29286 Federal Register / Vol. 63, No. 102 /Thursday, May 28, 1998 / Notices

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

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 37810

(October 11, 1996), 61 FR 54481 (October 18, 1996)

(approving File No. SR–PSE–96–09).

4See Securities Exchange Act Release No. 39106

(September 22, 1997), 62 FR 51172 (September 30,

1997).

5See Securities Exchange Act Release No. 37874

(October 28, 1996), 61 FR 56597 (November 1, 1996)

(approving SR–PSE–96–38, establishing a staffing

charge for LMMs who participate in the pilot

program). See also File No. SR–PCX–98–03

(proposal to modify the LMM Book Pilot staffing

charge).

6See Securities Exchange Act Release No. 38273

(February 12, 1997), 62 FR 7489 (February 19, 1997)

(approving File No. SR–PSE–96–45). See also

Securities Exchange Act Release No. 39667

(February 13, 1998), 63 FR 9895 (February 26, 1998)

(approving proposal to allow non-multiply-listed

option issues to be traded under the program).

7See Securities Exchange Act Release No. 38462

(April 1, 1997), 62 FR 16886 (April 8, 1997).

8See File No. SR–PCX–98–17.

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

10 15 U.S.C. 78f(b)(5).

11 15 U.S.C. 78s(b)(3)(A).

12 17 CFR 240.19b–4(e)(6).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40020; File No. SR–PCX–

98–23]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

Pacific Exchange, Inc. Relating to the

Number of Option Issues Permitted To

Be Traded Under the LMM Book Pilot

Program

May 21, 1998.

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 May 1,

1998, the Pacific Exchange, Inc. (‘‘PCX’’

or ‘‘Exchange’’) filed with the Securities

and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the self-regulatory

organization. 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 PCX is proposing to remove the

current cap on the number of issues

traded under the Lead Market Maker

(‘‘LMM’’) Book Pilot Program.

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

Purpose

On October 11, 1997, the Commission

approved an Exchange proposal to

adopt a one-year pilot program under

which a limited number of LMMs

would be able to assume operational

responsibility for the options public

limit order book (‘‘Book’’) in certain

option issues.3 On September 22, 1997,

the Commission approved an Exchange

proposal to extend the program for one

year, so that it is currently set to expire

on October 12, 1998.4

Under the pilot program, approved

LMMs manage the Book function, take

responsibility for trading disputes and

errors, set rates for Book execution, and

pay the Exchange a fee for systems and

services.5 Currently, both multiplylisted and non-multiply-listed option

issues are eligible to be traded under the

pilot program.6 Initially, the program

was limited by allowing no more than

three LMMs to participate in the

program and no more than 40 option

symbols to be used. But on April 1,

1997, the Commission approved an

Exchange proposal to expand the

program so that up to nine LMMs may

participate and up to 150 option

symbols may be used.7

The Exchange is now proposing to

expand the LMM Book Pilot Program to

eliminate the cap on the number of

symbols that may be used. The

Exchange notes that the program has

been in operation for approximately

eighteen months and no significant

problems have occurred. The program

has been viable and effective, and has

resulted in significant cost savings to

customers in Book execution charges.

The Exchange believes that it has

adequate systems and operation

capacity to expand the scope of the

program beyond its current limits.

The Exchange believes that the

proposed change will make the

Exchange’s LMM Program more

competitive because it will allow LMM

participants to reduce book execution

charges in a greater number of issues

than currently permitted. The Exchange

notes that it is currently seeking to

expand the number of LMMs who may

participate in the program which is

currently limited to nine.8

Basis

The Exchange believes the proposed

rule change is consistent with Section

6(b) 9 of the Act, in general, and furthers

the objectives of Section 6(b)(5),10 in

particular, in that it is designed to

facilitate transactions in securities, to

promote just and equitable principles of

trade, and to protect investors and the

public interest. The Exchange does not

believe that the proposal will affect the

protection of investors or the public

interest because the proposal will

merely expand the ability of LMMs

already participating in the program to

reduce the rates charged to customers.

The Exchange further believes that by

allowing further reductions in rates

charged to customers, the proposal

encourages competition rather than

placing any burdens on it.

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.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change shall

become operative 30 days after the date

of filing, or such shorter time as the

Commission may designate if consistent

with the protection of investors and the

public interest pursuant to Section

19(b)(3)(A) 11 of the Act and

subparagraph (e)(6) of Rule 19b–4

thereunder.12 Pursuant to Rule 19b–

4(e)(6) a proposed rule change may

become effective 30 days after filing

with the Commission if it does not

significantly affect the protection of

investors or the public interest; does not

impose any significant burden on

competition; and by its terms does not

become operative for 30 days after the

date of the filing, or such shorter time

as the Commission may designate if

consistent with the protection of

investors and the public interest. At any

time within 60 days of the filing of such
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