Federal Register / Vol. 63, No. 102 /Thursday, May 28, 1998 / Notices 29287

13 17 CFR 200.30–3(a)(12).

1 17 15 U.S.C. 78s(b)(1).

2CFR 240.19b–4(e)(6).

3The Exchange has represented that the proposed

rule change: (i) Will not significantly affect the

protection of investors or the public interest; (ii)

will not impose any significant burden on

competition; and (iii) will not become operative for

30 days after the date of this filing, unless otherwise

accelerated by the Commission. The Exchange also

has provided at least five business days notice to

the Commission of its intent to file this proposed

rule change, as required by Rule 19b–4(e)(6) under

the Act. Id.

4See Phlx Rule 1101A(b)(iii).

5See Securities Exchange Act Release Nos. 38571

(May 5, 1997), 62 FR 25682 (May 9, 1997) (Order

approving SR–Amex–97–14, relating to trading

equity securities in sixteenths); 38678 (May 27,

1997), 62 FR 30363 (June 3, 1997) (Order approving

SR–NASD–97–27, relating to trading certain equity

securities in sixteenths); 38897 (August 1, 1997), 62

FR 42847 (August 8, 1997) (Order approving SR–

NYSE–97–21, relating to trading equity securities in

sixteenths); and 38779 (June 26, 1997), 62 FR 36328

(July 7, 1997) (Order approving SR–Phylx–97–27,

relating to trading equity securities in sixteenths).

6See Securities Exchange Act Release Nos. 39734

(March 9, 1998), 63 FR 12846 (March 16, 1998)

(Order approving SR–Amex–97–41, relating to

trading options in narrower increments); 39736

(March 9, 1998), 63 FR 12851 (March 16, 1998)

(Order approving SR–CBOE–97–49, relating to

trading options in narrower increments); and 39735

(March 9, 1998), 63 FR 12852 (March 16, 1998)

(Order approving SR–PCX–97–39, relating to

trading options in narrower increments).

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 f 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 submission 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. 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 betweeen 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, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the PCX. All submissions

should refer to File No. SR–PCX–98–23

and should be submitted by June 18,

1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.13

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14114 Filed 5–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40007; File No. SR–PHLX–

98–12]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Philadelphia Stock Exchange, Inc. to

Trade Options in Narrower Increments

May 19, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

April 22, 1998, 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 selfregulatory organization. The Exchange

has designated the proposed rule change

as constituting a ‘‘non-controversial’’

rule change under paragraph (e)(6) of

Rule 19b–4 under the Act 2 which

renders the proposal effective upon

receipt of this filing by the

Commission.3 The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Phlx, pursuant to Rule 19b–4 of

the Act, proposes to permit Phlx index

and equity options to be traded in

narrower increments. Specifically, Rule

1034 is proposed to be amended to give

the Board of Governors the authority to

establish the minimum trading

increments for index and equity options

contracts.

The text of the proposed rule change

is available at the Office of the

Secretary, Phlx and at the Commission.

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

self-regulatory organization 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 self-regulatory organization 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

Currently, Rule 1034 provides that the

minimum fractional change for options

trading under $3.00 is one-sixteenth and

for options trading at $3.00 or higher,

one-eighth. In the case of LEAPS 4 on

the Value Line Composite Index, Rule

1034 provides that the minimum

fractional change is one-eighth point in

option contracts trading at $5.00 per

index option or higher, and onesixteenth point in option contracts

trading below $5.00 per index option. In

response to recent industry events,5 the

Exchange has determined that Rule

1034 be changed to permit Phlx index

and equity options to be traded in

narrower increments. Specifically, Rule

1034 is proposed to be amended to give

the Board of Governors the authority to

establish the minimum trading

increments for index and equity option

contracts. Until such time as the Board

of Governors determines to use its

authority to establish the minimum

fractional shares, current standards will

apply.

The proposal is intended to achieve

uniformity with the rules of other

options exchanges.6 The amendments

should also improve the Exchange’s

ability to promptly response to market

changes in trading increments. The

proposal will allow the Exchange to

revise its minimum fractional changes

quickly in response to changes adopted

in the minimum trading increments in

the markets for securities underlying

Phlx options or to changes in the

minimum trading increments for one of

the other options exchanges. When the

Board of Governors determines to

change the trading increments, the

Exchange will designate such change as

a stated policy, practice, or

interpretation with respect to the

administration of Rule 1034 within the

meaning of subparagraph (3)(A) of

subsection 19(b) of the Act and will file

a rule change for immediate

effectiveness upon filing with the

Commission.

The Exchange notes that there has

been a movement within the securities
29288 Federal Register / Vol. 63, No. 102 /Thursday, May 28, 1998 / Notices

7Supra, note 2.

8 15 U.S.C. 78f(b).

9 15 U.S.C. 78f(b)(5).

10 15 U.S.C. 78k–1.

11 In approving these rules, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation. 15

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

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

1317 CFR 240.19b–4(e)(6).

14 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

industry to reduce the minimum trading

and quotation increments for equity

securities imposed by the various selfregulatory organizations.7 As derivative

securities, the price of options are

determined in reference to the

underlying securities. Consequently, the

Exchange believes that where

practicable, the Exchange should have

minimum increments comparable to

those applicable to the securities

underlying the Phlx options.

The Exchange also believes that the

proposed rule change would give the

Exchange the flexibility to follow the

suit of the principal exchanges for the

underlying securities without having to

update its rules continually, but at the

same time would give the Exchange the

flexibility it needs to deviate from the

minimum increments established by the

principal markets for the underlying

securities in the event that the Phlx’s

systems were not immediately able to

handle such increments. The Exchange,

therefore, believes the quality of the

market for Phlx options will be

enhanced by allowing more accurate

pricing of Phlx options.

Further, the Exchange is proposing to

retitle Rule 1034 ‘‘Minimum Trading

Increments’’ for consistency with other

exchange’s rules. The Exchange is also

proposing to add express reference to

index options for clarity, noting that

Rule 1034 currently applies to index

options pursuant to Rule 1000A(a).

Lastly, the Exchange is proposing to

delete Commentary .01 regarding the

minimum trading increment for Value

Line LEAPs. If needed, any such new

product-specific trading increment

could be adopted pursuant to the

paragraph proposed to be renumbered

as Rule 1034 (iii), which provides that

different increments may be fixed by the

Exchange. The proposal should extend

the benefits of trading in a narrower

increment to Phlx options, which

should, in turn, promote more accurate

pricing of options and tighter

quotations.

2. Statutory Basis

The Exchange represents 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, prevent

fraudulent and manipulative acts and

practices, to foster cooperation and

coordination with persons engaged in

regulating, clearing, settling, processing

information with respect to, and

facilitating transactions in securities, to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system by

permitting narrower minimum trading

increments in Phlx options. The

proposal is also consistent with Section

11A of the Act,10 in that it promotes

competition among the exchanges and

market makers.11

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any inappropriate burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

The Exchange has neither solicited

nor received written comments on the

proposed rule change.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

This proposed rule filing has been

filed by the Exchange as a ‘‘noncontroversial’’ rule change pursuant to

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

subparagraph (e)(6) of Rule 19b–4

thereunder.13 Consequently, 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) does not become operative until May

23, 1998, more than 30 days from April

22, 1998, the date on which it was filed,

and the Exchange provided the

commission with written notice of its

intent to file the proposed rule change

at least five days prior to the filing date,

it has become effective pursuant to

Section 19(b)(3)(A) of the act and Rule

19b–4(6) thereunder.

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW,

Washington, DC 20549. 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 U.S.C. 552, will be

available for inspection and copying at

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–98–12 and should be

submitted by June 18, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.14

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14023 Filed 5–27–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40006; File No. SR–PHLX–

98–10]

Self-Regulatory Organizations;

Philadelphia Stock Exchange, Inc.;

Order Granting Approval to Proposed

Rule Change Relating to Automatic

Price Improvement for Certain PACE

Orders

May 19, 1998.

I. Introduction

On February 10, 1998, the

Philadelphia Stock Exchange, Inc.

(‘‘Phlx’’ or ‘‘Exchange’’) submitted to the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’), pursuant to

Section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’) 1 and Rule

19b–4 thereunder,2 a proposed rule

change to adopt rules relating to a new