Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Reduce the Value of the Nasdaq Composite Index® Underlying the Options Traded Under the Symbol QCE, 72141-72143 [E5-6730]

Download as PDF Federal Register / Vol. 70, No. 230 / Thursday, December 1, 2005 / Notices must examine their procedures for seeking to obtain best execution in light of market and technology changes and modify those practices if necessary to enable their customers to obtain the best reasonably available prices.16 In doing so, broker-dealers must take into account price improvement opportunities, and whether different markets may be more suitable for different types of orders or particular securities.17 Furthermore, the Commission finds good cause for approving Amendment No. 2 to the proposed rule change prior to the thirtieth day after the amendment is published for comment in the Federal Register pursuant to section 19(b)(2) of the Act.18 Amendment No. 2 clarified that the Exchange proposed to make the Directed Order Process available during the Opening Session and the Late Trading Session. The Commission does not believe that Amendment No. 2 materially affects the original proposed rule change, as amended, or that it presents any novel regulatory issues. Accordingly, the Commission finds good cause to accelerate approval of Amendment No. 2. V. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,19 that the proposed rule change (SR–PCX–2005– 56), as amended by Amendment No. 1, be, and it hereby is, approved, and that Amendment No. 2 is approved on an accelerated basis. must regularly and rigorously examine execution quality likely to be obtained from different markets or market makers trading a security.’’). See also Newton, 135 F.3d at 271; Market 2000: An Examination of Current Equity Market Developments V–4 (SEC Division of Market Regulation January 1994) (‘‘Without specific instructions from a customer, however, a brokerdealer should periodically assess the quality of competing markets to ensure that its order flow is directed to markets providing the most advantageous terms for the customer’s order.’’); Payment for Order Flow Final Rules, 59 FR at 55009. 16 Order Handling Rules, 61 FR at 48323. 17 Order Handling Rules, 61 FR at 48323. For example, in connection with orders that are to be executed at a market opening price. ‘‘[b]rokerdealers are subject to a best execution duty in executing customer orders at the opening, and should take into account the alternative methods in determining how to obtain best execution for their customer orders.’’ Disclosure of Order Execution and Routing Practices, Securities Exchange Act Release No. 43590 (November 17, 2000), 65 FR 75414, 75422 (December 1, 2000) (adopting new Rules 11Ac1–5 and 11Ac1–6 under the Act and noting that alternative methods offered by some Nasdaq market centers for pre-open orders included the mid-point of the spread or at the bid or offer). 18 15 U.S.C. 78s(b)(2). 19 15 U.S.C. 78s(b)(2). VerDate Aug<31>2005 14:47 Nov 30, 2005 Jkt 208001 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.20 Jonathan G. Katz, Secretary. [FR Doc. E5–6732 Filed 11–30–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–52817; File No. SR–Phlx– 2005–47] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Reduce the Value of the Nasdaq Composite Index Underlying the Options Traded Under the Symbol QCE November 22, 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 November 9, 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 November 18, 2005, the Phlx filed Amendment No. 1 to the proposed rule change.3 The Phlx 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.6 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to decrease by a factor of ten (10) the value of the index that underlies the options that are approved to trade on the Exchange under the symbol QCE (‘‘QCE Options’’) and thereby decrease the strike prices 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 In Amendment No. 1, the Exchange asked the Commission to waive the 30-day operative delay required by Rule 19b–4(f)(6)(iii). See 17 CFR 240.19b–4(f)(6)(iii). See also discussion infra section III. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b–4(f)(6). 6 The Phlx has asked the Commission to waive the 30-day operative delay required by Rule 19b– 4(f)(6)(iii), 17 CFR 240.19b–4(f)(6)(iii). See supra note 3. 1 15 PO 00000 Frm 00039 Fmt 4703 Sfmt 4703 72141 for the QCE Options, in order to eliminate investor confusion between the QCE Options and the QCX Options.7 The proposed decrease would be achieved by multiplying the Adjusted Base Period Market Value that is applied to the index underlying the QCE Options (‘‘QCE Index’’) by ten. The position and exercise limits applicable to QCE Options (currently 300,000 contracts on either side of the market in the near-term months) would remain unchanged. 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 In December 2003, the Commission approved Phlx’s proposed rule change to trade full-value options on the Nasdaq Composite Index 8 under the 7 See infra section II.A.1 for the definition of ‘‘QCX Options’’ and for the general background. 8 The composite index is a cash-settled, capitalization-weighted, broad-based, A.M. settled index composed of approximately 3,400 stocks listed and traded on The Nasdaq Stock Market, Inc. (‘‘Nasdaq’’). Nasdaq, Nasdaq Composite and Nasdaq Composite Index are registered trademarks of The Nasdaq Stock Market, Inc. (which with its affiliates are the ‘‘Corporations’’) and are licensed for use by the Philadelphia Stock Exchange. The product(s) described herein have not been passed on by the Corporations as to their legality or suitability. The product(s) are not issued, endorsed, sold, or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the product(s). The Corporations do not guarantee the accuracy and/or uninterrupted calculation of the Nasdaq Composite Index or any data included therein. The Corporations make no warranty, express or implied, as to results to be obtained by the exchange, owners of the product(s), or any other person or entity from the use of the Nasdaq Composite Index or any data included therein. The Corporations make no express or implied warranties, and expressly disclaim all warranties of merchantiability or fitness for a particular purpose or use with respect to the Nasdaq Composite Index or any data included therein. Without limiting any of the foregoing, in no event shall the Corporations have any liability for any lost profits or special, incidental, punitive, indirect, or consequential damages, even if notified of the possibility of such damages. E:\FR\FM\01DEN1.SGM 01DEN1 72142 Federal Register / Vol. 70, No. 230 / Thursday, December 1, 2005 / Notices symbol QCX (‘‘QCX Options’’) and reduced-value options on the Nasdaq Composite Index under the symbol QCE.9 Both the QCE Options and QCX Options were based on the full-value Nasdaq Composite Index and had identical strike prices, but the Premium Quotation Multiplier for QCX was 100 and the Premium Quotation Multiplier for QCE was 10. The Exchange has heard from a number of market participants that investors in QCE Options and QCX Options have become confused and not willing to trade these products because the identical options strike prices and similar ticker symbols tend to create the possibility of placing a mistaken order.10 As a result of this investor confusion, trading in the QCE and QCX Options diminished, and the Exchange delisted both the QCE and QCX Options on or about March 21, 2005. The purpose of the proposed rule change is to reduce the value of the QCE Index by a factor of ten and thereby effectively reduce the strike price of QCE Options in order to eliminate investor confusion between the QCE Options and the QCX Options. By reducing the value of the QCE Index by a factor of ten, investors in QCE Options would see a similar reduction in the strike prices of QCE Options contracts, and would be less likely to be confused between the QCE and QCX Options products. For example, as of October 27, 2005, the value of the Nasdaq Composite Index was 2063.50, and a near-month at-the-money call premium for the QCE Option would have been at a minimum its intrinsic value of $63.50 per contract.11 The Exchange proposes to reduce the value of the QCE Index to one-tenth of the value of the Nasdaq 9 See Securities Exchange Act Release No. 48884 (December 5, 2003), 68 FR 69753 (December 15, 2003). 10 As approved in 2003, a QCE Option contract is one-tenth the size of a QCX Option contract. Customarily, strike prices for a full-size options contract and a reduced-size options contract would also differ by a factor of ten. However, since both QCE and QCX Options were linked to the same value of the Nasdaq Composite Index, the strike prices for QCE and QCX Options were identical. 11 While QCX and QCE Options are currently delisted and not trading, Nasdaq has agreed to continue to calculate and disseminate the value for both the full-value Nasdaq Composite Index and the QCE Index, and has been doing so since July 1, 2005, to enable the trading of options overlying the indexes. Nasdaq will continue to disseminate these index values at least once every fifteen seconds during the normal trading day. The Exchange understands that in calculating and disseminating these index values, Nasdaq will synchronize the timing of changes in the indexes so that they occur simultaneously in both indexes, and the smaller QCE Index will at all times be onetenth the value the larger Nasdaq Composite Index, to negate arbitrage opportunities. VerDate Aug<31>2005 14:47 Nov 30, 2005 Jkt 208001 Composite Index, or 206.35, which would effectively be a ‘‘ten-for-one split.’’ This would be achieved by multiplying the Adjusted Base Period Market Value, the divisor used to calculate the QCE Index, by ten. In order to maintain a proper economic ratio between the two options (that is, QCX Options are ten times the value of QCE Options), each QCE Option contract would be assigned a strike price of onetenth of the original strike price. In addition, the Premium Quotation Multiplier, which is currently $100.00 for QCX Options and $10.00 for QCE Options, will be increased to $100.00 for QCE Options to maintain a reasonable equivalence in the options premium in relation to the new strike prices. Thus, for example, a hypothetical option buyer of one QCE 2000 call prior to the date of effectiveness of this proposed rule change would have been quoted a premium of $63.50; after applying the Premium Quotation Multiplier of $10.00, such option buyer would have paid a premium of $635.00. Similarly, a hypothetical option buyer of one QCE 200 call subsequent to the date of effectiveness of this proposed rule change would be quoted a premium of $6.35; after applying the Premium Quotation Multiplier of $100.00, such option buyer would pay a premium of $635.00. As a result, the premium paid, after applying the Premium Quotation Multiplier, would be $635.00 both before and after the date of effectiveness of this proposed rule change. The position and exercise limits applicable to QCE Options would remain unchanged. The options trading symbol would remain QCE. The Exchange will list the new, lower strike prices for QCE Options pursuant to Phlx Rule 1101A, Terms of Option Contracts. The Exchange will announce the effective date of the proposed rule change by way of an Exchange memorandum to the membership, also serving as notice of the strike price changes. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of section 6(b) of the Act,12 in general, and furthers the objectives of section 6(b)(5) of the Act,13 in particular, because it is designed to promote just and equitable principles of trade, as well as to protect investors and the public interest, by establishing a lower index value for the QCE Index which should, in turn, eliminate customer confusion and facilitate 12 15 13 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00040 Fmt 4703 Sfmt 4703 trading in QCE Options. The Exchange believes that reducing the value of the QCE Index should not raise manipulation concerns or cause adverse market impact because the Exchange will continue to employ its surveillance procedures and has proposed an orderly procedure to achieve the index value adjustment, which includes providing adequate prior notice to market participants.14 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 The Phlx has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has been filed by the Exchange as a ‘‘non-controversial’’ rule change pursuant to section 19(b)(3)(A)(i) of the Act 15 and subparagraph (f)(6) of Rule 19b–4 thereunder.16 Consequently, 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, and the Exchange provided the Commission with written notice of its intent to file the proposed rule change at least five days prior to the filing date, it 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 designate a shorter time if such action is consistent with the protection of investors and the public interest. 14 The Exchange further believes that reducing the value of the QCE Index should not impact investors because at the present time there is no open interest or trading in QCE Options overlying such index. 15 15 U.S.C. 78s(b)(3)(A)(i). 16 17 CFR 240.19b–4(f)(6). E:\FR\FM\01DEN1.SGM 01DEN1 Federal Register / Vol. 70, No. 230 / Thursday, December 1, 2005 / Notices The Phlx has asked the Commission to waive the 30-day operative delay to allow the Exchange to promptly decrease the value of the QCE Index that underlies the QCE Options so that trading in the QCE and QCX Options may re-commence. The Commission has determined to waive the 30-day operative delay period.17 The Commission believes that waiving the 30-day operative delay period is consistent with the protection of investors and the public interest because it will allow the Exchange to relist the QCE and QCX Options products in a more timely manner with a reduced risk of investors confusing the two products and placing mistaken orders. 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.18 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 No. SR–Phlx–2005–47 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–2005–47. This file number should be included on the subject line if e-mail is used. To help the 17 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 18 The effective date of the original proposed rule change is November 9, 2005, and the effective date of Amendment No. 1 is November 18, 2005. For purposes of calculating 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 such period to commence on November 18, 2005, the date on which the Exchange filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C). VerDate Aug<31>2005 14:47 Nov 30, 2005 Jkt 208001 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. 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–2005–47 and should be submitted on or before December 22, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.19 Jonathan G. Katz, Secretary. [FR Doc. E5–6730 Filed 11–30–05; 8:45 am] BILLING CODE 8010–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Public Notice for a Change in Use of Aeronautical Property at OwensboroDaviess County Regional Airport, Owensboro, KY Federal Aviation Administration (FAA), DOT. ACTION: Request for public comment. AGENCY: SUMMARY: Under the provisions of Title 49, U.S.C. 47153(c), the Federal Aviation Administration is requesting public comment on the OwensboroDaviess County Regional Airport Board’s request to change a portion (2.362 acres) of airport property from aeronautical use to non-aeronautical use. The property is to be sold to The City of Owensboro, Kentucky for the completion of a connector walkway to David C. Adkisson Greenbelt Park. 19 17 PO 00000 CFR 200.30–3(a)(12). Frm 00041 Fmt 4703 Sfmt 4703 72143 The 2.362 acres is located on the northeast boundary of OwensboroDaviess County Regional Airport; adjacent to and immediately west of the Wendell Ford Expressway, adjacent to and immediately south of Bittel Road, Daviess County, Kentucky. DATES: Comments must be received on or before January 3, 2006. ADDRESSES: Comments on this notice may be mailed or delivered in triplicate to the FAA at the following address: Memphis Airports District Office, 2862 Business Park Drive, Building G, Memphis, TN 38118–1555. In addition, one copy of any comments submitted to the FAA must be mailed or delivered to Mr. Tim Bradshaw, Manager, Owensboro-Daviess County Airport at the following address: 2200 Airport Road, Owensboro, Kentucky 42301. FOR FURTHER INFORMATION CONTACT: Tommy L. Dupree, Airports Program Manager, Memphis Airports District Office, 2862 Business Park Drive, Building G, Memphis, TN 38118–1555, (901) 322–8185. The application may be reviewed in person at this same location. The FAA is reviewing a request by the Owensboro-Daviess County Regional Airport Board to release 2.362 acres of aeronautical property at OwensboroDaviess County Regional Airport, Owensboro, Kentucky. The property will be released to The City of Owensboro, Kentucky for the completion of a connector walkway to David C. Adkisson Greenbelt Park. The City of Owensboro, Kentucky provides annual appropriations for the operation and maintenance of Owensboro-Daviess County Airport, and over the past six (6) years has done so in the amount of $403,792. The appraised value of the 2.362 acres is approximately $62,400. Therefore, release of the property to the City of Owensboro will be zero. A detailed legal description of the property proposed for release can be requested or seen at either of the contacts given above. However, the general description is the 2.362 acres is located on the northeast boundary of Owensboro-Daviess County Regional Airport; adjacent to and immediately west of the Wendell Ford Expressway, adjacent to and immediately south of Bittel Road, Daviess County, Kentucky. Any person may inspect the request in person at the FAA office listed above under FOR FURTHER INFORMATION CONTACT. In addition, any person may, upon request, inspect the request, notice and other documents germane to the SUPPLEMENTARY INFORMATION: E:\FR\FM\01DEN1.SGM 01DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 70, Number 230 (Thursday, December 1, 2005)]
[Notices]
[Pages 72141-72143]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6730]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52817; File No. SR-Phlx-2005-47]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto To Reduce the Value of the Nasdaq Composite 
Index[supreg] Underlying the Options Traded Under the Symbol QCE

November 22, 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 November 9, 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 November 18, 
2005, the Phlx filed Amendment No. 1 to the proposed rule change.\3\ 
The Phlx 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.\6\ The Commission is 
publishing this notice to solicit comments on the proposed rule change, 
as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange asked the Commission to 
waive the 30-day operative delay required by Rule 19b-4(f)(6)(iii). 
See 17 CFR 240.19b-4(f)(6)(iii). See also discussion infra section 
III.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ The Phlx has asked the Commission to waive the 30-day 
operative delay required by Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-
4(f)(6)(iii). See supra note 3.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to decrease by a factor of ten (10) the value of 
the index that underlies the options that are approved to trade on the 
Exchange under the symbol QCE (``QCE Options'') and thereby decrease 
the strike prices for the QCE Options, in order to eliminate investor 
confusion between the QCE Options and the QCX Options.\7\ The proposed 
decrease would be achieved by multiplying the Adjusted Base Period 
Market Value that is applied to the index underlying the QCE Options 
(``QCE Index'') by ten. The position and exercise limits applicable to 
QCE Options (currently 300,000 contracts on either side of the market 
in the near-term months) would remain unchanged.
---------------------------------------------------------------------------

    \7\ See infra section II.A.1 for the definition of ``QCX 
Options'' and for the general background.
---------------------------------------------------------------------------

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
    In December 2003, the Commission approved Phlx's proposed rule 
change to trade full-value options on the Nasdaq Composite 
Index[supreg] \8\ under the

[[Page 72142]]

symbol QCX (``QCX Options'') and reduced-value options on the Nasdaq 
Composite Index[supreg] under the symbol QCE.\9\ Both the QCE Options 
and QCX Options were based on the full-value Nasdaq Composite 
Index[supreg] and had identical strike prices, but the Premium 
Quotation Multiplier for QCX was 100 and the Premium Quotation 
Multiplier for QCE was 10. The Exchange has heard from a number of 
market participants that investors in QCE Options and QCX Options have 
become confused and not willing to trade these products because the 
identical options strike prices and similar ticker symbols tend to 
create the possibility of placing a mistaken order.\10\ As a result of 
this investor confusion, trading in the QCE and QCX Options diminished, 
and the Exchange delisted both the QCE and QCX Options on or about 
March 21, 2005.
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    \8\ The composite index is a cash-settled, capitalization-
weighted, broad-based, A.M. settled index composed of approximately 
3,400 stocks listed and traded on The Nasdaq Stock Market, Inc. 
(``Nasdaq''). Nasdaq[supreg], Nasdaq Composite[supreg] and Nasdaq 
Composite Index[supreg] are registered trademarks of The Nasdaq 
Stock Market, Inc. (which with its affiliates are the 
``Corporations'') and are licensed for use by the Philadelphia Stock 
Exchange. The product(s) described herein have not been passed on by 
the Corporations as to their legality or suitability. The product(s) 
are not issued, endorsed, sold, or promoted by the Corporations. The 
Corporations make no warranties and bear no liability with respect 
to the product(s).
    The Corporations do not guarantee the accuracy and/or 
uninterrupted calculation of the Nasdaq Composite Index[supreg] or 
any data included therein. The Corporations make no warranty, 
express or implied, as to results to be obtained by the exchange, 
owners of the product(s), or any other person or entity from the use 
of the Nasdaq Composite Index[supreg] or any data included therein. 
The Corporations make no express or implied warranties, and 
expressly disclaim all warranties of merchantiability or fitness for 
a particular purpose or use with respect to the Nasdaq Composite 
Index[supreg] or any data included therein. Without limiting any of 
the foregoing, in no event shall the Corporations have any liability 
for any lost profits or special, incidental, punitive, indirect, or 
consequential damages, even if notified of the possibility of such 
damages.
    \9\ See Securities Exchange Act Release No. 48884 (December 5, 
2003), 68 FR 69753 (December 15, 2003).
    \10\ As approved in 2003, a QCE Option contract is one-tenth the 
size of a QCX Option contract. Customarily, strike prices for a 
full-size options contract and a reduced-size options contract would 
also differ by a factor of ten. However, since both QCE and QCX 
Options were linked to the same value of the Nasdaq Composite 
Index[supreg], the strike prices for QCE and QCX Options were 
identical.
---------------------------------------------------------------------------

    The purpose of the proposed rule change is to reduce the value of 
the QCE Index by a factor of ten and thereby effectively reduce the 
strike price of QCE Options in order to eliminate investor confusion 
between the QCE Options and the QCX Options. By reducing the value of 
the QCE Index by a factor of ten, investors in QCE Options would see a 
similar reduction in the strike prices of QCE Options contracts, and 
would be less likely to be confused between the QCE and QCX Options 
products.
    For example, as of October 27, 2005, the value of the Nasdaq 
Composite Index[supreg] was 2063.50, and a near-month at-the-money call 
premium for the QCE Option would have been at a minimum its intrinsic 
value of $63.50 per contract.\11\ The Exchange proposes to reduce the 
value of the QCE Index to one-tenth of the value of the Nasdaq 
Composite Index[supreg], or 206.35, which would effectively be a ``ten-
for-one split.'' This would be achieved by multiplying the Adjusted 
Base Period Market Value, the divisor used to calculate the QCE Index, 
by ten. In order to maintain a proper economic ratio between the two 
options (that is, QCX Options are ten times the value of QCE Options), 
each QCE Option contract would be assigned a strike price of one-tenth 
of the original strike price. In addition, the Premium Quotation 
Multiplier, which is currently $100.00 for QCX Options and $10.00 for 
QCE Options, will be increased to $100.00 for QCE Options to maintain a 
reasonable equivalence in the options premium in relation to the new 
strike prices. Thus, for example, a hypothetical option buyer of one 
QCE 2000 call prior to the date of effectiveness of this proposed rule 
change would have been quoted a premium of $63.50; after applying the 
Premium Quotation Multiplier of $10.00, such option buyer would have 
paid a premium of $635.00. Similarly, a hypothetical option buyer of 
one QCE 200 call subsequent to the date of effectiveness of this 
proposed rule change would be quoted a premium of $6.35; after applying 
the Premium Quotation Multiplier of $100.00, such option buyer would 
pay a premium of $635.00. As a result, the premium paid, after applying 
the Premium Quotation Multiplier, would be $635.00 both before and 
after the date of effectiveness of this proposed rule change. The 
position and exercise limits applicable to QCE Options would remain 
unchanged. The options trading symbol would remain QCE.
---------------------------------------------------------------------------

    \11\ While QCX and QCE Options are currently delisted and not 
trading, Nasdaq has agreed to continue to calculate and disseminate 
the value for both the full-value Nasdaq Composite Index[supreg] and 
the QCE Index, and has been doing so since July 1, 2005, to enable 
the trading of options overlying the indexes. Nasdaq will continue 
to disseminate these index values at least once every fifteen 
seconds during the normal trading day. The Exchange understands that 
in calculating and disseminating these index values, Nasdaq will 
synchronize the timing of changes in the indexes so that they occur 
simultaneously in both indexes, and the smaller QCE Index will at 
all times be one-tenth the value the larger Nasdaq Composite 
Index[supreg], to negate arbitrage opportunities.
---------------------------------------------------------------------------

    The Exchange will list the new, lower strike prices for QCE Options 
pursuant to Phlx Rule 1101A, Terms of Option Contracts. The Exchange 
will announce the effective date of the proposed rule change by way of 
an Exchange memorandum to the membership, also serving as notice of the 
strike price changes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of section 6(b) of the Act,\12\ in general, and 
furthers the objectives of section 6(b)(5) of the Act,\13\ in 
particular, because it is designed to promote just and equitable 
principles of trade, as well as to protect investors and the public 
interest, by establishing a lower index value for the QCE Index which 
should, in turn, eliminate customer confusion and facilitate trading in 
QCE Options. The Exchange believes that reducing the value of the QCE 
Index should not raise manipulation concerns or cause adverse market 
impact because the Exchange will continue to employ its surveillance 
procedures and has proposed an orderly procedure to achieve the index 
value adjustment, which includes providing adequate prior notice to 
market participants.\14\
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ The Exchange further believes that reducing the value of 
the QCE Index should not impact investors because at the present 
time there is no open interest or trading in QCE Options overlying 
such index.
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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 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

    The Phlx has neither solicited nor received written comments on the 
proposed rule change.

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

    The foregoing proposed rule change has been filed by the Exchange 
as a ``non-controversial'' rule change pursuant to section 
19(b)(3)(A)(i) of the Act \15\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\16\ Consequently, 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, and the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change at least five 
days prior to the filing date, it has become effective pursuant to 
section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(i).
    \16\ 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.

[[Page 72143]]

    The Phlx has asked the Commission to waive the 30-day operative 
delay to allow the Exchange to promptly decrease the value of the QCE 
Index that underlies the QCE Options so that trading in the QCE and QCX 
Options may re-commence. The Commission has determined to waive the 30-
day operative delay period.\17\ The Commission believes that waiving 
the 30-day operative delay period is consistent with the protection of 
investors and the public interest because it will allow the Exchange to 
re-list the QCE and QCX Options products in a more timely manner with a 
reduced risk of investors confusing the two products and placing 
mistaken orders.
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    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 purposes of the Act.\18\
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    \18\ The effective date of the original proposed rule change is 
November 9, 2005, and the effective date of Amendment No. 1 is 
November 18, 2005. For purposes of calculating 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 such period to commence on November 18, 2005, the date on 
which the Exchange filed Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, 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 rule-comments@sec.gov. Please include 
File No. SR-Phlx-2005-47 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-2005-47. 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. 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-2005-47 and should be submitted on or before December 
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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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6730 Filed 11-30-05; 8:45 am]
BILLING CODE 8010-01-P

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