[Federal Register: November 2, 2007 (Volume 72, Number 212)]
[Notices]
[Page 62290-62291]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no07-89]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56714; File No. SR-Phlx-2007-70]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of a Proposed Rule Change as Modified by Amendment No.
1 Thereto Relating to Rule 1034, Minimum Increments
October 29, 2007.
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 September 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
October 11, 2007, the Exchange submitted Amendment No. 1 to the
proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Phlx proposes to amend Rule 1034, Minimum Increments, to decrease
the size of the minimum quoting and trading increments applicable to
the Exchange's U.S. dollar-settled foreign currency options (``FCOs'').
The text of the proposed rule change is available at Phlx, 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, 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. 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 provide additional
trading opportunities by reducing the minimum increments applicable to
the Exchange's U.S. dollar-settled FCOs.\3\ Quoting and trading in
smaller increments should enable investors to trade U.S. dollar-settled
currency options with greater precision as to price. The changes would
permit the trading of U.S. dollar-settled FCOs in the same minimum
increments that have long been applicable (with one unrelated
exception--the physical delivery British pound/Japanese yen option) to
the Exchange's physical delivery FCO contracts.
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\3\ On January 8, 2007, the Exchange began trading U.S. dollar-
settled options on the British pound and the Euro on the Exchange's
electronic trading platform for options, Phlx XL. See Securities
Exchange Act Release No. 54989 (December 21, 2006), 71 FR 78506
(December 29, 2006) (approving SR-Phlx-2006-34). The Exchange
subsequently listed U.S. dollar-settled FCOs on the Australian
dollar, the Canadian dollar, the Swiss franc and the Japanese yen.
See Securities Exchange Act Release No. 56034 (July 10, 2007), 72 FR
38853 (July 16, 2007) (approving SR-Phlx-2007-34).
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Currently, all U.S. dollar-settled FCOs other than the Japanese yen
have minimum increments of $.0010 (expressed as .10) or $.0005
(expressed as .05). Minimum increments for the Japanese yen are
$.000010 (also expressed as .10) or $.000005 (expressed as .05). In
each case the applicable minimum increment is determined by the price
at which the option is quoting. For example, all U.S. dollar-settled
FCO contracts (other than options on the Japanese yen) quoting at
$.0300 (expressed as 3.00) or higher have a minimum trading increment
of $.0010 (expressed as .10), while the minimum increment for these
U.S. dollar-settled FCOs quoting under $.0300 (expressed as 3.00) is
$.0005 (expressed as .05). These minimum increments were originally
established in order to accommodate trading of U.S. dollar-settled FCOs
on the Phlx XL platform, which did not have penny trading capability
when the rules for the U.S. dollar-settled FCOs were first drafted and
filed with the Commission.
The proposed amendments to Rule 1034 would set the minimum
increment for U.S. dollar-settled FCOs on currencies other than the
Japanese yen at $.0001 and the minimum increment for U.S. dollar-
settled FCO contracts on the Japanese yen at $.000001 (in both cases
expressed as .01), regardless of the price at which the option is
quoting. This change would conform the minimum increments for U.S.
dollar-settled FCOs to those applicable currently to the Exchange's
physical delivery FCOs. Although U.S. dollar-settled FCOs would be
trading in these narrower minimum increments, they would not actually
be trading in pennies (the trading increment would actually be much
smaller although it would be expressed as .01) and would not be
considered part of the Exchange's pilot program currently applicable to
certain equity options.\4\
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\4\ The pilot, which permits certain options series to be quoted
and traded in increments of $0.01, began on January 26, 2007. See
Securities Exchange Act Release No. 55153 (January 23, 2007), 72 FR
4553 (January 31, 2007) (SR-Phlx-2006-74). The pilot was extended
through September 27, 2007. See Securities Exchange Act Release No.
56141 (July 24, 2007), 72 FR 42216 (August 1, 2007) (SR-Phlx-2007-
53). The pilot program has been extended again through March 27,
2009. See Securities Exchange Act Release No. 56563 (September 27,
2007), 72 FR 56429 (October 3, 2007) (SR-Phlx-2007-62). With one
exception all series in options included in the pilot trading at a
price of less than $3.00 are currently quoted and traded in minimum
increments of $0.01, and those with a price of $3.00 or higher are
currently quoted and traded in minimum increments of $0.05. A list
of all series of options in the pilot was communicated to membership
via Exchange circular.
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Currently, options on currency futures trade in these smaller
trading increments on the Chicago Mercantile Exchange. As a competitive
matter, the
[[Page 62291]]
Exchange seeks the opportunity to offer investors those same, more
refined increments. Also, currencies trade on the cash market in these
smaller increments. Additionally, as stated above, Phlx customers have
been accustomed to trading in these more refined increments in the
Exchange's physical delivery FCOs since 1982. Providing these more
refined increments would permit Exchange specialists the opportunity to
provide better fills (meaning less spread than the current wider
minimum increments rules allow) to customers.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\5\ in general, and with
Section 6(b)(5) of the Act,\6\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to a free and
open market and a national market system, and, in general, to protect
investors and the public interest.
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\5\ 15 U.S.C. 78f.
\6\ 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 would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor 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 Amex 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 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-2007-70 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-2007-70. 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 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-2007-70 and should be
submitted on or before November 23, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-21578 Filed 11-1-07; 8:45 am]
BILLING CODE 8011-01-P