Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change as Modified by Amendment No. 1 Thereto To Amend the Quarterly Options Series Pilot Program To Permit the Listing of Additional Series, 18589-18592 [E8-6961]
Download as PDF
<![CDATA[
Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
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–NASDAQ–2008–026 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57583; File No. SR–Phlx–
2008–23]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change as Modified by Amendment
No. 1 Thereto To Amend the Quarterly
Options Series Pilot Program To
Permit the Listing of Additional Series
March 31, 2008.
ebenthall on PRODPC61 with NOTICES
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
All submissions should refer to File
notice is hereby given that on March 27,
Number SR–NASDAQ–2008–026. This
2008, the Philadelphia Stock Exchange,
file number should be included on the
Inc. (‘‘Exchange’’ or ‘‘Phlx’’) filed with
subject line if e-mail is used. To help the the Securities and Exchange
Commission process and review your
Commission (‘‘Commission’’) the
comments more efficiently, please use
proposed rule change as described in
only one method. The Commission will Items I and II below, which Items have
post all comments on the Commission’s been substantially prepared by the
Internet Web site (https://www.sec.gov/
Exchange. On March 28, 2008, the
rules/sro.shtml). Copies of the
Exchange submitted Amendment No. 1
to the proposed rule change. The
submission, all subsequent
Exchange has designated this proposal
amendments, all written statements
as non-controversial under section
with respect to the proposed rule
19(b)(3)(A)(iii) of the Act 3 and Rule
change that are filed with the
19b–4(f)(6) thereunder,4 which renders
Commission, and all written
the proposed rule change effective upon
communications relating to the
filing with the Commission. The
proposed rule change between the
Commission and any person, other than Commission is publishing this notice to
solicit comments on the proposed rule
those that may be withheld from the
change, as amended, from interested
public in accordance with the
persons.
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Commission’s Public Reference
the Proposed Rule Change
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
The Exchange proposes to amend
between the hours of 10 a.m. and 3 p.m. Phlx Rule 1012, Series of Options Open
Copies of the filing also will be available for Trading, to expand the number of
for inspection and copying at the
series of exchange traded fund (‘‘ETF’’)
principal office of Nasdaq. All
options that may be listed pursuant to
comments received will be posted
Phlx’s Quarterly Option Series (‘‘QOS’’)
pilot program (the ‘‘Pilot Program’’) 5
without change; the Commission does
and to establish a delisting program in
not edit personal identifying
connection with the Pilot Program.6
information from submissions. You
should submit only information that
1 15 U.S.C. 78s(b)(1).
you wish to make available publicly. All
2 17 CFR 240.19b–4.
submissions should refer to File
3 15 U.S.C. 78s(b)(3)(A)(iii).
Number SR–NASDAQ–2008–026 and
4 17 CFR 240.19b–4(f)(6).
should be submitted on or before April
5 Phlx’s Pilot Program was established in 2007
and subsequently extended through July 10, 2008.
25, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–6960 Filed 4–3–08; 8:45 am]
BILLING CODE 8011–01–P
16 17
CFR 200.30–3(a)(12).
VerDate Aug<31>2005
15:24 Apr 03, 2008
Jkt 214001
See Securities Exchange Act Release Nos. 55301
(February 15, 2007), 72 FR 8238 (February 23, 2007)
(SR–Phlx–2007–08) (‘‘Pilot Program Release’’) and
56030 (July 9, 2007), 72 FR 38645 (July 13, 2007)
(SR–Phlx–2007–42). The American Stock Exchange,
the Chicago Board Options Exchange (‘‘CBOE’’), the
International Stock Exchange, and NYSEArca (the
‘‘pilot program exchanges’’) have similar pilot
programs that likewise continue through July 10,
2008.
6 The Phlx proposal is substantially identical to
a proposal by CBOE. See Securities Exchange Act
Release No. 57410 (March 3, 2008), 73 FR 12483
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
18589
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.phlx.com), at the
Exchange’s principal office, 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 received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s Rule
1012, Series of Options Open for
Trading, to permit the Exchange to list
strike prices for QOS in ETF options
that fall within a percentage range
(30%) above and below the price of the
underlying ETF. The proposed rule
change will allow the Exchange, upon
demonstrated customer interest, to open
additional strike prices of QOS in ETF
options that are more than 30% above
or below the current price of the
underlying ETF. The proposal will
permit the Exchange to list up to sixty
(60) additional series per expiration
month for each QOS in ETF options.
Additionally, the proposal will establish
a delisting program for delisting QOS
within certain parameters.
The Pilot Program in Phlx Rule 1012
allows the Exchange to list and trade
QOS on ETFs that satisfy the applicable
listing criteria under Phlx rules.7 Under
the Pilot Program, the Exchange may list
QOS in up to five currently listed option
classes that are either options on ETFs
or indexes. The Exchange is also
permitted to list QOS in any options
class that is selected by the other pilot
program exchanges. QOS trade based on
calendar quarters that end in March,
June, September and December. The
(March 7, 2008) (SR–CBOE–2007–96). See also
Securities Exchange Act Release No. 57425 (March
4, 2008), 73 FR 12783 (March 10, 2008) (SR–ISE–
2008–19) (notice of filing and immediate
effectiveness of a similar proposed rule change by
the International Securities Exchange).
7 Phlx Rule 1101A establishes the Pilot Program
for index options.
E:\FR\FM\04APN1.SGM
04APN1
18590
Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
Exchange lists QOS that expire at the
end of the next consecutive four
calendar quarters, as well as the fourth
quarter of the next calendar year. For
example, if the Exchange were trading
QOS in iShares Russell 2000 Index
Fund (‘‘IWM’’) in the month of April
2008, it would list series that expire at
the end of the second quarter 2008
(June), third quarter 2008 (September),
fourth quarter 2008 (December), first
quarter 2009 (March), and fourth quarter
2009 (December).
Phlx now lists QOS in five ETF
options: (1) Nasdaq-100 Index Tracking
Stock (‘‘QQQQ’’); (2) IWM; (3)
DIAMONDS Trust, Series 1 (‘‘DIA’’); (4)
Standard and Poor’s Depositary
Receipts/SPDRs (‘‘SPY’’); and (5) Energy
Select SPDR (‘‘XLE’’).8 The average
trading volume and total volume for
QOS in IWM options, QQQQ options,
October 2007
and SPY options exceed the volume for
QOS in the other ETF options (DIA and
XLE) that are listed and traded on the
Exchange. The chart below provides
trading volume figures for the fourth
quarter in 2007, demonstrating that, in
all but the month of November, QOS in
IWM, along with QOS in QQQQ and
SPY, were some of the more popular
and heavily traded QOS on the
Exchange.
November 2007
December 2007
QOS
ADV
ebenthall on PRODPC61 with NOTICES
IWM ..........................................................
QQQQ ......................................................
SPY ..........................................................
DIA ...........................................................
XLE ..........................................................
Total Vol
2,090
3,900
3,919
412
653
ADV
48,066
89,692
90,134
9,478
15,008
3,998
8,043
4,697
669
8,967
Total Vol
ADV
83,952
168,904
98,646
14,042
188,316
Total Vol
9,325
15,859
5,064
1,816
3,357
177,172
301,320
96,210
34,496
63,776
Over time, some of the pilot program
exchanges have received requests from
market participants to add additional
strike prices for QOS in IWM options
that would be outside of the price range
for setting strikes as provided for under
Rule 5.5(e)(3) (hereinafter ‘‘+/¥$5
range’’).9 Moreover, investors and other
market participants have advised such
exchanges that they are buying and
selling QOS in IWM options to trade
volatility. In order to adequately
replicate the desired volatility exposure,
these market participants need to trade
several IWM option series, many having
strike prices that fall outside of the +/
¥$5 range currently allowed under the
QOS rules.
Market participants have also advised
pilot program exchanges that their
investment strategies involve trading
options tied to a particular option
‘‘delta,’’10 rather than a particular level
of the underlying security or index. At
issue is the fact that delta depends on
both the relative difference between the
level of the underlying security or index
and the option strike price and time to
expiration. For example, with IWM
trading at $85 per share, the strike price
corresponding to a ‘‘25-delta’’ IWM call
(i.e., a call option with a delta of 25)
with one month to expiration would be
89. However, the strike price
corresponding to a ‘‘25-delta’’ IWM call
with 3 months to expiration would be
93, and the strike price of a ‘‘25-delta’’
call with 1 year to expiration would be
106. In short, the +/¥$5 range for QOS
in IWM options is insufficient to satisfy
customer demand.
In order to meet such customer
demand, the Exchange proposes to
amend Commentary .08 to Phlx Rule
1012, which governs the Quarterly
Option Series Pilot Program.
Specifically, the Exchange proposes to
revise Commentary .08 to allow the
Exchange to open additional strike
prices of QOS in ETF options that are
within thirty percent (30%) above or
below the closing price of the
underlying on the preceding business
day. The Exchange also will be
permitted to open additional strike
prices of QOS in ETF options that are
more than 30% above or below the
current price of the underlying ETF,
provided that demonstrated customer
interest exists for such series, as
expressed by institutional, corporate, or
individual customers or their brokers.
Market-Makers trading for their own
account will not be considered when
determining customer interest under
this proposed provision. The Exchange
will be permitted to list up to sixty (60)
additional series per expiration month
for each QOS in ETF options.
The Exchange also is proposing to add
new paragraph (g) to Commentary .08 to
Phlx Rule 1012, which will set forth a
delisting policy. Specifically, with
respect to QOS in ETF options, the
Exchange will, on a monthly basis,
review series that are outside a range of
five strikes above and five strikes below
the current price of the underlying ETF,
and delist series with no open interest
in both the put and the call series
having a strike price that is: (i) Higher
than the highest strike price with open
interest in the put and/or call series for
a given expiration month; or (ii) lower
than the lowest strike price with open
interest in the put and/or call series for
a given expiration month.
To illustrate how the proposed
delisting program will work, assume
that IWM closed at $70 on the day the
Exchange conducts the monthly review
of QOS in ETF options. Series having
strike prices above $75 and below $65
would be reviewed by the Exchange for
possible delisting. Assume that the
Exchange lists the following QOS in
IWM options that expire in June 2008:
8 These are the same options that are listed by the
other pilot program exchanges.
9 Commentary .08(d) to Phlx Rule 1012 provides
that the Exchange shall list strike prices for a QOS
that are within $5 from the closing price of the
underlying on the preceding day.
10 ‘‘Delta’’ is a measure of how an option price
will change in response to a $1 price change in the
underlying security or index. For example, an ABC
option with a delta of ‘‘50’’ can be expected to
change by $0.50 in response to a $1 change in the
price of ABC.
VerDate Aug<31>2005
16:44 Apr 03, 2008
Jkt 214001
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
Calls—June 08 Exp
Puts—June 08 Exp
Strike
Open
Interest?
Strike
Open
Interest?
62
63
64
*
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
No
No
Yes
*
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
62
63
64
*
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
No
Yes
Yes
*
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
No
No
No
No
No
E:\FR\FM\04APN1.SGM
04APN1
Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
The Exchange would delist the first
series listed above, as well as the last
three: $62, $91, $92, and $93. The
Exchange would not delist the $83 and
$84 series because there are series
having open interest with strike prices
higher than these two series. In
addition, the Exchange would not delist
the $63 call series because there is open
interest in the $63 put series.
Notwithstanding the proposed
delisting policy, customer requests to
add strikes and/or maintain strikes in
QOS in ETF options in series eligible for
delisting shall be granted.
Further, in connection with the
proposed delisting policy, if the
Exchange identifies series for delisting,
the Exchange shall notify other options
exchanges with similar delisting
policies regarding eligible series for
listing, and shall work with such other
exchanges to develop a uniform list of
series to be delisted, so as to ensure
uniform series delisting of multiply
listed QOS in ETF options. The
Exchange expects that the proposed
delisting policy for QOS in ETF options
would be adopted by other options
exchanges that have adopted the QOS
Pilot Program.
The Exchange represents that it has
the necessary systems capacity to
support new options series that will
result from this proposal. Further, as
proposed, the Exchange notes that this
rule change would become part of the
Pilot Program and, going forward,
would be considered by the
Commission when the Exchange seeks
to renew or make permanent the Pilot
Program in the future.11
ebenthall on PRODPC61 with NOTICES
2. Statutory Basis
The Exchange believes that because
the additional new series can be added
without presenting capacity problems
and because the Exchange has proposed
a delisting policy with respect to QOS
in ETF options, the rule proposal is
consistent with section 6(b) of the Act 12
in general, and furthers the objectives of
section 6(b)(5) of the Act 13 in particular,
in that it is designed to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
11 To the extent the Commission views the
proposed rule change as an expansion of the Pilot
Program, thus triggering the requirement under the
terms of the Pilot Program Approval Order that the
Exchange submit a Pilot Program report, the
Exchange notes that it submitted a report on or
about June 26, 2007, in connection with its filing
to extend the Pilot Program through July 10, 2008.
See Securities Exchange Act Release No. 56030
(July 9, 2007), 72 FR 38645 (July 13, 2007) (SR–
Phlx–2007–42).
12 15 U.S.C. 78f(b).
13 15 U.S.C. 78f(b)(5).
VerDate Aug<31>2005
15:24 Apr 03, 2008
Jkt 214001
and a national market system, 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 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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the
proposed rule change as one that: (1)
Does not significantly affect the
protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) does not become operative for 30
days from the date of filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest. Therefore, the foregoing rule
change has become effective pursuant to
section 19(b)(3)(A) of the Act 14 and
subparagraph (f)(6) of Rule 19b–4
thereunder.15 The Exchange has asked
the Commission to waive the 30-day
operative delay to permit the Exchange
to immediately compete with the other
options exchanges that have similarly
amended their quarterly options series
pilot programs.
The Commission notes that this
proposal is substantially similar to a
proposed rule change submitted by
CBOE, which was approved by the
Commission following publication for
notice and comment, and does not raise
any new regulatory issues.16 Waiving
the 30-day operative delay will promote,
without undue delay, further
competition in the options market.17 For
14 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). 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 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
Exchange has fulfilled this requirement.
16 See Securities Exchange Act Release No. 57410,
supra note 6. See also Securities Exchange Act
Release No. 57425, supra note 6.
17 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. See 15 U.S.C. 78c(f).
15 17
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
18591
these reasons, the Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest and
designates the proposal operative upon
filing.
The Commission notes that this rule
change will become part of the Pilot
Program and, going forward, its effects
will be considered by the Commission
in the event that the Exchange seeks to
renew or make permanent the Pilot
Program.18 Thus, in the Exchange’s
future reports on the Pilot Program, the
Exchange should include analysis of (1)
the impact of the additional series on
the Exchange’s market and quote
capacity, and (2) the implementation
and effects of the delisting policy,
including the number of series eligible
for delisting during the period covered
by the report, the number of series
actually delisted during that period
(pursuant to the delisting policy or
otherwise), and documentation of any
customer requests to maintain QOS
strikes that were otherwise eligible for
delisting.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the 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.19
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
18 As set forth in the Pilot Program Release, if the
Exchange were to propose an extension, expansion,
or permanent approval of the Pilot Program, the
Exchange must submit, along with any filing
proposing such amendments to the program, a
report that provides an analysis of the Pilot Program
covering the entire period during which the Pilot
Program was in effect. See Pilot Program Release,
supra note 5. The Pilot Program Release requires
the Exchange to include in its report, at a minimum:
(1) Data and written analysis on the open interest
and trading volume in the classes for which QOS
were opened; (2) an assessment of the
appropriateness of the option classes selected for
the Pilot Program; (3) an assessment of the impact
of the Pilot Program on the capacity of the
Exchange, OPRA, and market data vendors (to the
extent data from market data vendors is available);
(4) any capacity problems or other problems that
arose during the operation of the Pilot Program and
how the Exchange addressed such problems; (5) any
complaints that the Exchange received during the
operation of the Pilot Program and how the
Exchange addressed them; and (6) any additional
information that would assist in assessing the
operation of the Pilot Program.
19 For purposes of calculating the 60-day period
within which the Commission may summarily
abrogate the proposed rule change, the Commission
considers the period to commence on March 28,
2007, the date on which the Exchange filed
Amendment No. 1.
E:\FR\FM\04APN1.SGM
04APN1
18592
Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
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 rulecomments@sec.gov. Please include File
No. SR–Phlx–2008–23 on the subject
line.
ebenthall on PRODPC61 with NOTICES
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Phlx–2008–23. 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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–Phlx–2008–23 and should
be submitted on or before April 25,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–6961 Filed 4–3–08; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57578; File No. SR–Amex–
2008–34]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing of Proposed Rule Change To
Give Retroactive Effect to Its Revenue
Sharing Program for ETF Quoting
Participants
March 28, 2008.
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 March 27,
2008, the American Stock Exchange LLC
(‘‘Amex’’ 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
substantially prepared by the Exchange.
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 Exchange proposes to
retroactively apply a previously-adopted
revenue sharing program (‘‘RSP’’) for
Designated Amex Remote Traders
(‘‘DARTs’’), ETF specialists, and
registered traders (collectively, ‘‘ETF
quoting participants’’) on the Exchange.
The text of the proposed rule change is
available at Amex’s principal office, the
Commission’s Public Reference Room,
and https://www.amex.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Amex included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The Exchange has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
BILLING CODE 8011–01–P
1 15
20 17
CFR 200.30–3(a)(12).
VerDate Aug<31>2005
15:24 Apr 03, 2008
2 17
Jkt 214001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00103
Fmt 4703
Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to
retroactively apply its previouslyadopted RSP for ETF quoting
participants on the Exchange, as
described below. The RSP was first put
in place by the Exchange for ETF
specialists and registered traders,
effective July 1, 2007, and was to last
through December 31, 2007 unless
otherwise extended.3 The Exchange
then inadvertently failed to file to
extend the RSP at the expiration of that
time period, but, upon realizing the
error (when recently expanding the RSP
to DARTs), promptly filed to reinstate
the RSP for all ETF quoting participants,
effective March 18, 2008.4 The RSP is
now in effect through the end of
September 2008.
The purpose of the instant filing is to
seek approval to retroactively apply the
now-reinstated RSP for the time period
January 1, 2008 through March 17, 2008
in order to effectively assure continuity
of the RSP from its inception for all ETF
quoting participants on the Exchange,
who have continued to quote
aggressively in the expectation of
receiving RSP payments flowing
therefrom. To date, the Exchange
believes that the current RSP has been
beneficial in creating incentives for ETF
quoting participants and does not
believe it fair to withhold RSP payments
for the retroactive period from ETF
quoting participants solely because of
the Exchange’s inadvertent error.
Retroactive application of the RSP will
satisfy all ETF quoting participants’
expectations.
For the retroactive period, the RSP
will operate under the same terms
established in the RSP Release.5
Specifically:
• RSP payments will be made from
the Exchange’s general revenues and not
be limited to a particular revenue
source.
• ETF specialists may receive an
aggregate RSP payment (calculated
monthly) of as much as $0.0024 per
share (or 24 cents per 100 shares)
whenever the specialist either buys or
3 3 See Securities Exchange Act Release No.
55893 (June 29, 2007), 72 FR 37059 (July 6, 2007)
(SR–Amex–2007–68) (‘‘RSP Release’’).
4 See Securities Exchange Act Release No. 57541
(March 20, 2008) (SR–Amex–2008–25), 73 FR 16400
(March 27, 2008) (reinstating RSP for all ETF
quoting participants); see also Securities Exchange
Act Release No. 57540 (March 20, 2008), 73 FR
16399 (March 27, 2008) (SR–Amex–2008–23)
(expanding RSP to DARTs).
5 See supra note 3.
E:\FR\FM\04APN1.SGM
04APN1
]]>Agencies
[Federal Register Volume 73, Number 66 (Friday, April 4, 2008)]
[Notices]
[Pages 18589-18592]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-6961]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57583; File No. SR-Phlx-2008-23]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change as
Modified by Amendment No. 1 Thereto To Amend the Quarterly Options
Series Pilot Program To Permit the Listing of Additional Series
March 31, 2008.
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 March 27, 2008, the Philadelphia Stock Exchange, Inc. (``Exchange''
or ``Phlx'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
On March 28, 2008, the Exchange submitted Amendment No. 1 to the
proposed rule change. The Exchange has designated this proposal as non-
controversial under section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(6) thereunder,\4\ which renders the proposed rule change
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change, as
amended, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx Rule 1012, Series of Options
Open for Trading, to expand the number of series of exchange traded
fund (``ETF'') options that may be listed pursuant to Phlx's Quarterly
Option Series (``QOS'') pilot program (the ``Pilot Program'') \5\ and
to establish a delisting program in connection with the Pilot
Program.\6\
---------------------------------------------------------------------------
\5\ Phlx's Pilot Program was established in 2007 and
subsequently extended through July 10, 2008. See Securities Exchange
Act Release Nos. 55301 (February 15, 2007), 72 FR 8238 (February 23,
2007) (SR-Phlx-2007-08) (``Pilot Program Release'') and 56030 (July
9, 2007), 72 FR 38645 (July 13, 2007) (SR-Phlx-2007-42). The
American Stock Exchange, the Chicago Board Options Exchange
(``CBOE''), the International Stock Exchange, and NYSEArca (the
``pilot program exchanges'') have similar pilot programs that
likewise continue through July 10, 2008.
\6\ The Phlx proposal is substantially identical to a proposal
by CBOE. See Securities Exchange Act Release No. 57410 (March 3,
2008), 73 FR 12483 (March 7, 2008) (SR-CBOE-2007-96). See also
Securities Exchange Act Release No. 57425 (March 4, 2008), 73 FR
12783 (March 10, 2008) (SR-ISE-2008-19) (notice of filing and
immediate effectiveness of a similar proposed rule change by the
International Securities Exchange).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
Web site (https://www.phlx.com), at the Exchange's principal office, 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 received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Exchange's
Rule 1012, Series of Options Open for Trading, to permit the Exchange
to list strike prices for QOS in ETF options that fall within a
percentage range (30%) above and below the price of the underlying ETF.
The proposed rule change will allow the Exchange, upon demonstrated
customer interest, to open additional strike prices of QOS in ETF
options that are more than 30% above or below the current price of the
underlying ETF. The proposal will permit the Exchange to list up to
sixty (60) additional series per expiration month for each QOS in ETF
options. Additionally, the proposal will establish a delisting program
for delisting QOS within certain parameters.
The Pilot Program in Phlx Rule 1012 allows the Exchange to list and
trade QOS on ETFs that satisfy the applicable listing criteria under
Phlx rules.\7\ Under the Pilot Program, the Exchange may list QOS in up
to five currently listed option classes that are either options on ETFs
or indexes. The Exchange is also permitted to list QOS in any options
class that is selected by the other pilot program exchanges. QOS trade
based on calendar quarters that end in March, June, September and
December. The
[[Page 18590]]
Exchange lists QOS that expire at the end of the next consecutive four
calendar quarters, as well as the fourth quarter of the next calendar
year. For example, if the Exchange were trading QOS in iShares Russell
2000 Index Fund (``IWM'') in the month of April 2008, it would list
series that expire at the end of the second quarter 2008 (June), third
quarter 2008 (September), fourth quarter 2008 (December), first quarter
2009 (March), and fourth quarter 2009 (December).
---------------------------------------------------------------------------
\7\ Phlx Rule 1101A establishes the Pilot Program for index
options.
---------------------------------------------------------------------------
Phlx now lists QOS in five ETF options: (1) Nasdaq-100 Index
Tracking Stock (``QQQQ''); (2) IWM; (3) DIAMONDS Trust, Series 1
(``DIA''); (4) Standard and Poor's Depositary Receipts/SPDRs (``SPY'');
and (5) Energy Select SPDR (``XLE'').\8\ The average trading volume and
total volume for QOS in IWM options, QQQQ options, and SPY options
exceed the volume for QOS in the other ETF options (DIA and XLE) that
are listed and traded on the Exchange. The chart below provides trading
volume figures for the fourth quarter in 2007, demonstrating that, in
all but the month of November, QOS in IWM, along with QOS in QQQQ and
SPY, were some of the more popular and heavily traded QOS on the
Exchange.
---------------------------------------------------------------------------
\8\ These are the same options that are listed by the other
pilot program exchanges.
--------------------------------------------------------------------------------------------------------------------------------------------------------
October 2007 November 2007 December 2007
QOS -----------------------------------------------------------------------------------------------
ADV Total Vol ADV Total Vol ADV Total Vol
--------------------------------------------------------------------------------------------------------------------------------------------------------
IWM..................................................... 2,090 48,066 3,998 83,952 9,325 177,172
QQQQ.................................................... 3,900 89,692 8,043 168,904 15,859 301,320
SPY..................................................... 3,919 90,134 4,697 98,646 5,064 96,210
DIA..................................................... 412 9,478 669 14,042 1,816 34,496
XLE..................................................... 653 15,008 8,967 188,316 3,357 63,776
--------------------------------------------------------------------------------------------------------------------------------------------------------
Over time, some of the pilot program exchanges have received
requests from market participants to add additional strike prices for
QOS in IWM options that would be outside of the price range for setting
strikes as provided for under Rule 5.5(e)(3) (hereinafter ``+/-$5
range'').\9\ Moreover, investors and other market participants have
advised such exchanges that they are buying and selling QOS in IWM
options to trade volatility. In order to adequately replicate the
desired volatility exposure, these market participants need to trade
several IWM option series, many having strike prices that fall outside
of the +/-$5 range currently allowed under the QOS rules.
---------------------------------------------------------------------------
\9\ Commentary .08(d) to Phlx Rule 1012 provides that the
Exchange shall list strike prices for a QOS that are within $5 from
the closing price of the underlying on the preceding day.
---------------------------------------------------------------------------
Market participants have also advised pilot program exchanges that
their investment strategies involve trading options tied to a
particular option ``delta,''\10\ rather than a particular level of the
underlying security or index. At issue is the fact that delta depends
on both the relative difference between the level of the underlying
security or index and the option strike price and time to expiration.
For example, with IWM trading at $85 per share, the strike price
corresponding to a ``25-delta'' IWM call (i.e., a call option with a
delta of 25) with one month to expiration would be 89. However, the
strike price corresponding to a ``25-delta'' IWM call with 3 months to
expiration would be 93, and the strike price of a ``25-delta'' call
with 1 year to expiration would be 106. In short, the +/-$5 range for
QOS in IWM options is insufficient to satisfy customer demand.
---------------------------------------------------------------------------
\10\ ``Delta'' is a measure of how an option price will change
in response to a $1 price change in the underlying security or
index. For example, an ABC option with a delta of ``50'' can be
expected to change by $0.50 in response to a $1 change in the price
of ABC.
---------------------------------------------------------------------------
In order to meet such customer demand, the Exchange proposes to
amend Commentary .08 to Phlx Rule 1012, which governs the Quarterly
Option Series Pilot Program. Specifically, the Exchange proposes to
revise Commentary .08 to allow the Exchange to open additional strike
prices of QOS in ETF options that are within thirty percent (30%) above
or below the closing price of the underlying on the preceding business
day. The Exchange also will be permitted to open additional strike
prices of QOS in ETF options that are more than 30% above or below the
current price of the underlying ETF, provided that demonstrated
customer interest exists for such series, as expressed by
institutional, corporate, or individual customers or their brokers.
Market-Makers trading for their own account will not be considered when
determining customer interest under this proposed provision. The
Exchange will be permitted to list up to sixty (60) additional series
per expiration month for each QOS in ETF options.
The Exchange also is proposing to add new paragraph (g) to
Commentary .08 to Phlx Rule 1012, which will set forth a delisting
policy. Specifically, with respect to QOS in ETF options, the Exchange
will, on a monthly basis, review series that are outside a range of
five strikes above and five strikes below the current price of the
underlying ETF, and delist series with no open interest in both the put
and the call series having a strike price that is: (i) Higher than the
highest strike price with open interest in the put and/or call series
for a given expiration month; or (ii) lower than the lowest strike
price with open interest in the put and/or call series for a given
expiration month.
To illustrate how the proposed delisting program will work, assume
that IWM closed at $70 on the day the Exchange conducts the monthly
review of QOS in ETF options. Series having strike prices above $75 and
below $65 would be reviewed by the Exchange for possible delisting.
Assume that the Exchange lists the following QOS in IWM options that
expire in June 2008:
------------------------------------------------------------------------
Calls--June 08 Exp Puts--June 08 Exp
------------------------------------------------------------------------
Strike Open Interest? Strike Open Interest?
------------------------------------------------------------------------
62 No 62 No
63 No 63 Yes
64 Yes 64 Yes
* * * *
76 Yes 76 Yes
77 Yes 77 Yes
78 Yes 78 Yes
79 Yes 79 Yes
80 Yes 80 Yes
81 Yes 81 Yes
82 Yes 82 Yes
83 No 83 No
84 No 84 No
85 No 85 Yes
86 Yes 86 No
87 Yes 87 Yes
88 Yes 88 Yes
89 Yes 89 No
90 Yes 90 No
91 No 91 No
92 No 92 No
93 No 93 No
------------------------------------------------------------------------
[[Page 18591]]
The Exchange would delist the first series listed above, as well as
the last three: $62, $91, $92, and $93. The Exchange would not delist
the $83 and $84 series because there are series having open interest
with strike prices higher than these two series. In addition, the
Exchange would not delist the $63 call series because there is open
interest in the $63 put series.
Notwithstanding the proposed delisting policy, customer requests to
add strikes and/or maintain strikes in QOS in ETF options in series
eligible for delisting shall be granted.
Further, in connection with the proposed delisting policy, if the
Exchange identifies series for delisting, the Exchange shall notify
other options exchanges with similar delisting policies regarding
eligible series for listing, and shall work with such other exchanges
to develop a uniform list of series to be delisted, so as to ensure
uniform series delisting of multiply listed QOS in ETF options. The
Exchange expects that the proposed delisting policy for QOS in ETF
options would be adopted by other options exchanges that have adopted
the QOS Pilot Program.
The Exchange represents that it has the necessary systems capacity
to support new options series that will result from this proposal.
Further, as proposed, the Exchange notes that this rule change would
become part of the Pilot Program and, going forward, would be
considered by the Commission when the Exchange seeks to renew or make
permanent the Pilot Program in the future.\11\
---------------------------------------------------------------------------
\11\ To the extent the Commission views the proposed rule change
as an expansion of the Pilot Program, thus triggering the
requirement under the terms of the Pilot Program Approval Order that
the Exchange submit a Pilot Program report, the Exchange notes that
it submitted a report on or about June 26, 2007, in connection with
its filing to extend the Pilot Program through July 10, 2008. See
Securities Exchange Act Release No. 56030 (July 9, 2007), 72 FR
38645 (July 13, 2007) (SR-Phlx-2007-42).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that because the additional new series can be
added without presenting capacity problems and because the Exchange has
proposed a delisting policy with respect to QOS in ETF options, the
rule proposal is consistent with section 6(b) of the Act \12\ in
general, and furthers the objectives of section 6(b)(5) of the Act \13\
in particular, in that it is designed to promote just and equitable
principles of trade, to remove impediments to and perfect the mechanism
of a free and open market and a national market system, and to protect
investors and the public interest.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 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 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the proposed rule change as one that:
(1) Does not significantly affect the protection of investors or the
public interest; (2) does not impose any significant burden on
competition; and (3) does not become operative for 30 days from the
date of filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest.
Therefore, the foregoing rule change has become effective pursuant to
section 19(b)(3)(A) of the Act \14\ and subparagraph (f)(6) of Rule
19b-4 thereunder.\15\ The Exchange has asked the Commission to waive
the 30-day operative delay to permit the Exchange to immediately
compete with the other options exchanges that have similarly amended
their quarterly options series pilot programs.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). 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 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 Exchange has fulfilled this requirement.
---------------------------------------------------------------------------
The Commission notes that this proposal is substantially similar to
a proposed rule change submitted by CBOE, which was approved by the
Commission following publication for notice and comment, and does not
raise any new regulatory issues.\16\ Waiving the 30-day operative delay
will promote, without undue delay, further competition in the options
market.\17\ For these reasons, the Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest and designates the proposal operative upon
filing.
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 57410, supra note
6. See also Securities Exchange Act Release No. 57425, supra note 6.
\17\ 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. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
The Commission notes that this rule change will become part of the
Pilot Program and, going forward, its effects will be considered by the
Commission in the event that the Exchange seeks to renew or make
permanent the Pilot Program.\18\ Thus, in the Exchange's future reports
on the Pilot Program, the Exchange should include analysis of (1) the
impact of the additional series on the Exchange's market and quote
capacity, and (2) the implementation and effects of the delisting
policy, including the number of series eligible for delisting during
the period covered by the report, the number of series actually
delisted during that period (pursuant to the delisting policy or
otherwise), and documentation of any customer requests to maintain QOS
strikes that were otherwise eligible for delisting.
---------------------------------------------------------------------------
\18\ As set forth in the Pilot Program Release, if the Exchange
were to propose an extension, expansion, or permanent approval of
the Pilot Program, the Exchange must submit, along with any filing
proposing such amendments to the program, a report that provides an
analysis of the Pilot Program covering the entire period during
which the Pilot Program was in effect. See Pilot Program Release,
supra note 5. The Pilot Program Release requires the Exchange to
include in its report, at a minimum: (1) Data and written analysis
on the open interest and trading volume in the classes for which QOS
were opened; (2) an assessment of the appropriateness of the option
classes selected for the Pilot Program; (3) an assessment of the
impact of the Pilot Program on the capacity of the Exchange, OPRA,
and market data vendors (to the extent data from market data vendors
is available); (4) any capacity problems or other problems that
arose during the operation of the Pilot Program and how the Exchange
addressed such problems; (5) any complaints that the Exchange
received during the operation of the Pilot Program and how the
Exchange addressed them; and (6) any additional information that
would assist in assessing the operation of the Pilot Program.
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the 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.\19\
---------------------------------------------------------------------------
\19\ For purposes of calculating the 60-day period within which
the Commission may summarily abrogate the proposed rule change, the
Commission considers the period to commence on March 28, 2007, the
date on which the Exchange filed Amendment No. 1.
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing,
[[Page 18592]]
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-2008-23 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2008-23. 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2008-23 and should be
submitted on or before April 25, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-6961 Filed 4-3-08; 8:45 am]
BILLING CODE 8011-01-P
