Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment Nos. 1 Thereto and 2, Relating to Margining, 38487-38489 [E8-15198]

Download as PDF Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Notices competition among markets that trade the Shares. In addition, the Commission finds that proposal is consistent with Section 12(f) of the Act,14 which permits an exchange to trade, pursuant to UTP, a security that is listed and registered on another exchange.15 The Commission notes that it approved the original listing and trading of the Shares on Amex.16 The Commission also finds that the proposal is consistent with Rule 12f–5 under the Act,17 which provides that an exchange shall not extend UTP to a security unless the exchange has in effect a rule or rules providing for transactions in the class or type of security to which the exchange extends UTP. The Exchange has represented that it meets this requirement because it deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. The Commission further believes that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act,18 which sets forth Congress’s finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Quotations for and last-sale information regarding the Shares will be disseminated through the facilities of the CTA and Consolidated Quote High Speed Lines. Amex will disseminate through the facilities of the CTA an IIV on a per-share basis at least every 15 seconds during regular trading hours. Amex will post the premium or discount of the midpoint of the bid/ offer, together with the end-of-day price information, for the Shares on its Web site. In addition, the per-Share underlying value for the Shares on each price determination day will be publicly disseminated. The Commission also believes that the proposal is reasonably designed to prevent trading in the Shares when transparency is impaired. The Exchange 14 15 U.S.C. 78l(f). 12(a) of the Act, 15 U.S.C. 78l(a), generally prohibits a broker-dealer from trading a security on a national securities exchange unless the security is registered on that exchange pursuant to Section 12 of the Act. Section 12(f) of the Act excludes from this restriction trading in any security to which an exchange ‘‘extends UTP.’’ When an exchange extends UTP to a security, it allows its members to trade the security as if it were listed and registered on the exchange even though it is not so listed and registered. 16 See supra note 5. 17 17 CFR 240.12f–5. 18 15 U.S.C. 78k–1(a)(1)(C)(iii). mstockstill on PROD1PC66 with NOTICES 15 Section VerDate Aug<31>2005 17:39 Jul 03, 2008 Jkt 214001 represents that it will halt trading in the Shares if the listing market institutes a regulatory halt in trading in the Shares. The Exchange also has represented that it would follow the procedures with respect to trading halts set forth in NYSE Arca Equities Rule 7.34, which provides, inter alia, for trading halts in certain circumstances when the IIV is not being disseminated as anticipated. In addition, if the Exchange becomes aware that the underlying value perShare of the Up MacroShares or the Down MacroShares is not disseminated to all market participants at the same time, it would halt trading in the relevant Shares until such time as the underlying value per-Share is available to all market participants. The Commission notes that, if the Shares should be delisted by the listing exchange, NYSE Arca would no longer have authority to trade the Shares pursuant to this order. In support of the proposed rule change, the Exchange has made the following representations: 1. The Exchange intends to utilize its existing surveillance procedures applicable to derivative securities products, including Paired Trust Shares, to monitor trading in the Shares. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules or applicable federal securities laws. 2. The Exchange will inform its ETP Holders in a Bulletin of the special characteristics and risks associated with trading the Shares, including risks inherent with trading the Shares during the Opening and Late Trading Sessions when the updated IIV is not calculated and disseminated. 3. The Bulletin will reference the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction. This approval order is based on these representations. The Commission finds good cause for approving this proposed rule change prior to the thirtieth day after the publication of notice thereof in the Federal Register. As noted above, the Commission previously found that the listing and trading of these Shares on Amex is consistent with the Act.19 The Commission presently is not aware of any issue that would cause it to revisit that finding or preclude the trading of the Shares on the Exchange pursuant to UTP. Therefore, accelerating approval of PO 00000 19 See supra note 5. Frm 00099 Fmt 4703 Sfmt 4703 38487 this proposed rule change should benefit investors by creating, without undue delay, additional competition in the market for the Shares. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR–NYSEArca– 2008–65), is hereby approved on an accelerated basis.20 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.21 Florence E. Harmon, Acting Secretary. [FR Doc. E8–15238 Filed 7–3–08; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–58045; File No. SR–Phlx– 2007–33] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment Nos. 1 Thereto and 2, Relating to Margining June 26, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that on April 5, 2007, 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, II, and III, below, which Items have been substantially prepared by Phlx. On July 31, 2007, Phlx filed Amendment No. 1 to the proposed rule change. On May 19, 2008, Phlx filed Amendment No. 2 to the proposed rule change.3 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 amend its rules to streamline and make more efficient its margin rules and procedures by: (1) Adding a new section to Rule 721 (Proper and Adequate Margin) requiring 20 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Amendment No. 2 replaced and superseded the original filing and Amendment No. 1 in their entirety. 21 17 E:\FR\FM\07JYN1.SGM 07JYN1 38488 Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Notices each member to indicate in writing to the Exchange that such member shall be bound by the initial and maintenance margin requirements of either the Chicago Board Options Exchange (‘‘CBOE’’) or New York Stock Exchange (‘‘NYSE’’); and (2) eliminating Rules 724 (Guaranteed Accounts) and 725 (Daily Record of Required Margin). The Exchange also proposes to significantly shorten Rules 723 (Day Trading and Prohibition on Free-Riding in Cash Accounts) and 722 (Margin Accounts) to eliminate redundant language while retaining those margin requirements that are unique to current Exchange margin rules. The text of the proposed rule change is available on the Exchange’s Web site at Phlx’s principal office, the Commission’s public reference room, and http://www.phlx.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, 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 mstockstill on PROD1PC66 with NOTICES 1. Purpose The purpose of the proposed rule change is to streamline Phlx margin rules by requiring member organizations to elect in writing that they shall follow the margin rules of CBOE or NYSE, which should eliminate unnecessary or duplicative margin requirements. At the same time, the Exchange proposes to retain those margin provisions that are unique to current Exchange margin rules, particularly those pertaining to foreign currency options, which only trade on Phlx. The proposal will also make portfolio margining available to Exchange members.4 The Exchange’s current margin requirements are embodied in its Rules 721 through 725, with the bulk of them 4 The Exchange believes that the portfolio margin rules noted herein most likely will be used by Phlx clearing firm members for which the Exchange is not the designated examining authority (DEA). The Phlx does not, at this time, intend to approve member firms for which it is the DEA to engage in portfolio margining. VerDate Aug<31>2005 17:39 Jul 03, 2008 Jkt 214001 in Rule 722. The proposal would require member organizations to elect, via written notice to the Exchange, to use and follow the margin rules of either CBOE or NYSE as they are in effect from time to time (known as the ‘‘elected margin rules’’). This would allow the Exchange to drastically reduce the length of Rule 722 while retaining those margin concepts that are not covered by the elected margin rules, such as Miscellaneous Securities options,5 currency pairs, and free-riding. Rule 722 as amended would specifically require that once an Exchange member organization elects to follow the margin rules of either CBOE or NYSE, it shall be bound to comply with such elected margin rules, as applicable, as though they were part of the Exchange’s margin rules. The election of appropriate margin rules enables the Exchange to eliminate Rules 724 and 725 because the topics of those rules—guaranteed accounts and daily record of required margin, respectively—are covered in the elected margin rules and retention of 724 and 725 would therefore be duplicative.6 The Exchange likewise proposes to shorten Rule 723 by retaining the unique prohibition on free-riding while eliminating the duplicative day-trading margin language. The language proposed to be deleted duplicates similar provisions in CBOE Rule 12.3 and NYSE Rule 431. The elected margin rules contain the portfolio margin pilot programs that were initiated by CBOE and NYSE in 2005 and are currently codified in their margin rules (the ‘‘Pilots’’).7 As stated above, the Exchange believes that the portfolio margin rules noted herein most likely will be used by Phlx clearing firm members for which the Exchange is not 5 Miscellaneous Securities include cross rate currencies and cash index participations as defined in proposed Rule 722. 6 See CBOE Rules 12.4 and 12.12, and NYSE Rules 431 and 432. With the creation of the Financial Industry Regulatory Authority (‘‘FINRA’’) through the consolidation of NASD and the member regulation, enforcement and arbitration operations of the NYSE, NYSE Rules 431 and 432 are now part of the FINRA rulebook which currently consists of both NASD Rules and certain NYSE Rules that FINRA has incorporated (Incorporated NYSE Rules). See http://www.finra.org/RulesRegulation/ FINRARules/index.htm. 7 See Exchange Act Release Nos. 52032 (July 14, 2005), 70 FR 42118 (July 21, 2005) (SR–CBOE– 2002–03); and 52031 (July 14, 2005), 70 FR 42130 (July 21, 2005) (SR–NYSE–2002–19). The Exchange notes that the OCC has amended its rules and bylaws to accommodate the Pilots. See, e.g., Exchange Act Release No. 52030 (July 14, 2005), 70 FR 42405 (July 22, 2005) (SR–OCC–2003–04) (establishes new OCC ‘‘customers’ lien account’’ for customers of clearing members that are margined on a portfolio risk basis or pursuant to a cross-margining arrangement in accordance with exchange rules). See also infra note 8. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 the designated examining authority (‘‘DEA’’). Whereas current Phlx Rule 722 requires that margin must be calculated using fixed percentages, on a positionby-position basis, the Pilots permit a broker-dealer to calculate customer margin requirements by grouping all eligible products in an account(s) based on the same index or issuer into a single portfolio. Products eligible for margining according to the portfolio margining methodology of the Pilots include listed, broad-based, and market index options, index warrants, futures, futures options and related exchangetraded funds. The Pilots were subsequently extended and modified by expanding the scope of products eligible for portfolio margining to include margin equity securities, unlisted derivatives, listed options and securities futures.8 This proposal to incorporate CBOE or NYSE margin rules is similar to the approach used by the International Securities Exchange (‘‘ISE’’) and the Boston Options Exchange (‘‘BOX’’) requiring their members to elect and follow CBOE or NYSE margin rules and incorporating such rules by reference into their own rules.9 The Exchange believes that the proposal to have its members elect appropriate CBOE or NYSE margin rules, in conjunction with retaining the needed portions of the Exchange’s current margin rules, should enable it to maximize and maintain its competitive position among options exchanges to the benefit of investors. 8 See Exchange Act Release Nos. 56107 (July 19, 2007), 72 FR 41377 (July 27, 2007) (SR–NYSE– 2007–56); 56109 (July 19, 2007), 72 FR 41365 (July 27, 2007) (SR–CBOE–2007–75); and 56108 (July 19, 2007), 72 FR 41375 (July 27, 2007) (SR–NASD– 2007–045) (orders extending the Pilots until July 31, 2008). See also Exchange Act Release No. 54918 (December 12, 2006), 71 FR 75790 (December 18, 2006) (SR–NYSE–2006–13); Exchange Act Release No. 54919 (December 12, 2006), 71 FR 75781 (December 18, 2006) (SR–CBOE 2006–14); and Exchange Act Release No. 54125 (July 11, 2006), 71 FR 40766 (July 18, 2006) (SR–NYSE–2005–93) (orders expanding the scope of products eligible for portfolio margining). The Exchange could have adopted the Pilots and relevant updates piecemeal but instead has determined to incorporate them by adopting the margin rules of CBOE and NYSE as described herein. 9 See Exchange Act Release Nos. 48355 (August 22, 2003), 68 FR 50813 (August 22, 2003) (SR–BSE– 2002–15); and 49260 (February 14, 2004), 69 FR 8500 (February 24, 2004) (approval, among other things, of ISE rule incorporating CBOE and NYSE margin rules). The Exchange has, under separate cover, submitted a letter seeking an exemption under Section 36 of the Act from the rule filing procedures of Section 19(b) of the Act with respect to changes to the proposed incorporated CBOE and NYSE margin rules going forward. See generally Exchange Act Release No. 49260. E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 73, No. 130 / Monday, July 7, 2008 / Notices 2. Statutory Basis Paper Comments The Exchange believes that its proposal is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of Section 6(b)(5) of the Act 11 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, in general to protect investors and the public interest, by streamlining its margin rules commensurate with industry practice. • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2007–33. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, 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 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 Number SR–Phlx–2007–33 and should be submitted on or before July 28, 2008. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, 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 either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Florence E. Harmon, Acting Secretary. [FR Doc. E8–15198 Filed 7–3–08; 8:45 am] SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11264 and # 11265] mstockstill on PROD1PC66 with NOTICES • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–Phlx–2007–33 on the subject line. AGENCY: U.S. Small Business Administration. ACTION: Amendment 6. SUMMARY: This is an amendment of the Presidential declaration of a major disaster for the State of Iowa (FEMA– 1763–DR), dated 05/27/2008. U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Aug<31>2005 17:39 Jul 03, 2008 12 17 Jkt 214001 PO 00000 CFR 200.30–3(a)(12). Frm 00101 Fmt 4703 06/28/2008. Physical Loan Application Deadline Date: 07/28/2008. EIDL Loan Application Deadline Date: 02/27/2009. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster declaration for the State of Iowa, dated 05/27/2008 is hereby amended to include the following areas as adversely affected by the disaster: Primary Counties: (Physical Damage and Economic Injury Loans): Dallas, Davis, Iowa, Lucas, Mitchell, Worth. Contiguous Counties: (Economic Injury Loans Only): Iowa: Wayne. Minnesota: Freeborn, Mower. Missouri: Schuyler, Scotland. All other information in the original declaration remains unchanged. EFFECTIVE DATE: (Catalog of Federal Domestic Assistance Numbers 59002 and 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E8–15283 Filed 7–3–08; 8:45 am] BILLING CODE 8025–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 11272] Iowa Disaster Number IA–00016 U.S. Small Business Administration. ACTION: Amendment 1. Iowa Disaster Number IA–00015 11 15 Incident: Severe Storms, Tornadoes, and Flooding. Incident Period: 05/25/2008 and continuing. AGENCY: BILLING CODE 8010–01–P Electronic Comments 10 15 38489 Sfmt 4703 SUMMARY: This is an amendment of the Presidential declaration of a major disaster for Public Assistance Only for the State of Iowa (FEMA—1763—DR), dated 05/27/2008. Incident: Severe Storms, Tornadoes, and Flooding. Incident Period: 05/25/2008 and continuing. Effective Date: 06/20/2008. Physical Loan Application Deadline Date: 07/28/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business E:\FR\FM\07JYN1.SGM 07JYN1

Agencies

[Federal Register Volume 73, Number 130 (Monday, July 7, 2008)]
[Notices]
[Pages 38487-38489]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-15198]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58045; File No. SR-Phlx-2007-33]


Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment Nos. 
1 Thereto and 2, Relating to Margining

June 26, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 \2\ thereunder, notice 
is hereby given that on April 5, 2007, 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, II, and III, below, which Items have been substantially 
prepared by Phlx. On July 31, 2007, Phlx filed Amendment No. 1 to the 
proposed rule change. On May 19, 2008, Phlx filed Amendment No. 2 to 
the proposed rule change.\3\ 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\ Amendment No. 2 replaced and superseded the original filing 
and Amendment No. 1 in their entirety.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend its rules to streamline and make more 
efficient its margin rules and procedures by: (1) Adding a new section 
to Rule 721 (Proper and Adequate Margin) requiring

[[Page 38488]]

each member to indicate in writing to the Exchange that such member 
shall be bound by the initial and maintenance margin requirements of 
either the Chicago Board Options Exchange (``CBOE'') or New York Stock 
Exchange (``NYSE''); and (2) eliminating Rules 724 (Guaranteed 
Accounts) and 725 (Daily Record of Required Margin). The Exchange also 
proposes to significantly shorten Rules 723 (Day Trading and 
Prohibition on Free-Riding in Cash Accounts) and 722 (Margin Accounts) 
to eliminate redundant language while retaining those margin 
requirements that are unique to current Exchange margin rules.
    The text of the proposed rule change is available on the Exchange's 
Web site at Phlx's principal office, the Commission's public reference 
room, and http://www.phlx.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, the Phlx included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Phlx has prepared summaries, set forth in sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to streamline Phlx 
margin rules by requiring member organizations to elect in writing that 
they shall follow the margin rules of CBOE or NYSE, which should 
eliminate unnecessary or duplicative margin requirements. At the same 
time, the Exchange proposes to retain those margin provisions that are 
unique to current Exchange margin rules, particularly those pertaining 
to foreign currency options, which only trade on Phlx. The proposal 
will also make portfolio margining available to Exchange members.\4\
---------------------------------------------------------------------------

    \4\ The Exchange believes that the portfolio margin rules noted 
herein most likely will be used by Phlx clearing firm members for 
which the Exchange is not the designated examining authority (DEA). 
The Phlx does not, at this time, intend to approve member firms for 
which it is the DEA to engage in portfolio margining.
---------------------------------------------------------------------------

    The Exchange's current margin requirements are embodied in its 
Rules 721 through 725, with the bulk of them in Rule 722. The proposal 
would require member organizations to elect, via written notice to the 
Exchange, to use and follow the margin rules of either CBOE or NYSE as 
they are in effect from time to time (known as the ``elected margin 
rules''). This would allow the Exchange to drastically reduce the 
length of Rule 722 while retaining those margin concepts that are not 
covered by the elected margin rules, such as Miscellaneous Securities 
options,\5\ currency pairs, and free-riding. Rule 722 as amended would 
specifically require that once an Exchange member organization elects 
to follow the margin rules of either CBOE or NYSE, it shall be bound to 
comply with such elected margin rules, as applicable, as though they 
were part of the Exchange's margin rules.
---------------------------------------------------------------------------

    \5\ Miscellaneous Securities include cross rate currencies and 
cash index participations as defined in proposed Rule 722.
---------------------------------------------------------------------------

    The election of appropriate margin rules enables the Exchange to 
eliminate Rules 724 and 725 because the topics of those rules--
guaranteed accounts and daily record of required margin, respectively--
are covered in the elected margin rules and retention of 724 and 725 
would therefore be duplicative.\6\ The Exchange likewise proposes to 
shorten Rule 723 by retaining the unique prohibition on free-riding 
while eliminating the duplicative day-trading margin language. The 
language proposed to be deleted duplicates similar provisions in CBOE 
Rule 12.3 and NYSE Rule 431.
---------------------------------------------------------------------------

    \6\ See CBOE Rules 12.4 and 12.12, and NYSE Rules 431 and 432. 
With the creation of the Financial Industry Regulatory Authority 
(``FINRA'') through the consolidation of NASD and the member 
regulation, enforcement and arbitration operations of the NYSE, NYSE 
Rules 431 and 432 are now part of the FINRA rulebook which currently 
consists of both NASD Rules and certain NYSE Rules that FINRA has 
incorporated (Incorporated NYSE Rules). See http://www.finra.org/
RulesRegulation/FINRARules/index.htm.
---------------------------------------------------------------------------

    The elected margin rules contain the portfolio margin pilot 
programs that were initiated by CBOE and NYSE in 2005 and are currently 
codified in their margin rules (the ``Pilots'').\7\ As stated above, 
the Exchange believes that the portfolio margin rules noted herein most 
likely will be used by Phlx clearing firm members for which the 
Exchange is not the designated examining authority (``DEA'').
---------------------------------------------------------------------------

    \7\ See Exchange Act Release Nos. 52032 (July 14, 2005), 70 FR 
42118 (July 21, 2005) (SR-CBOE-2002-03); and 52031 (July 14, 2005), 
70 FR 42130 (July 21, 2005) (SR-NYSE-2002-19). The Exchange notes 
that the OCC has amended its rules and by-laws to accommodate the 
Pilots. See, e.g., Exchange Act Release No. 52030 (July 14, 2005), 
70 FR 42405 (July 22, 2005) (SR-OCC-2003-04) (establishes new OCC 
``customers' lien account'' for customers of clearing members that 
are margined on a portfolio risk basis or pursuant to a cross-
margining arrangement in accordance with exchange rules). See also 
infra note 8.
---------------------------------------------------------------------------

    Whereas current Phlx Rule 722 requires that margin must be 
calculated using fixed percentages, on a position-by-position basis, 
the Pilots permit a broker-dealer to calculate customer margin 
requirements by grouping all eligible products in an account(s) based 
on the same index or issuer into a single portfolio. Products eligible 
for margining according to the portfolio margining methodology of the 
Pilots include listed, broad-based, and market index options, index 
warrants, futures, futures options and related exchange-traded funds. 
The Pilots were subsequently extended and modified by expanding the 
scope of products eligible for portfolio margining to include margin 
equity securities, unlisted derivatives, listed options and securities 
futures.\8\
---------------------------------------------------------------------------

    \8\ See Exchange Act Release Nos. 56107 (July 19, 2007), 72 FR 
41377 (July 27, 2007) (SR-NYSE-2007-56); 56109 (July 19, 2007), 72 
FR 41365 (July 27, 2007) (SR-CBOE-2007-75); and 56108 (July 19, 
2007), 72 FR 41375 (July 27, 2007) (SR-NASD-2007-045) (orders 
extending the Pilots until July 31, 2008). See also Exchange Act 
Release No. 54918 (December 12, 2006), 71 FR 75790 (December 18, 
2006) (SR-NYSE-2006-13); Exchange Act Release No. 54919 (December 
12, 2006), 71 FR 75781 (December 18, 2006) (SR-CBOE 2006-14); and 
Exchange Act Release No. 54125 (July 11, 2006), 71 FR 40766 (July 
18, 2006) (SR-NYSE-2005-93) (orders expanding the scope of products 
eligible for portfolio margining). The Exchange could have adopted 
the Pilots and relevant updates piecemeal but instead has determined 
to incorporate them by adopting the margin rules of CBOE and NYSE as 
described herein.
---------------------------------------------------------------------------

    This proposal to incorporate CBOE or NYSE margin rules is similar 
to the approach used by the International Securities Exchange (``ISE'') 
and the Boston Options Exchange (``BOX'') requiring their members to 
elect and follow CBOE or NYSE margin rules and incorporating such rules 
by reference into their own rules.\9\ The Exchange believes that the 
proposal to have its members elect appropriate CBOE or NYSE margin 
rules, in conjunction with retaining the needed portions of the 
Exchange's current margin rules, should enable it to maximize and 
maintain its competitive position among options exchanges to the 
benefit of investors.
---------------------------------------------------------------------------

    \9\ See Exchange Act Release Nos. 48355 (August 22, 2003), 68 FR 
50813 (August 22, 2003) (SR-BSE-2002-15); and 49260 (February 14, 
2004), 69 FR 8500 (February 24, 2004) (approval, among other things, 
of ISE rule incorporating CBOE and NYSE margin rules). The Exchange 
has, under separate cover, submitted a letter seeking an exemption 
under Section 36 of the Act from the rule filing procedures of 
Section 19(b) of the Act with respect to changes to the proposed 
incorporated CBOE and NYSE margin rules going forward. See generally 
Exchange Act Release No. 49260.

---------------------------------------------------------------------------

[[Page 38489]]

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \11\ 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, in general to protect investors and the public 
interest, by streamlining its margin rules commensurate with industry 
practice.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 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, as 
amended, 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 either solicited or received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2007-33 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2007-33. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, 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 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 Number SR-Phlx-2007-33 and should be 
submitted on or before July 28, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-15198 Filed 7-3-08; 8:45 am]
BILLING CODE 8010-01-P