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]
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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
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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
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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 https://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 https://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.
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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 (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 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 (https://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 https://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 https://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'').
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\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.
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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\
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\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.
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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.
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\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.
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[[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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The 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 (https://
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 (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 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