[Federal Register Volume 73, Number 6 (Wednesday, January 9, 2008)]
[Notices]
[Pages 1657-1659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-136]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57086; File No. SR-Phlx-2007-90]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto
Relating to the $1 Strike Pilot Program
January 2, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 12, 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 the
Exchange. On December 28, 2007, the Exchange filed Amendment No. 1 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ The Exchange states that Amendment No. 1 to the proposed
rule change supersedes and replaces the original filing in its
entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Commentary .05 to Phlx Rule 1012
(Series of Options Open for Trading) to expand the $1 Strike Pilot
Program (``$1 Pilot'') and to request permanent approval of the $1
Pilot.\4\ The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and http://www.phlx.com.
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\4\ The Commission approved the $1 Pilot on June 11, 2003. See
Securities Exchange Act Release No. 48013 (June 11, 2003), 68 FR
35933 (June 17, 2003) (SR-Phlx-2002-55). The $1 Pilot has
subsequently been extended through June 5, 2008. See Securities
Exchange Act Release Nos. 49801 (June 3, 2004), 69 FR 32652 (June
10, 2004) (SR-Phlx-2004-38) (extending the $1 Pilot until June 5,
2005); 51768 (May 31, 2005), 70 FR 33250 (June 7, 2005) (SR-Phlx-
2005-35) (extending the $1 Pilot until June 5, 2006); 53938 (June 5,
2006), 71 FR 34178 (June 13, 2006) (SR-Phlx-2006-36) (extending the
$1 Pilot until June 5, 2007); and 55666 (April 25, 2007), 72 FR
23879 (May 1, 2007) (SR-Phlx-2007-29) (extending the $1 Pilot until
June 5, 2008). The other options exchanges have similar $1 strike
price listing programs that were likewise extended through June 5,
2008.
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[[Page 1658]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to expand the number of
options classes eligible for the $1 Pilot and to request permanent
approval of the $1 Pilot and thereby provide investors with greater
flexibility in the trading of equity options that overlie lower priced
stocks and allow equity options positions that are better tailored to
meet investment objectives.
The $1 Pilot, under the terms set forth in Commentary .05 to Phlx
Rule 1012, currently allows the Exchange to establish $1 strike price
intervals on options classes overlying no more than five individual
stocks designated by the Exchange where: (1) The underlying stock
closes below $20 on the primary market on the trading day before
selection by the Exchange; (2) the $1 strike price is from $3 to $20;
(3) the $1 strike price is no more than $5 above or below the closing
price of the underlying stock on the preceding day; and (4) the $1
strike price is not within $0.50 of an existing $2.50 strike price in
the same series. The Exchange may not list long-term option series
(``LEAPS'') at $1 strike price intervals for any class selected for the
$1 Pilot. In addition, pursuant to the $1 Pilot, the Exchange may list
$1 strike prices on any other option classes if those classes are
specifically designated by other securities exchanges that employ a
similar $1 strike price program under their respective rules.
The Exchange proposes to expand the $1 Pilot to allow it to select
a total of 10, instead of the current 5, individual stocks on which
option series may be listed at $1 strike price intervals. Additionally,
the Exchange proposes to expand the price range on which it may list $1
strikes to $3-$50, instead of the current $3-$20. The proposed expanded
and permanent $1 Pilot would be known as the ``$1 Strike Program.'' The
Exchange notes that the existing restrictions on listing $1 strikes
would continue to apply; i.e., no $1 strike price may be listed that is
greater than $5 from the underlying stock's closing price in its
primary market on the previous day or that would result in strike
prices being $0.50 apart.
As stated in the Commission order approving Phlx's $1 Pilot and in
the subsequent extensions of the $1 Pilot,\5\ the Exchange believes
that $1 strike price intervals provide greater trading flexibility to
investors so that they may better achieve their investment objectives.
The Exchange states that its member firms representing customers have
requested that Phlx seek to expand the $1 Pilot both in terms of the
number of classes that can be selected by the Exchange and the range in
which $1 strikes may be listed.
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\5\ See id.
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Phlx's last $1 Pilot report (the ``Report'') reviewed the
Exchange's positive experience with the $1 Pilot.\6\ The Exchange
states that the Report showed the strength and efficacy of the $1 Pilot
on the Exchange, as reflected by the increase in the percentage of $1
strikes in comparison to total options volume traded on Phlx at $1
strike price intervals and other options volume and the continuing
robust open interest of options traded on Phlx at $1 strike price
intervals. With regard to the impact on systems capacities, Phlx's
analysis of the $1 Pilot showed that the impact on Phlx's, OPRA's, and
market data vendors' respective automated systems has been negligible.
The Exchange states that, as indicated in the Report, the $1 Pilot has
not created, and in the future should not create, capacity problems for
the systems of OPRA. Phlx represents that it has sufficient capacity to
handle an expansion of the $1 Pilot, as proposed.
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\6\ See Securities Exchange Act Release No. 55666 (April 25,
2007), 72 FR 23879 (May 1, 2007) (SR-Phlx-2007-29) (enclosing the
Report as Exhibit 3 to the filing).
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Finally, because the $1 Pilot has been very successful in allowing
investors to establish equity options positions that are better
tailored to meeting their investment objectives, Phlx requests that the
$1 Pilot, as expanded, be approved on a permanent basis.
2. Statutory Basis
The Exchange believes that its proposal is consistent with section
6(b) of the Act,\7\ in general, and furthers the objectives of section
6(b)(5), specifically,\8\ in that it is designed to promote just and
equitable principles of trade, to perfect the mechanism of a free and
open market and the national market system, and, in general, to protect
investors and the public interest. The proposal should achieve this by
allowing continued listing of options at $1 strike price intervals
within certain parameters, thereby stimulating customer interest in
options overlying the lowest tier of stocks and creating greater
trading opportunities and flexibility and providing customers with the
ability to more closely tailor investment strategies to the precise
movement of the underlying stocks.
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\7\ 15 U.S.C. 78f(b).
\8\ 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
The Exchange states that no written comments on the proposed rule
change 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 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 [email protected]. Please include
File
[[Page 1659]]
Number SR-Phlx-2007-90 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-2007-90. 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Phlx-2007-90 and should be
submitted on or before January 30, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-136 Filed 1-8-08; 8:45 am]
BILLING CODE 8011-01-P