allow
the Exchange to continue listing $1 strike prices without a lapse in
the operation of the Pilot Program.
The Commission waives the five-day pre-filing notice requirement.
In addition, the Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest because it will permit the Pilot Program to continue without
interruption through June 5, 2006.\14\ For this reason, the Commission
designates that the proposal become operative on June 5, 2005.\15\
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\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\15\ As set forth in the Commission's initial approval of the
Pilot Program, if the Phlx proposes to: (1) Extend the Pilot
Program; (2) expand the number of options eligible for inclusion in
the Pilot Program; or (3) seek permanent approval of the Pilot
Program, it must submit a Pilot Program report to the Commission
along with the filing of its proposal to extend, expand, or seek
permanent approval of the Pilot Program. The Phlx must file any such
proposal and the Pilot Program report with the Commission at least
60 days prior to the expiration of the Pilot Program. The Pilot
Program report must cover the entire time the Pilot Program was in
effect and must include: (1) data and written analysis on the open
interest and trading volume for options (at all strike price
intervals) selected for the Pilot Program; (2) delisted options
series (for all strike price intervals) for all options selected for
the Pilot Program; (3) an assessment of the appropriateness of $1
strike price intervals for the options the Phlx selected for the
Pilot Program; (4) an assessment of the impact of the Pilot Program
on the capacity of the Phlx's, OPRA's, and vendors' automated
systems; (5) any capacity problems or other problems that arose
during the operation of the Pilot Program and how the Phlx addressed
them; (6) any complaints that the Phlx received during the operation
of the Pilot Program and how the Phlx addressed them; and (7) any
additional information that would help to assess the operation of
the Pilot Program. See Phlx Approval Order, supra note 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.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-Phlx-2005-35 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 No. SR-Phlx-2005-35. 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 Room, 450 Fifth Street,
NW., 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-2005-35 and should be
submitted on or before June 28, 2005.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2900 Filed 6-6-05; 8:45 am]
BILLING CODE 8010-01-P