8240 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Notices 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6)(iii). 

14The Exchange provided the Commission with 

pre-filing notice of the proposal, as required by Rule 

19b–4(f)(6)(iii). 

15See Securities Exchange Act Release Nos. 

54123 (July 11, 2006), 71 FR 40558 (July 17, 2006) 

(SR–CBOE–2006–65) (notice of filing and 

immediate effectiveness for CBOE’s quarterly 

option series pilot program). 

16See Securities Exchange Act Releases No. 

54762 (November 16, 2006), 71 FR 67663 

(November 22, 2006) (SR–CBOE–2006–93) (order 

approving certain amendments to CBOE’s quarterly 

option series pilot program). 

17See supra note 5. 

18For purposes only of waiving the operative 

delay of this proposal, the Commission notes that 

it has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 2 superceded Amendment No. 

1 in its entirety. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange believes that the 

foregoing proposed rule change may 

take effect upon filing with the 

Commission pursuant to Section 

19(b)(3)(A) of the Act 12 and 

subparagraph (f)(6)(iii) of Rule 19b–4 

thereunder 13 because the foregoing 

proposed rule change (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) does not become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, if 

consistent with the protection of 

investors and the public interest.14

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative for 30 days after the 

date of filing. However, Rule 19b–

4(f)(6)(iii) permits the Commission to 

waive the operative delay if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay and designate the proposed rule 

change immediately operative, so that 

the Exchange can have quarterly options 

pilot rules that are similar to that of 

other options exchanges. The Exchange 

believes that waiving the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest. 

The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest. The 

Commission notes that the proposal is 

substantially identical to the CBOE’s 

pilot program for quarterly option 

series, previously published for 

comment 15 and approved by the 

Commission,16 and is substantially 

similar to existing pilot programs 

currently in place at other SROs.17

Thus, Phlx’s proposal raises no new 

issues of regulatory concern. Moreover, 

waiving the operative delay will allow 

Phlx to immediately compete with other 

exchanges that list and trade quarterly 

options under similar programs, and 

consequently will benefit the public. 

Therefore, the Commission has 

determined to waive the 30-day delay 

and allow the proposed rule change to 

become operative upon filing.18

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. 

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 rulecomments@sec.gov. Please include File 

No. SR–Phlx–2007–08 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–2007–08. 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 Commissions 

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. Copies of such 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–2007–08 and should 

be submitted on or before March 16, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.19

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–3070 Filed 2–22–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55305; File No. SR–Phlx–

2006–65] 

Self-Regulatory Organizations; 

Philadelphia Stock Exchange, Inc.; 

Notice of Filing and Order Granting 

Accelerated Approval of Proposed 

Rule Change as Modified by 

Amendment Nos. 2 and 3 Thereto 

Relating to Options on the Russell 

2000 Index 

February 15, 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 October 

31, 2006 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 the 

Exchange. On November 22, 2006, the 

Exchange filed Amendment No. 1 to the 

proposed rule change. On January 24, 

2007, the Exchange filed Amendment 

No. 2 to the proposed rule change.3 On 

February 7, 2007, the Exchange filed 

Amendment No. 3 to the proposed rule 

change. This order provides notice of 

the proposed rule change as modified by 

Amendment Nos. 2 and 3 and approves 

the proposed rule change as amended 

on an accelerated basis. 


cprice-sewell on PROD1PC61 with NOTICES
Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Notices 8241 

4FLEX options are customized or flexible index 

and equity options and LEAPS are Long-term 

Equity Anticipation Securities or long term options 

series. See Phlx Rules 1079, 1012 and 1101A. The 

Exchange does not anticipate listing reduced value 

LEAPS on the Russell 2000 Index. 

5Although Exchange Rule 1009A has generic 

listing standards for options on broad-based indexes 

that apply to options on the Russell 2000 Index, 

see Securities Exchange Act Release No. 54158 (July 

17, 2006), 71 FR 41853 (July 24, 2006) (SR–Phlx–

2006–17), the proposed rule change is necessary to 

establish, among other things, larger position limits 

on such Russell products. 

6See Securities Exchange Act Release Nos. 49388 

(March 10, 2004), 69 FR 12720 (March 17, 2004) 

(SR–CBOE–2003–51) (approving listing and trading 

on CBOE of options, including LEAPS, on the 

Russell Top 200 Index, Russell Top 200 Growth 

Index, and the Russell Top 200 Value Index); 

48591 (October 2, 2003), 68 FR 58728 (October 10, 

2003) (SR–CBOE–2003–17) (approving listing and 

trading on CBOE of options, including LEAPS, on 

the Russell 3000 Index, Russell 3000 Value 

Index, Russell 3000 Growth Index, Russell 2000

Value Index, Russell 2000 Growth Index, Russell 

1000 Index, Russell 1000 Value Index, Russell 

1000 Growth Index, Russell MidCap Index, 

Russell MidCap Value Index, and Russell 

MidCap Growth Index); and 31382 (October 30, 

1992), 57 FR 52802 (November 5, 1992) (SR–CBOE–

92–02) (approving listing and trading on CBOE of 

options, including LEAPS, on the Russell 2000

Index). See also Securities Exchange Act Release 

Nos. 51619 (April 27, 2005), 70 FR 22947 (May 3, 

2005) (SR–ISE–2005–09) (order approving listing 

and trading on the International Securities 

Exchange (‘‘ISE’’) of options, including LEAPS, on 

the Russell 3000 Index, Russell 3000 Value 

Index, Russell 3000 Growth Index, Russell 2500

Index, Russell 2500 Value Index, Russell 2500

Growth Index, Russell 2000 Index, Russell 2000

Value Index, Russell 2000 Growth Index, Russell 

1000 Index, Russell 1000 Value Index, Russell 

1000 Growth Index, Russell Top 200 Index, 

Russell Top 200 Value Index, Russell Top 200

Growth Index, Russell MidCap Index, Russell 

MidCap Value Index, Russell MidCap Growth 

Index, Russell Small Cap Completeness Index, 

Russell Small Cap Completeness Value Index, and 

Russell Small Cap Completeness Growth Index); 

and 53191 (January 30, 2006), 71 FR 6111 (February 

6, 2006) (SR–Amex–2005–061) (order approving 

listing and trading on the Amex of options, 

including LEAPS, on the Russell 1000 Index, 

Russell 1000 Growth Index, Russell 1000 Value 

Index, Russell 2000 Index, Russell 2000 Growth 

Index, Russell 2000 Value Index, Russell 3000

Index, Russell 3000 Growth Index, Russell 3000

Value Index, Russell MidCap Index, Russell 

MidCap Growth Index, Russell MidCap Value 

Index, and Russell Top 50 Index). 

7Per subsection (b)(iii) of Phlx Rule 1101A, the 

Exchange may list, with respect to any class of stock 

index options, series of options having up to 60 

months to expiration. 

8Additional information about the Russell 

indexes can also be found at http:// 

www.russell.com/us/indexes/us/definitions.asp. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

Rules 1079 (FLEX Index and Equity 

Options), 1001A (Position Limits), and 

1101A (Terms of Option Contracts) so 

that it can list and trade cash-settled, 

European-style options, including FLEX 

options and LEAPS,4 on the Russell 

2000 Index of the Frank Russell 

Company (‘‘Russell’’), namely full value 

options (‘‘Full Value Russell Options’’) 

and one-tenth value options (‘‘Reduced 

Value Russell Options’’) on the Russell 

2000 Index. 

Amended Phlx Rule 1001A would 

establish position limits for the Full 

Value Russell Options of 50,000 

contracts total on either side of the 

market, with 30,000 contracts in the 

nearest expiration month, and position 

limits for the Reduced Value Russell 

Options of 500,000 contracts total on 

either side of the market, with 300,000 

contracts total in the nearest expiration 

month. Amended Phlx Rule 1079 would 

establish similar position limits for 

FLEX Full Value Russell Options and 

FLEX Reduced Value Russell Options. 

Amended Phlx Rule 1101A would 

establish that Full Value Russell 

Options and the Reduced Value Russell 

Options may be traded on the Exchange 

until 4:15 p.m. each business day, and 

that Phlx may list $2.50 or higher strike 

price intervals for options on the Russell 

2000 Index if the strike price is less 

than $200. The text of the proposed rule 

change is available at the Phlx, the 

Commission’s Public Reference Room, 

and www.phlx.com/exchange/ 

phlx_rule_fil.html. 

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 

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 Exchange proposes to amend its 

Rules 1079 (FLEX Index and Equity 

Options), 1001A (Position Limits), and 

1101A (Terms of Option Contracts) to 

list and trade on the Exchange cashsettled, European-style index options on 

the full and reduced values of the 

Russell 2000 Index.5

The Russell 2000 Index is a 

capitalization-weighted index 

containing the smallest 2000 companies 

in the Russell 3000 Index, which 

includes the largest 3,000 companies 

incorporated in the United States. All 

index components are traded on the 

New York Stock Exchange LLC 

(‘‘NYSE’’), the American Stock 

Exchange LLC (‘‘Amex’’), and/or The 

NASDAQ Stock Market LLC (‘‘Nasdaq’’). 

Options on the Russell 2000 Index and 

other Russell indexes currently trade on 

the Chicago Board Options Exchange, 

Inc. (‘‘CBOE’’) and other options 

exchanges.6 The Exchange also is 

proposing to be able to list and trade 

long-term options on the Russell 2000

Index.7

Index Design and Composition 

The Russell 2000 Index is designed 

to be a comprehensive representation of 

the investable U.S. equity market. The 

index is capitalization-weighted and 

includes only common stocks belonging 

to corporations domiciled in the United 

States that are traded on NYSE, Nasdaq, 

or Amex. Stocks are weighted by their 

‘‘available’’ market capitalization, which 

is calculated by multiplying the primary 

market price by the ‘‘available’’ shares; 

that is, total shares outstanding less 

corporate cross-owned shares; shares 

owned by Employee Stock Ownership 

Plans and Leveraged Employee Stock 

Ownership Plans that comprise 10% or 

more of shares outstanding; shares that 

are part of unlisted share classes; shares 

held by an individual, a group of 

individuals acting together, or a 

corporation not in the index that owns 

10% or more of the shares outstanding; 

and shares subject to Initial Public 

Offering lock-ups. The Russell 2000

Index is designed to measure the 

performance of the 2,000 smallest 

companies in the Russell 3000 Index, 

representing approximately 8% of the 

investable U.S. equity market.8

All equity securities listed on NYSE, 

Amex, or Nasdaq are considered for 

inclusion in the Russell 2000 Index, 

with the following exceptions: (1) 

Stocks trading at less than $1.00 per 

share on May 31 of each year; (2) stocks 

of non-U.S. companies; (3) preferred 

and convertible preferred stocks; (4) 

redeemable shares; (5) participating 

preferred stocks; (6) warrants and rights; 

(7) trust receipts; (8) royalty trusts; (9) 

limited liability companies; (10) 

Bulletin Board and Pink Sheet stocks; 

(11) closed-end investment companies; 

(12) limited partnerships; and (13) 

foreign stocks. As a special exception, 

Berkshire Hathaway is also excluded. 

The Russell 2000 Index is derived from 

the smallest 2000 companies in the 

Russell 3000 Index and represents 

approximately 8% of the investable U.S. 


cprice-sewell on PROD1PC61 with NOTICES
8242 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Notices 

9The Russell 3000 Index in turn measures the 

performance of the 3,000 largest U.S. companies 

based on total market capitalization, representing 

approximately 98% of the investable U.S. equity 

market. 

10The Exchange believes that reduced value 

options on certain Russell indexes have generated 

considerable interest from investors, as measured, 

for example, by the robust trading volume of 

reduced value options on the Russell 2000 Index 

that traded on CBOE and the ISE in 2005 (total 

320,876 contracts). 

11The aggregate exercise value of the option 

contract is calculated by multiplying the index 

value by the index multiplier, which is 100. 

equity market.9 All of these stocks are 

‘‘NMS Stocks’’ as defined in Rule 600 of 

Regulation NMS under the Act. 

As of June 30, 2006, the stocks 

comprising the Russell 2000 Index had 

an average market capitalization of 

$641.69 million, ranging from a high of 

$2.33 billion (Maverick Tube Corp.) to 

a low of $305.29 million (Tiens Biotech 

Group). The number of available shares 

outstanding averaged 35.80 million, 

ranging from a high of 482.72 million 

(Conexant Systems Inc.) to a low of 1.26 

million (Seaboard Corp.). The six-month 

average daily trading volume for Russell 

2000 Index components was 461,255 

shares per day, ranging from a high of 

20.37 million shares per day (Conexant 

Systems Inc.) to a low of 2,067 shares 

per day (Arden Group). Stocks that 

averaged less than 50,000 shares per day 

for the previous six months accounted 

for 12% of the index weight of the 

Russell 2000 Index. Additionally, over 

56% of Russell 2000 Index 

components have options listed on 

them, representing over 94% of the 

index weight. The Russell 2000 Index 

has a total capitalization of 

approximately $1.6 trillion as of 

December 18, 2006. 

Index Calculation and Index 

Maintenance 

The value of the Russell 2000 Index 

(both full and reduced value) is 

currently calculated by Reuters on 

behalf of Russell and is disseminated 

every 15 seconds during regular Phlx 

trading hours to market information 

vendors via the Options Price Reporting 

Authority (‘‘OPRA’’). 

The methodology used to calculate 

the value of the Russell 2000 Index is 

similar to the methodology used to 

calculate the value of other well known 

market-capitalization-weighted indexes, 

reflecting the total market value of the 

component stocks relative to a 

particular base period and is computed 

by dividing the total market value of the 

companies in the index by the index 

divisor. The divisor is adjusted 

periodically to maintain consistent 

measurement of the index. The base 

index value of the Russell 2000 Index 

was $135.00 on the December 31, 1986 

base index date, and the value of the 

Russell 2000 Index on December 31, 

2005 was $673.22. 

In recent years, the values of the 

Russell 2000 Index has increased 

significantly. As a result, the premium 

for options on the Russell 2000 Index 

has also increased, causing these index 

options to trade at a level that may be 

uncomfortably high for retail investors. 

Therefore, the Exchange also proposes 

to trade Reduced Value Russell Options. 

The Exchange believes that listing 

reduced value options would attract a 

greater source of customer business than 

if it listed only full value options on the 

Russell 2000 Index. The Exchange 

further believes that listing reduced 

value options would provide an 

opportunity for investors to hedge, or 

speculate on, the market risk associated 

with the stocks comprising the Russell 

2000 Index and use this trading 

vehicle while extending a smaller outlay 

of capital. The Exchange believes that 

this should attract additional investors 

and, in turn, create a more active and 

liquid trading environment.10

Full value and reduced value options 

on the Russell 2000 Index would 

expire on the Saturday following the 

third Friday of the expiration month 

(‘‘Expiration Saturday’’). Trading in 

options on the Russell 2000 Index 

would normally cease at 4:15 p.m. 

Eastern Standard Time (‘‘EST’’) on the 

Thursday preceding an Expiration 

Saturday. The exercise settlement value 

at expiration of each new index option 

would be calculated by Reuters on 

behalf of Russell, based on the opening 

prices of the index’s component 

securities on the last business day prior 

to expiration (‘‘Settlement Day’’).11 The 

Settlement Day is normally the Friday 

preceding Expiration Saturday. If a 

component security in a Russell index 

does not trade on Settlement Day, the 

last reported sales price in the primary 

market from the previous trading day 

would be used to calculate both full and 

reduced settlement values. Settlement 

values for the full and reduced value 

options on the Russell 2000 Index 

would be disseminated by OPRA. 

The Russell 2000 Index is monitored 

and maintained by Russell, which is 

responsible for making all necessary 

adjustments to the index to reflect 

component deletions, share changes, 

stock splits, stock dividends (other than 

ordinary cash dividends), and stock 

price adjustments due to restructuring, 

mergers, or spin-offs involving the 

underlying components. Some corporate 

actions, such as stock splits and stock 

dividends, require simple changes to the 

available shares outstanding and the 

stock prices of the underlying 

components. Other corporate actions, 

such as share issuances, change the 

market value of an index and require the 

use of an index divisor to effect 

adjustments. 

The Russell 2000 Index is reconstituted annually on June 30, based 

on prices and available shares 

outstanding as of the preceding May 31. 

New index components are added only 

as part of the annual re-constitution, 

after which, should a stock be removed 

from an index for any reason, it could 

not be replaced until the next reconstitution. 

The Exchange represents that, 

although it is not involved in the 

maintenance of any of the Russell 

indexes, it would monitor the Russell 

2000 Index on a quarterly basis and 

notify the Commission’s Division of 

Market Regulation (‘‘Division’’) by filing 

a proposed rule change pursuant to Rule 

19b–4 if: (i) The number of securities in 

the index drops by one-third or more; 

(ii) 10% or more of the weight of the 

index is represented by component 

securities having a market value of less 

than $ 75 million; (iii) less than 80% of 

the weight of the index is represented 

by component securities that are eligible 

for options trading pursuant to Phlx 

Rule 1009; (iv) 10% or more of the 

weight of the index is represented by 

component securities trading less than 

20,000 shares per day; or (v) the largest 

component security in the index 

accounts for more than 15% of the 

weight of the index, or the largest five 

components in the aggregate account for 

more than 50% of the weight of the 

index. 

The Exchange also would notify the 

Division immediately if Russell ceases 

to maintain or calculate the Russell 

2000 Index on which Phlx is proposing 

to list and trade options, or if the full 

or reduced value of the Russell 2000

Index is not disseminated every 15 

seconds by a widely available source. If 

the Russell 2000 Index ceases to be 

maintained or calculated, or its values 

are not disseminated every 15 seconds 

by a widely available source, the 

Exchange would not list any additional 

series for trading and would limit all 

transactions in options on that index to 

closing transactions only for the 

purpose of maintaining a fair and 

orderly market and protecting investors. 

Contract Specifications 

The proposed contract specifications 

for full and reduced value options on 

the Russell 2000 Index are based on 

the contract specifications of similar 


cprice-sewell on PROD1PC61 with NOTICES
Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Notices 8243 

12See supra note 6. 

13See generally Phlx Rules 1000A through 1106A 

(Rules Applicable to Trading of Options on Indices) 

and Phlx Rules 1000 through 1093 (Options Rules 

of the Phlx). 

14The same limits that apply to position limits 

would apply to exercise limits for these products. 

See Phlx Rule 1002A. 

15See CBOE Rule 24.4(a). 

16The Exchange is not proposing to list reducedvalue LEAPS on the Russell 2000 Index. 

17 15 U.S.C. 78f(b). 

18 15 U.S.C. 78f(b)(5). 

options currently listed on CBOE, ISE 

and Amex.12 The Russell 2000 Index is 

a broad-based index, as defined in Phlx 

Rule 1000A(b)(11). Full and reduced 

value options on the Russell 2000

Index would be European-style and a.m. 

cash-settled. The Exchange’s standard 

trading hours for index options (9:30 

a.m. to 4:15 p.m. EST), as set forth in 

Commentary .01 to Phlx Rule 1101A, 

would apply to options on the Russell 

2000 Index (both full and reduced 

value). Exchange rules that apply to the 

trading of options on broad-based 

indexes also would apply to both the 

full value and reduced value options on 

the Russell 2000 Index.13 The trading 

of these options also would be subject 

to, among others, Exchange rules 

governing margin requirements and 

trading halt procedures for index 

options. 

For Full Value Russell Options, the 

Exchange proposes to establish in its 

Rule 1001A(a)(iv) an aggregate position 

limit of 50,000 contracts on the same 

side of the market, provided that no 

more than 30,000 of such contracts are 

in the nearest expiration month series. 

Full Value Russell Options contracts 

would be aggregated with Reduced 

Value Russell Options contracts, where 

ten Reduced Value Russell Options 

contracts would equal one Full Value 

Russell Options contract.14 These limits 

are identical to the limits applicable to 

options based on the Russell 2000

Index that currently trade on CBOE.15

Additionally, Commentary .01 to Phlx 

Rule 1001A provides that under certain 

circumstances index options positions 

may be exempted from established 

position limits for each contract 

‘‘hedged’’ by an equivalent dollar 

amount of the underlying component 

securities. Furthermore, Commentary 

.02 provides that member organizations 

may receive exemptions of up to two 

times the applicable position limit 

where the index options positions are in 

proprietary accounts used for the 

purpose of facilitating orders for 

customers of those member 

organizations. See Phlx Rule 1001A. 

The Exchange proposes to apply 

existing index margin requirements for 

the purchase and sale of options on the 

Russell 2000 Index. See Phlx Rule 722. 

The Exchange proposes to set strike 

price intervals for index options of at 

least $2.50 when the strike price of full 

or reduced value options on the Russell 

2000 Index is below $200, and at least 

$5.00 strike price intervals otherwise. 

The minimum tick size for series trading 

below $3 would be $0.05, and for series 

trading at or above $3 would be $0.10. 

See Phlx Rule 1034 and proposed Rule 

1101A. 

The Exchange proposes to list series 

of Full Value Russell Options and 

Reduced Value Russell Options having 

up to three consecutive expiration 

months, with the shortest-term series 

initially having no more than two 

months to expiration (consecutive 

month series), and may designate one 

expiration cycle for each class that shall 

consist of four calendar months 

occurring at three-month intervals 

(cycle month series). Thus, the 

Exchange intends to initially list and 

trade options on the Russell 2000

Index in the following six series: 

February, March, April, June, September 

and December. In addition, LEAPS 

having up to 60 months to expiration 

may be traded.16 See Phlx Rule 1101A. 

The trading of long-term options series 

on the Russell 2000 Index would be 

subject to the same rules that govern all 

the Exchange’s index options, including 

sales practice rules, margin 

requirements, and trading rules. 

All of the specifications and 

calculations for Reduced Value Russell 

Options would be the same as those 

used for the Full Value Russell Options 

with position limits adjusted 

accordingly for Reduced Value Russell 

Options. The reduced value options 

would trade independently of, and in 

addition to, the full value options. 

Options on the Russell 2000 Index 

would be subject to the same rules that 

presently govern all Exchange index 

options, including sales practice rules, 

margin requirements, trading rules, and 

position and exercise limits. 

Surveillance and Capacity 

The Exchange represents that it has an 

adequate surveillance program in place 

for options on the Russell 2000 Index 

and intends to apply those same 

procedures that it applies to the 

Exchange’s other index options. 

Additionally, the Exchange is a member 

of the Intermarket Surveillance Group 

(‘‘ISG’’) under the Intermarket 

Surveillance Group Agreement, dated 

June 20, 1994. The members of the ISG 

include all of the national securities 

exchanges. The ISG members work 

together to coordinate surveillance and 

share information regarding the stock 

and options markets. In addition, the 

major futures exchanges are affiliated 

members of the ISG, which allows for 

the sharing of surveillance information 

for potential intermarket trading abuses. 

The Exchange also represents that it 

has the necessary systems capacity to 

support the new options series that 

would result from the introduction of 

full value and reduced value options on 

the Russell 2000 Index, including full 

value LEAPS on the Russell 2000

Index. The Exchange has provided the 

Commission with system capacity 

information to support this 

representation. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act17 in general, and furthers the 

objectives of Section 6(b)(5) of the Act18

in particular, in that it will permit 

trading in options on the Russell 2000

Index pursuant to rules designed to 

prevent fraudulent and manipulative 

practices and to protect investors and 

the public interest. 

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 rulecomments@sec.gov. Please include File 

Number SR–Phlx–2006–65 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 


cprice-sewell on PROD1PC61 with NOTICES
8244 Federal Register / Vol. 72, No. 36 / Friday, February 23, 2007 / Notices 

19 In approving this proposal, the Commission has 

considered its impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

20 15 U.S.C. 78f(b)(5). 

21See Securities Exchange Act Release Nos. 

31382, 51619 and 53191, supra at note 6. 

22 15 U.S.C. 78s(b)(2). 

23 17 CFR 200.30–3(a)(12). 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2006–65. 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. Copies of such 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–2006–65 and should 

be submitted on or before March 16, 

2007. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of 

Proposed Rule Change 

The Commission finds that the 

proposed rule change, as amended, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.19 In particular, the 

Commission believes that the proposal 

is consistent with Section 6(b)(5) of the 

Act,20 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 Commission notes that it 

previously has found that the listing and 

trading on the CBOE, the ISE and the 

Amex of options on the Russell 2000

Index, and those exchanges’ position 

and exercise limits applicable to such 

options, are consistent with the Act.21

The Phlx has proposed substantially 

similar contract specifications for these 

options, as well as identical position 

and exercise limits for these options. 

The Commission finds nothing that 

would cause it to revisit those earlier 

findings or prohibit the listing and 

trading of these options on the Phlx. 

As noted above, the Russell 2000

Index is designed to represent a broad 

segment of the U.S. equity securities 

market. Furthermore, the Phlx has 

represented that it would notify the 

Commission if: (i) The number of 

securities in the index drops by onethird or more; (ii) 10% or more of the 

weight of the index is represented by 

component securities having a market 

value of less than $75 million; (iii) less 

than 80% of the weight of the index is 

represented by component securities 

that are eligible for options trading 

pursuant to Phlx Rule 1009; (iv) 10% or 

more of the weight of the index is 

represented by component securities 

trading less than 20,000 shares per day; 

or (v) the largest component security in 

the index accounts for more than 15% 

of the weight of the index, or the largest 

five components in the aggregate 

account for more than 50% of the 

weight of the index. 

In approving this proposal, the 

Commission has specifically relied on 

the following representations made by 

the Exchange: 

1. The Exchange would notify the 

Division immediately if Russell ceases 

to maintain or calculate the Russell 

2000 Index on which Phlx is proposing 

to list and trade options, or if the full 

or reduced value of the Russell 2000

Index is not disseminated every 15 

seconds by a widely available source. If 

the Russell 2000 Index ceases to be 

maintained or calculated, or its values 

are not disseminated every 15 seconds 

by a widely available source, the 

Exchange would not list any additional 

series for trading and would limit all 

transactions in options on that index to 

closing transactions only for the 

purpose of maintaining a fair and 

orderly market and protecting investors. 

2. The Exchange has an adequate 

surveillance program in place for the 

proposed options on the Russell 2000

Index. 

3. The additional quote and message 

traffic that will be generated by listing 

and trading the proposed options on the 

Russell 2000 Index, including full 

value LEAPS on the Russell 2000

Index, will not exceed the Exchange’s 

current message capacity allocated by 

the Independent System Capacity 

Advisor. 

The Commission further notes that, in 

approving this proposal, it relied on the 

Exchange’s discussion of how Russell 

currently calculates the Russell 2000

Index. If the manner in which the 

Russell 2000 Index is calculated were 

to change substantially, this approval 

order might no longer be effective. 

The Commission finds good cause for 

approving this proposal before the 

thirtieth day after the publication of 

notice thereof in the Federal Register. 

Options on the Russell 2000 Index 

already have been approved for listing 

and trading on other exchanges and are 

governed by contract specifications that 

are substantially similar to those 

proposed by the Phlx. Therefore, 

accelerating approval of the Exchange’s 

proposal should benefit investors by 

creating, without undue delay, 

additional competition in the market for 

options on the Russell 2000 Index. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,22 that the 

proposed rule change (SR–Phlx–2006–

65), as modified by Amendment Nos. 2 

and 3, be, and it hereby is, approved on 

an accelerated basis. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.23

Nancy M. Morris, 

Secretary. 

[FR Doc. E7–3089 Filed 2–22–07; 8:45 am] 

BILLING CODE 8010–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration # 10811] 

Illinois Disaster # IL–00007 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Notice. 

SUMMARY: This is a Notice of the 

Presidential declaration of a major 

disaster for Public Assistance Only for 

the State of Illinois (FEMA–1681–DR), 

dated February 9, 2007. 

Incident: Severe Winter Storm. 

Incident Period: November 30, 2006 

through December 1, 2006. 

Effective Date: February 9, 2007. 

Physical Loan Application Deadline 

Date: April 10, 2007. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 


cprice-sewell on PROD1PC61 with NOTICES