[Federal Register Volume 65, Number 106 (Thursday, June 1, 2000)]
[Notices]
[Pages 35152-35153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-13672]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42814; File No. SR-Phlx-00-11]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the Philadelphia Stock 
Exchange, Inc. To Reduce the Value of Its Computer Box Maker Index 
Option (``BMX'')

May 23, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ Rule 19b-4 thereunder,\2\ notice is hereby given that on 
March 31, 2000, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The proposed rule change has been filed by the Phlx as a 
``non-controversial'' rule change under Rule 19b-4(f)(6) under the 
Act.\3\ The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Exchange proposes to reduce the value of its Computer Box Maker 
Index (``Index'') option (``BMX'') to one-half its present value by 
doubling the base market divisor used to calculate the index. 
Additionally, the Exchange proposes to double the position and exercise 
limits applicable to BMX until the last expiration then trading. The 
index is a price weighted, narrow-based, A.M. settled index comprised 
of nine stocks issued by companies that manufacture, market, and 
support desktop and notebook personal computers and fault tolerant 
systems.\4\
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    \4\ The index is comprised of the following stocks (primary 
markets in parentheses): Apple Computer, Inc. (Nasdaq); Compaq Corp. 
(NYSE); Dell Computer Corp. (Nasdaq); Gateway 2000, Inc. (NYSE); 
Hewlitt Packard Co. (NYSE); International Business Machines (NYSE); 
Micron Technology, Inc. (NYSE); Sun Microsystems, Inc. (Nasdaq); and 
Unisys Corp. (NYSE).
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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 this proposed rule change is to attract additional 
liquidity to BMX. The Exchange began trading BMX in 1998.\5\ On March 
31, 2000, the index value was 451.24 and the near-month in-the-money 
call premium was $35.125 per contract. The Exchange proposes to conduct 
a ``two-for-one split'' of the index, to reduce the value of index to 
one-half its current value. The split would double the number of BMX 
contracts so that for each BMX contract held at the time of the split, 
a contract holder would receive two contracts at the reduced value, 
with a strike price one-half of the original strike price.\6\ 
Additionally, the Exchange proposes to double the position and exercise 
limits applicable to BMX, from 25,0000 contracts to 50,000 contracts, 
until the last expiration then trading. The Exchange represents that 
the proposed changes would result in an index value of 225.50 and a 
near-month in-the-money call premium of $17.56.\7\
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    \5\ See Securities Exchange Act Release No. 39895 (April 21, 
1998), 63 FR 23327 (April 28, 1998).
    \6\ For instance, the holder of a BMX 800 call will receive two 
BMX 400 calls.
    \7\ The Exchange represents that this procedure is similar to 
the type used for equity options, where the underlying security is 
subject to a two-for-one stock split.

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[[Page 35153]]

    In conjunction with the split, the Exchange will list strike prices 
surrounding the new, lower index value, pursuant to Phlx Rule 1101A. 
The trading symbol will remain as BMX. The Exchange will announce the 
effective date, the strike price, and the position limit changes by way 
of an Exchange memorandum to the membership.
    The Exchange is proposing this rule change to attract additional 
liquidity to BMX. The Phlx believes a two-for-one split will reduce the 
value of the index and will have a positive effect on overall 
transaction volumes by making the option premiums more attractive for 
retail investors. Additionally, the Exchange believes that a reduced 
index value will encourage additional investor interest because 
investors will be able to utilize this trading vehicle with a smaller 
amount of capital. The Exchange believes that attracting additional 
investors will create a more active and liquid trading environment.
2. Statutory Basis
    For these reasons, the Exchange believes that the proposed rule 
change is consistent with Section 6 of the Act,\8\ in general, and in 
particular, with Section 6(b)(5),\9\ in that it is designed to promote 
just and equitable principles of trade, as well as to protect investors 
and the public interest, by establishing a lower index value, which 
should, in turn, facilitate trading in BMX options. The Exchange 
believes that reducing the value of the index should not raise 
manipulation concerns or adversely impact the market, because the 
Exchange will continue to employ its surveillance procedures and has 
proposed an orderly procedure to achieve the index split, including 
adequate notice of the split to market participants.
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    \8\ 15 U.S.C. 78f.
    \9\ 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 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 neither solicited nor received written comments with 
respect to the proposed rule change.

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

    This proposed rule change has been filed by the Exchange as a 
``non-controversial'' rule change pursuant to Section 19(b)(3)(A) of 
the Act \10\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\11\ 
Because the foregoing proposed rule change: (1) Does not significantly 
affect the protection of investors or the public interest, (2) does not 
impose any significant burden on competition, and (3) by its terms does 
not become operative for 30 days after the date of filing, or such 
shorter time as the Commission may designate,\12\ it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6) thereunder.\14\
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    \10\ 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ The Exchange provided the Commission with the five business 
day notice required by Rule 19b-4(f)(6) of the Act on March 3, 2000.
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission accelerate the 
operative date of the rule change to permit the Exchange to implement 
it immediately. The Commission has determined, consistent with the 
protection of investors and the public interest, to make the proposed 
rule change operative upon filing, pursuant to Section 19(b)(3)(A) of 
the Act and Rule 19b-4(f)(6)(iii).\15\ Under Rule 19b-4(f)(6)(iii), a 
proposed ``non-controversial'' rule change does not become operative 
for 30 days after the date of filing, unless the Commission designates 
a shorter time.\16\ The Commission believes that it is consistent with 
the protection of investors and the public interest to make the 
proposed rule change operative upon filing because reducing the value 
of the Index should enable more investors to participate in the market, 
thereby promoting liquidity in the market place.\17\ At any time within 
60 days of the filing of the proposed rule change, the Commission may 
summarily abrogate such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.
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    \15\ 17 CFR 240.19b-4(f)(6)(iii)
    \16\ Id.
    \17\ For purposes only of accelerating the operative date of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington DC 20549-0609. 
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. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Phlx. All submissions should refer to File No. SR-Phlx-00-11 and should 
be submitted by June 22, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-13672 Filed 5-31-00; 8:45 am]
BILLING CODE 8010-01-M