26062 Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Notices

10 15 U.S.C. 78f(5) (1988).

11 15 U.S.C. 78k(b) (1988).

12 17 CFR 240.11b–1 (1994).

13See generally NYSE Rule 104 (Dealing By

Specialists); and Commission Rule 11b–1 under the

Act, 17 CFR 240.11b–1 (1994).

14See Securities Exchange Act Release Nos.

34022 (May 6, 1994), 59 FR 25143 (May 13, 1994);

32285 (May 10, 1993), 58 FR 28905 (May 17, 1993);

29180 (May 8, 1991), 56 FR 22489 (May 15m, 1991);

and 28215 (July 17, 1990), 55 FR 30060 (July 24,

1990).

15See supra. Although the Exchange has

developed the capital utilization and near neighbor

measures of market making performance for use by

the Allocation Committee, it has not yet proposed

to include these objective measures in its Rule 103A

program.

16See Securities Exchange Act Release No. 34022,

supra note 3.

17See supra notes 5, 8 and 15.

18As of July 1996, the NYSE should have two

years experience with the capital utilization

measure and a full year’s experience with the near

neighbor measure of specialist performance.

19Assuming that the experience with the capital

utilization and near neighbor measure is good, the

NYSE should incorporate these measures in the

Rule 103A evaluation prior to the Exchange’s next

request for an extension or permanent approval of

the Rule. In this regard, the Commission expects the

NYSE to submit to the Division of Market

Regulation, by July 1, 1996, a proposed rule change

pursuant to Rule 19b–4 under the Act, 17 CFR

240.19b–4, to extend the Rule 103A pilot.

20The Commission requests that the Exchange

submit to the Division by July 1, 1996, a status

report on the implementation of Rule 103A. The

report should contain data, for each quarter of 1995

and the first quarter of 1996, on (1) the number of

specialists that fell below acceptance levels of

performance for each category; (2) the number of

performance improvement actions commenced; (3)

the number of units subjected to informal

counseling to improve performance; and (4) a list

of stocks reallocated due to substandard

performance under the Rule and the particular unit

involved.

21See Securities Exchange Act Release Nos.

24919 (September 15, 1987), 52 FR 35821

(September 23, 1987); and 25681 (May 9, 1988), 53

FR 17287 (May 16, 1987).

22See supra note 3.

23 15 U.S.C. 78s(b)(2) (1988).

24 17 CFR 200.30–3(a)(12) (1994).

principles of trade, perfect the

mechanism of a free and open national

market system, and, in general, further

investor protection and the public

interest.10 Further, the Commission

finds that the proposal is consistent

with Section 11(b) of the Act,11 and

Rule 11b–1 thereunder,12 which allow

securities exchanges to promulgate rules

relating to specialists consistent with

the maintenance of fair and orderly

markets.

Specifically, because specialist units

play a crucial role in providing stability,

liquidity, and continuity to the trading

of stocks on the Exchange, the

Commission believes that effective

oversight, including periodic evaluation

of the specialists’ performance, is

important to the maintenance of a fair

and efficient marketplace. The

Commission believes that the NYSE’s

Rule 103A performance evaluation

process is critical to this oversight in

that it provides the Exchange with the

means to identify and correct poor

specialist performance and to ascertain

whether specialists are maintaining fair

and orderly markets in their assigned

securities, as required pursuant to

Exchange rules and the Act, and the

rules thereunder.13 Moreover, the

possibility of a performance

improvement action as a result of the

evaluation process, in addition to the

use of the evaluation results in stock

allocation decisions, should help

motivate and provide incentives for

specialists to maintain and improve

their market making performance for the

benefit of investors.

In previous orders extending the Rule

103A pilot,14 the Commission

emphasized its desire for the Exchange

to develop objective measures of market

making performance and incorporate

such measures into the Rule 103A

pilot.15 In addition, the Commission

previously stated that it believes the

mature status of the Intermarket Trading

System (‘‘ITS’’), as a market structure

facility, warrants the incorporation of

ITS turnaround and trade-through

concerns into the NYSE’s Rule 1903A

performance standards. As discussed

fully in the previous extension order,16

the Commission believes that objective

measures of specialist performance with

regard to these concerns should be

incorporated into the evaluation

process.

Even though the proposal lacks

objective market marking performance

standards, the Commission has

determined to approve the proposal to

extend the effectiveness of Rule 103A

for an additional sixteen months in light

of the substantial time and resources the

Exchange has dedicated to the

development of the capital utilization

and near neighbor measures. The

Commission notes that the NYSE has

not proposed to incorporate these

objective measures into their specialist

evaluation program at this time.17 The

Commission believes that it is

reasonable to extend the pilot to give the

Exchange time to gain experience with

these measures before incorporating

them into the Rule 103A evaluation

criteria.18

The Commission continues to believe

that the Exchange should include

objective performance standards that

would measure accurately the

traditional indica of specialist

performance, namely market depth,

price continuity and dealer

participation and stabilization in the

Rule 103A program. The Commission

encourages the NYSE to incorporate

objective standards, including those

relating to ITS and market making

performance, into the program prior to

or simultaneous with future proposals

to extend the effectiveness of Rule 103A

or adopt the Rule on a permanent

basis.19

The Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice thereof in the

Federal Register. The Commission

believes it is appropriate to approve the

proposed rule change on an accelerated

basis so that the Exchange can continue

to administer, on an uninterrupted

basis, its Rule 103A evaluation process.

During the extension of the Rule, the

Commission expects the NYSE to

continue its examination of the efficacy

of its current specialist evaluation

procedures.20 In addition, a substantial

portion of current Rule 103A was

noticed for the full statutory period in

1987, and the Commission did not

receive any adverse commentary on the

revised Rule 103A program.21 Further,

interested persons were invited to

comment on the most recent of such

proposals being the extension of Rule

103A until May 9, 1995.22 The

Commission received no comments on

these proposals. The Commission

believes, therefore, that granting

accelerated approval of the proposed

rule change is appropriate and

consistent with Section 6 of the Act.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,23 that the

proposed rule change is hereby

approved on an accelerated basis until

September 10, 1996.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.24

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–12003 Filed 5–15–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35688; International Series

Release No. 811; File No. SR–PHLX–95–13]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change and

Amendment Nos. 1 and 2 to the

Proposed Rule Change by the

Philadelphia Stock Exchange, Inc.,

Relating to Modifications of the

Position and Exercise Limits for

Foreign Currency Options

May 8, 1995.

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

Securities Exchange Act of 1934

(‘‘Act’’), 15 U.S.C. 78s(b)(1), notice is

hereby given that on March 10, 1995,
Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Notices 26063

1On April 5, 1995, the PHLX submitted a revised

version of the text of the proposed rule change,

which amends the text to indicate that the proposed

position limit for foreign currency options (‘‘FCOs’’)

is 200,000 contracts. See Letter from Edith

Hallahan, Special Counsel, Regulatory Services, to

Michael Walinskas, Branch Chief, Office of Market

Supervision (‘‘OMS’’), Division of Market

Regulation (‘‘Division’’), Commission, dated April

5, 1995 (‘‘Amendment No. 1’’). On April 26, 1995,

the PHLX amended PHLX Rule 1001, Commentary

.05(c), to replace references to the current FCO

position limits with references to the proposed FCO

position limit and to designate current paragraph (c)

as paragraph (b), in order to reflect the deletion of

current paragraph (b). See Letter from Edith

Hallahan, Special Counsel, Regulatory Services,

PHLX, to Michael Walinskas, Branch Chief, OMS,

Division, Commission, dated April 26, 1995

(‘‘Amendment No. 2’’).

2Position limits impose a ceiling on the number

of option contracts which an investor or group of

investors acting in concert may hold or write in

each class of options on the same side of the market

(i.e., aggregating long calls and short puts or long

puts and short calls).

3Exercise limits prohibit an investor or group of

investors acting in concert from exercising more

than a specified number of puts or calls in a

particular class within five consecutive business

days.

4See Securities Exchange Act Release No. 19313

(October 14, 1982), 47 FR 46946 (October 21, 1982)

(order approving File No. SR–PHLX–81–4).

5See Securities Exchange Act Release Nos. 21676

(January 18, 1985), 50 FR 3859 (January 28, 1985)

(order approving File No. SR–PHLX–84–18

(increasing position limits from 10,000 to 25,000

contracts); 22479 (September 27, 1985), 50 FR

41276 (October 9, 1985) (order approving File No.

SR–PHLX–85–22) (increasing position limits to

50,000 contracts); 23710 (October 15, 1986), 51 FR

37691 (October 23, 1986) (order approving File No.

SR–PHLX–86–24) (increasing position limits to

100,000 contracts); and 34712 (September 23, 1994),

59 FR 50307 (October 3, 1994) (order approving File

No. SR–PHLX–93–13) (adopting position limit of

150,000 contracts for FCOs with annual trading

volume of at least 3,500,000 contracts).

6See Securities Exchange Act Release No. 34712,

supra note 4.

7Position accountability standards require traders

who own or control positions in excess of

established limits to provide to the exchange, upon

request, information regarding the nature of the

position and the trading strategy employed.

8See Letter from Jean A. Webb, Secretary,

Commodity Futures Trading Commission (‘‘CFTC’’),

to Todd E. Petzel, Senior Vice President, Research,

and Chief Economist, CME, dated January 2, 1992.

In its notice of the CME’s proposal, the CFTC states

that ‘‘the nearly inexhaustible deliverable supply of

major foreign currencies, such as those currently

traded, coupled with the very high liquidity of the

underlying cash markets and the ease of arbitrage

between the cash and futures markets * * *

substantially lessen the threat of market

manipulation or distortions caused by large * * *

positions. In this regard, it should be noted that the

relative depth of deliverable supplies for futures

and option contracts on foreign currencies is unique

* * *.’’ See Speculative Position Limits—

Exemption from CFTC Rule 1.61; CME Proposed

Amendments to Rules 3902.D, 5001.E., 3010.F,

3012.F, 3013.F, 3015., 4604, and Deletion of Rules

3902.F, 5001.G, 3010.H., 3012.H, 3013.H, and

3015.H.

9See Securities Exchange Act Release No. 34925

(November 1, 1994), 59 FR 55720 (November 8,

1994) (order approving File No. SR–PHLX–94–18).

10See e.g., Securities Exchange Act Release Nos.

30672 (May 6, 1992), 57 FR 20546 (May 13, 1992)

(order approving File No. SR–PHLX–91–30)

(aggregating long-term FCOs); 30945 (July 21, 1992),

57 FR 33381 (July 28, 1992) (order approving File

No. SR–PHLX–92–13) (aggregating month-end

FCOs); 33732 (March 8, 1994), 59 FR 12023 (order

approving File No. SR–PHLX–93–10) (aggregating

cash/spot FCOs); and 24859 (August 27, 1987), 52

FR 33493 (September 3, 1987) (order approving File

No. SR–PHLX–87–24) (aggregating European-style

contracts).

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 self-regulatory

organization.1 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

Currently, PHLX Rule 1001, ‘‘Position

Limits,’’ 2 establishes the following

position limits for FCOs: (i) 150,000

contracts for FCOs which had annual

trading volume of at least 3,500,000

contracts; and (ii) 100,000 contracts for

all other FCOs traded on the PHLX, The

PHLX proposes to amend Exchange

Rule 1001 and Exchange Rule 1002,

‘‘Exercise Limits,’’ 3 to increase the

position and exercise limits for all FCOs

to 200,000 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

The PHLX proposes to increase the

position limits for FCOs from the

current two-tiered approach of 100,000

or 150,000 contracts to 200,00 contracts

for all FCOs. The PHLX states that in

recent years, the size of the underlying

market for foreign currencies has grown

steadily. Thus, the Exchange believes

that the existing FCO position limits are

too low, in view of the large market for

the underlying foreign currencies. In

addition, the Exchange believes that

increasing the position limits for FCOs

may increase the liquidity of the PHLX’s

FCO markets and encourage the

migration of trading from the over-thecounter (‘‘OTC’’) market.

PHLX FCO position limits were set

initially at 10,000 contracts in 1982,

when FCOs first began trading on the

Exchange.4 Since that time, the position

limits have been raised four times.5 In

1993, the Exchange filed a proposal to

adopt a two-tiered approach to FCO

position limits, which was approved by

the Commission in September 1994.6

According to the PHLX, many of the

factors cited at that time continue to

indicate that FCO position limits

warrant an increase to 200,000

contracts. For example, the Chicago

Mercantile Exchange (‘‘CME’’)

substituted ‘‘position accountability

standards’’ 7 for position limits for

futures and futures options on certain

foreign currencies.8 As a result, the

PHLX believes that the Exchange is

placed at a serious competitive

disadvantage.

In addition, the Exchange has since

commenced trading customized FCOs,9

in which positions are aggregated with

other FCO positions in the underlying

currency; however, customized option

trading volume is not included in the

volume calculation to determine the

applicable position limit under the

current two-tiered system. In addition to

customized options, there are also other

FCO products that are aggregated for

position limit purposes, including longterm, month-end, cash/spot, and

American- and European-style

options.10

As a result, the PHLX claims that FCO

participants have continued to

accumulate positions near existing

limits. If large traders continue to be

restricted by the current position limit

levels, the PHLX believes that trading

interest could migrate to the OTC

market, hampering PHLX liquidity. The

Exchange believes that a higher position

limit may enable such traders to

consider, or return to, an exchange

marketplace for their FCO trading. Thus,

the PHLX believes that increased

position and exercise limits are

necessary to add depth and liquidity to

the PHLX’s FCO market. These

increases are particularly appropriate

because the FCO market attracts a large

number of institutional and corporate

investors with substantial hedging
26064 Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Notices

11See Securities Exchange Act Release No. 34712,

supra note 4.

12See Bank for International Settlements (‘‘BIS’’)

Central Bank Survey of Foreign Exchange Market

Activity in 1989.

13See BIS Central Bank Survey of Foreign

Exchange Market Activity in April 1992 (March

1993).

14 200,000 Deutsche mark contracts×62,500

contracts×.68 (of $1.00) exchange rate=$9 billion,

which is 2% of $544 billion.

15 In 1985, the first increase from 10,000 contracts

to 25,000 contracts represented a 150% change

while the second increase from 25,000 to 50,000

contracts represented a 100% increase; similarly,

the 1986 change to 100,000 contracts represented a

100% change.

16See Securities Exchange Act Release No. 22479,

supra note 5.

needs. These investors utilize the PHLX

marketplace by participating in block

size transactions in FCOs to hedge

exposure to fluctuations in exchange

rates due to international business

transactions, often many billions of

dollars.

Since the most recent increase in

position limits, the Exchange has

continued to examine FCO position

limits in light of the vast underlying

currency market. The PHLX represents

that the Commission has recognized that

the interbank foreign currency spot

market is an extremely large, diverse

market consisting of banks and other

financial institutions worldwide,

supplemented by equally deep and

liquid markets for standardized options,

futures and futures options, as well as

an active OTC market.11

The PHLX estimates that the size of

the worldwide currency market has

grown exponentially. In 1989, total

gross global foreign exchange turnover

was estimated to be $932 billion per day

and net global turnover was estimated to

be $640 billion per day.12 In 1992, total

gross global foreign exchange turnover

was estimated to be $1.354 billion per

day, which represents a 35% increase

since 1989. Further, global ‘‘net-net’’

exchange market turnover was

estimated at $880 billion; this takes into

account local and cross-border double

counting and estimated gaps in

reporting.13

With respect to the underlying dollar

value of FCO positions at the 200,000

contract level, the Exchange believes

that the figure should be evaluated in

the context of the worldwide currency

market as a whole. According to the

PHLX, as a percentage of total global

currency turnover, the impact of a PHLX

FCO position, even at 200,000 contracts,

is minimal. For example, the Exchange

estimates that 200,000 Deutsche mark

contracts would represent far less than

2% of the daily international currency

transaction volume in the Deutsche

mark.14 As a comparison, the Exchange

emphasizes that the interbank currency

market is exponentially larger than the

daily volume on the New York Stock

Exchange, Inc. (‘‘NYSE’’): $8 billion on

the NYSE as compared to $800 billion

in the currency markets.

The Exchange also believes that the

proposed increase is reasonable in light

of prior position limit increases. The

1992 increase represents a 50% increase

in the two affected options. Previously,

the Commission approved increases of

150%, 100%, and 100%.15 Accordingly,

the PHLX believes that the current

proposal to raise the limits by 100% is

in line with prior changes, and

specifically does not create a higher

increase than any prior one.

Because of the large size of the

underlying market in foreign currencies,

the PHLX does not believe that

manipulative concerns would be

enhanced if the limits were increased.

With respect to the proposed increase in

exercise limits, the Exchange believes

that the proposal does not raise new

concerns regarding manipulation or

potential market disruption in the

underlying currencies. The Exchange

notes that its surveillance procedures

are designed to detect violations of these

limits. In addition, the Exchange notes

that a higher limit for all FCOs should

simplify and facilitate the

implementation of such limits, without

the volume reviews currently required,

thereby eliminating the fluctuations in

limits inherent in a volume-based

approach.

The PHLX notes that the Commission

has stated previously that although FCO

position and exercise limits must be

sufficient to protect the options and

related markets from disruptions caused

by manipulation, at the same time, the

limits must not be so low as to

discourage participation in the options

market by institutions and other

investors with substantial hedging

needs or to prevent specialists and

market makers from adequately meeting

their obligations to maintain a fair and

orderly market.16

For these reasons, and in light of these

market changes, the Exchange believes

that the proposed rule change is

consistent with Section 6 of the Act, in

general, and, in particular, with Section

6(b)(5), in that it is designed to promote

just and equitable principles of trades as

well as to protect investors and the

public interest. The PHLX believes that

the increased depth and liquidity of the

FCO market should promote just and

equitable principles of trade. The PHLX

believes that this, in turn, should result

in position limit levels that serve the

purposes of protecting investors and the

public interest as well as preventing

unfair acts and practices, such as

manipulation.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The PHLX 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

No written comments were either

received or requested.

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 reason for so finding or (ii)

as to which the self-regulatory

organization 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.

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 5 U.S.C. 552, will be

available for inspection and copying at

the Commission’s Public Reference

Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to the file number in the caption

above and should be submitted by June

6, 1995.
Federal Register / Vol. 60, No. 94 / Tuesday, May 16, 1995 / Notices 26065

17 17 CFR 200.30–3(a)(12) (1994).

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

2 17 CFR 240.19b–4.

3European-style options can be exercised only

during a specific time period prior to expiration of

the options.

4New York Stock Exchange’s Fact Book 1994.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–11946 Filed 5–15–95; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–35699; File No. SR–PHLx–

95–22]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Philadelphia Stock Exchange, Inc.

Relating to the Listing and Trading of

Options on the PHLX Super Cap Index

May 10, 1995.

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 April 10,

1995, 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 prepared by the Exchange.

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 Exchange proposes to list and

trade options on the Phlx Super Cap

Index (‘‘Super Cap Index’’ or ‘‘Index’’),

a capitalization weighted index

developed by the Phlx composed of the

five largest stocks, by capitalization,

traded on the New York Stock Exchange

(‘‘NYSE’’). Exchange Rules 1000A,

Applicability and Definitions; 1001A,

Position Limits; 1006A, Other

Restrictions on Options Transactions

and Exercises; 1047A, Trading

Rotations, Halts or Reopenings; 1101A,

Terms of Option Contracts; and 722,

Margin Accounts will be amended to

include reference to this proposed

Index. The text of the proposed rule

changes is available at the Office of the

Secretary, the Exchange, 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

Exchange included statements

concerning the purpose of and basis for

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 Section (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

The Phlx proposes to list for trading

an European-style option 3 on the Phlx

Super Cap Index which is composed of

the five largest capitalized common

stock issues traded on the New York

Stock Exchange.

The Phlx believes there are numerous

benefits to listing the Super Cap Index

options. First, the Exchange believes

that the Super Cap will appeal to

individual investors as well as program

and basket traders because the Index

reflects the direction and pricing of

some of the nation’s largest and most

important companies. These stocks are

frequently found in investor and trader

portfolios alike and currently account

for 10% of the capitalization on the

NYSE.4 Second, because the Super Cap

Index is based on a relatively small

number of actively traded stocks,

replication of the Index for hedging

purposes with underlying stocks can be

readily accomplished with complete

accuracy. Thus, the Phlx believes that

the proposed Super Cap Index is unique

and will fill a current market void.

Third, the Exchange does not believe

that the Super Cap Index will be

susceptible to manipulation as the

stocks comprising the Super Cap Index

are some of the largest and most widely

held common stocks in the country.

The Phlx represents that as of April 5,

1995, the market capitalization of the

individual stocks in the Index ranged

from a high of $93.8 billion to a low of

$59.7 billion. The market capitalization

of all five of the stocks in the Index was

approximately $394 trillion. As of that

same date, no one stock accounted for

more than 23.81%, or less than 15.17%,

of the Index’s total value.

The formula for calculating the Super

Cap Index ‘‘Current Index Value’’ is as

follows:

Current Index Value = total capitalization

divisor

total capitalization = the sum of the market values (price times shares outstanding) for all of the component issues

divisor = total capitalization

old index value

The index value was set at a starting

value of 200 as of January 12, 1995. In

order to maintain continuity in the

value of the Index, the Index divisor

will be adjusted for changes in

capitalization of any of the component

issues resulting from, among other

things, mergers, acquisitions, delistings,

and substitutions. Adjustments in the

value of the Index which are

necessitated by the addition and/or the

deletion of an issue from the Index are

made by adding and/or subtracting the

market value (price times shares

outstanding) of the relevant issues. The

value of the index as of the close of

trading on Wednesday, April 5, 1995

was 214.42.

The Super Cap Index value will be

updated dynamically at least once every

15 seconds during the trading day. The

Phlx has retained Bridge Data, Inc. to

compute and do all necessary

maintenance of the Index. Pursuant to

Phlx Rule 1100A, updated Index values

will be disseminated and displayed by

means of primary market prints reported

by the Consolidated Tape Association

and over the facilities of the Options

Price Reporting Authority. The Index

value will also be available on broker/

dealer interrogation devices to

subscribers of the option information.