[Federal Register: November 5, 2007 (Volume 72, Number 213)]
[Notices]
[Page 62508-62510]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05no07-87]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56717; File No. SR-Phlx-2007-73]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change and Amendment No. 1 Thereto to List and Trade Options
Already Listed on Another National Securities Exchange
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 21, 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 and
II below, which Items have been substantially prepared by Phlx. On
October 18, 2007, Phlx filed Amendment No. 1 to the proposed rule
change.\3\ This order provides notice of the proposal, as amended, and
approves the proposal on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 supercedes the original filing and replaces
it in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Phlx proposes to amend Phlx Rule 1009 to enable it to list and
trade equity options that are otherwise ineligible for listing and
trading on the Exchange if such options are listed and traded on
another national securities exchange and the security or securities
underlying such options meet Phlx's continued listing requirements.
The text of the proposed rule change is available on Phlx's Web
site (http://www.phlx.com), at Phlx'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 III 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 revise the options
listing standards in Phlx Rule 1009 so that as long as the options
maintenance listing standards set forth in Phlx Rule 1010 are met and
the option is listed and traded on another national securities
exchange, Phlx would be able to list and trade the option. Phlx Rule
1009 sets forth the requirements that an underlying equity security
must meet before the Exchange may initially list options on that
security. Phlx notes that these requirements are uniform among the
options exchanges.
Commentary .01(4) to Phlx Rule 1009 relates to the minimum market
price at which an underlying security must trade for an option to be
listed on it, and applies to the listing of individual equity options
on both ``covered'' and ``uncovered'' underlying securities. In the
case of an underlying security that is a ``covered security'' as
defined under section 18(b)(1)(A) of the Securities Act of 1933 (``1933
Act''),\4\ the closing market price of the underlying security must be
at least $3 per share for five previous consecutive business days prior
to the date on which Phlx submits an option class certification to The
Options Clearing Corporation (``OCC''). In connection with underlying
securities deemed to be ``uncovered,'' Phlx's rules require that the
closing price of such underlying security be at least $7.50 for the
majority of business days during the three calendar months preceding
the date of selection for such listing. In addition, an alternative
listing procedure for ``uncovered'' securities also permits the listing
of such options so long as: (1) The underlying security meets the
guidelines for continued approval contained in Phlx Rule 1010; (2)
options on such underlying security are traded on at least one other
registered national securities exchange; and (3) the average daily
trading volume (``ADTV'') for such options over the last three calendar
months preceding the date of selection has been at least 5,000
contracts. Subparagraphs (1) through (4) of Commentary .01 to Phlx Rule
1009 further set forth minimum requirements for an underlying security
such as shares outstanding, number of holders and trading volume.
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\4\ Section 18(b)(1)(A) of the 1933 Act provides that `` [a]
security is a covered security if such security is * * * listed, or
authorized for listing, on the New York Stock Exchange or the
American Stock Exchange, or listed or authorized for listing on the
National Market System of the Nasdaq Stock Market (or any successor
to such entities) * * *.'' See 15 U.S.C. 77r(b)(1)(A).
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When Phlx first commenced operations, if an option failed to meet
the Exchange's original listing requirements, Phlx could not list that
option, even if the option met the continued listing requirements of
one or more other exchanges and traded on those exchanges. In order to
somewhat remedy this situation, in 2002, the Exchange proposed, and the
Commission approved, amendments to Phlx's original listing criteria
that permitted Phlx to list options where the underlying ``uncovered''
security did not meet the $7.50 share price requirement so long as (i)
the underlying security met Phlx's continued listing criteria, (ii)
such options were traded on at least one other exchange, and (iii)
during the three preceding calendar months, the
[[Page 62509]]
options had ADTV across all exchanges of at least 5,000 contracts.\5\
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\5\ See Securities Exchange Act Release No. 46789 (November 7,
2002), 67 FR 69284 (November 15, 2002) (order granting approval of
proposal relating to maintenance listing criteria in Phlx Rule 1010
and original listing criteria in Phlx Rule 1009) (the ``2002
Filing'').
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The Exchange notes that the 2002 Filing, while permitting the Phlx
to list some of the more actively-traded options, does not permit the
listing of non-active options that are currently trading at other
options exchanges. The options exchange (or exchanges) that may be
fortunate enough to list an option that at first met the original
listing criteria, but subsequently fails to do so, is provided a
trading monopoly inconsistent with the multiple trading of options,
fostering competition and the maintenance of a national market system.
Under this proposed rule change, an option may be multiply-listed and
traded as long as one other options exchange is trading the particular
option and such underlying security of the option meets the Exchange's
continued listing requirements.
Phlx notes that the requirements for listing additional series of
an existing listed option (i.e., continued listing guidelines) are less
stringent, largely because, in total, the Exchange's guidelines assure
that options will be listed and traded on securities of companies that
are financially sound and subject to adequate minimum standards.
Phlx believes that although the continued listing requirements are
uniform among the other options exchanges, the application of both the
original and continued listing standard in the current market
environment have had an anti-competitive effect. Specifically, the
Exchange notes that on several occasions it has been unable to list and
trade options classes that trade elsewhere because the underlying
security of such option did not at that time meet original listing
standards. However, the other options exchange(s) may continue to trade
such options (and list additional series) based on the lower
maintenance listing standards, while Phlx may not list any options on
such underlying security. The Exchange believes this clearly is anti-
competitive and inconsistent with the aims and goals of a national
market system in options.
To address this situation, the Exchange proposes to add new
Commentary .01(6) to Phlx Rule 1009 and amend the current listing
requirement adopted by the 2002 Filing. Specifically, proposed
Commentary .01(6) provides that notwithstanding that a particular
underlying security may not meet the requirements set forth in
Paragraphs (1) through (4) of Commentary .01, the Exchange nonetheless
could list and trade an option on such underlying security if (i) the
underlying security meets continued listing requirements under Phlx
Rule 1010; and (ii) options on such underlying security are listed and
traded on at least one other registered national securities exchange.
Consequently, the second half of Commentary .01(4)(ii) to Phlx Rule
1009, which references an alternative original listing requirement for
``uncovered securities,'' would be deleted. In connection with the
proposed changes, the Exchange represents that the procedures currently
employed to determine whether a particular underlying security meets
the initial listing criteria will similarly be applied to the continued
listing criteria.
Phlx believes that this proposal is narrowly tailored to address
the circumstances where an options class is currently ineligible for
listing on the Exchange while at the same time, such option is trading
on another options exchange(s). The Exchange submits that the adoption
of the proposal is essential for competitive purposes and to promote a
free and open market for the benefit of investors.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\6\ in general, and furthers the objectives of Section
6(b)(5),\7\ specifically, in that it is designed to perfect the
mechanism of a free and open market and the national market system,
protect investors and the public interest and promotes just and
equitable principles of trade. The proposal would achieve this by
enabling Phlx to list an option that is listed and traded on another
national securities exchange and the underlying security meets Phlx
continued listing standards.
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\6\ 15 U.S.C. 78f(b).
\7\ 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 will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. 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-2007-73 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-2007-73. 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-2007-73 and should
[[Page 62510]]
be submitted on or before November 26, 2007.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
regulations thereunder applicable to a national securities exchange.\8\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\9\ which requires that the
rules of an exchange be designed to prevent fraudulent and manipulative
acts and practices, 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. The proposal is narrowly tailored to
address the circumstances where an equity option class is currently
ineligible for initial listing on the Exchange even though it meets the
Exchange's continued listing standards and is trading on another
options exchange. Allowing Phlx to list and trade options on such
underlying securities should help promote competition among the
exchanges that list and trade options. The Commission notes, and the
Exchange represents, that the procedures that the Exchange currently
employs to determine whether a particular underlying security meets the
initial equity option listing criteria for the Exchange will similarly
be applied when determining whether an underlying security meets the
Exchange's continued listing criteria.
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\8\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(5).
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The Commission finds good cause, pursuant to Section 19(b)(2)(B) of
the Act,\10\ for approving the proposed rule change prior to the 30th
day after the publication of the notice of the filing thereof in the
Federal Register. The Commission notes that the proposed rule change is
substantially identical to a proposed rule change submitted by the
American Stock Exchange LLC,\11\ which was previously approved by the
Commission after an opportunity for notice and comment, and therefore
does not raise any new regulatory issues.
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\10\ 15 U.S.C. 78s(b)(2)(B).
\11\ See Securities Exchange Act Release No. 56598 (October 2,
2007), 72 FR 57615 (October 10, 2007) (SR-Amex-2007-48). See also
Securities Exchange Act Release No. 56647 (October 11, 2007), 72 FR
58702 (October 16, 2007) (SR-ISE-2007-80) (substantially identical
proposed rule change approved on an accelerated basis).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Phlx-2007-73), as amended,
be, and it hereby is, approved on an accelerated basis.
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\12\ Id.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-21634 Filed 11-2-07; 8:45 am]
BILLING CODE 8011-01-P