Document ID: SEC-2007-1513-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-11-05T05:00Z

[Federal Register: November 5, 2007 (Volume 72, Number 213)]
[Notices]               
[Page 62508-62510]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05no07-87]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56717; File No. SR-Phlx-2007-73]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change and Amendment No. 1 Thereto to List and Trade Options 
Already Listed on Another National Securities Exchange

October 29, 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 September 21, 2007, 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 Phlx. On 
October 18, 2007, Phlx filed Amendment No. 1 to the proposed rule 
change.\3\ This order provides notice of the proposal, as amended, and 
approves the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 supercedes the original filing and replaces 
it in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to amend Phlx Rule 1009 to enable it to list and 
trade equity options that are otherwise ineligible for listing and 
trading on the Exchange if such options are listed and traded on 
another national securities exchange and the security or securities 
underlying such options meet Phlx's continued listing requirements.
    The text of the proposed rule change is available on Phlx's Web 
site (http://www.phlx.com), at Phlx's principal office and at the 

Commission's Public Reference Room.

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 Phlx has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to revise the options 
listing standards in Phlx Rule 1009 so that as long as the options 
maintenance listing standards set forth in Phlx Rule 1010 are met and 
the option is listed and traded on another national securities 
exchange, Phlx would be able to list and trade the option. Phlx Rule 
1009 sets forth the requirements that an underlying equity security 
must meet before the Exchange may initially list options on that 
security. Phlx notes that these requirements are uniform among the 
options exchanges.
    Commentary .01(4) to Phlx Rule 1009 relates to the minimum market 
price at which an underlying security must trade for an option to be 
listed on it, and applies to the listing of individual equity options 
on both ``covered'' and ``uncovered'' underlying securities. In the 
case of an underlying security that is a ``covered security'' as 
defined under section 18(b)(1)(A) of the Securities Act of 1933 (``1933 
Act''),\4\ the closing market price of the underlying security must be 
at least $3 per share for five previous consecutive business days prior 
to the date on which Phlx submits an option class certification to The 
Options Clearing Corporation (``OCC''). In connection with underlying 
securities deemed to be ``uncovered,'' Phlx's rules require that the 
closing price of such underlying security be at least $7.50 for the 
majority of business days during the three calendar months preceding 
the date of selection for such listing. In addition, an alternative 
listing procedure for ``uncovered'' securities also permits the listing 
of such options so long as: (1) The underlying security meets the 
guidelines for continued approval contained in Phlx Rule 1010; (2) 
options on such underlying security are traded on at least one other 
registered national securities exchange; and (3) the average daily 
trading volume (``ADTV'') for such options over the last three calendar 
months preceding the date of selection has been at least 5,000 
contracts. Subparagraphs (1) through (4) of Commentary .01 to Phlx Rule 
1009 further set forth minimum requirements for an underlying security 
such as shares outstanding, number of holders and trading volume.
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    \4\ Section 18(b)(1)(A) of the 1933 Act provides that `` [a] 
security is a covered security if such security is * * * listed, or 
authorized for listing, on the New York Stock Exchange or the 
American Stock Exchange, or listed or authorized for listing on the 
National Market System of the Nasdaq Stock Market (or any successor 
to such entities) * * *.'' See 15 U.S.C. 77r(b)(1)(A).
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    When Phlx first commenced operations, if an option failed to meet 
the Exchange's original listing requirements, Phlx could not list that 
option, even if the option met the continued listing requirements of 
one or more other exchanges and traded on those exchanges. In order to 
somewhat remedy this situation, in 2002, the Exchange proposed, and the 
Commission approved, amendments to Phlx's original listing criteria 
that permitted Phlx to list options where the underlying ``uncovered'' 
security did not meet the $7.50 share price requirement so long as (i) 
the underlying security met Phlx's continued listing criteria, (ii) 
such options were traded on at least one other exchange, and (iii) 
during the three preceding calendar months, the

[[Page 62509]]

options had ADTV across all exchanges of at least 5,000 contracts.\5\
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    \5\ See Securities Exchange Act Release No. 46789 (November 7, 
2002), 67 FR 69284 (November 15, 2002) (order granting approval of 
proposal relating to maintenance listing criteria in Phlx Rule 1010 
and original listing criteria in Phlx Rule 1009) (the ``2002 
Filing'').
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    The Exchange notes that the 2002 Filing, while permitting the Phlx 
to list some of the more actively-traded options, does not permit the 
listing of non-active options that are currently trading at other 
options exchanges. The options exchange (or exchanges) that may be 
fortunate enough to list an option that at first met the original 
listing criteria, but subsequently fails to do so, is provided a 
trading monopoly inconsistent with the multiple trading of options, 
fostering competition and the maintenance of a national market system. 
Under this proposed rule change, an option may be multiply-listed and 
traded as long as one other options exchange is trading the particular 
option and such underlying security of the option meets the Exchange's 
continued listing requirements.
    Phlx notes that the requirements for listing additional series of 
an existing listed option (i.e., continued listing guidelines) are less 
stringent, largely because, in total, the Exchange's guidelines assure 
that options will be listed and traded on securities of companies that 
are financially sound and subject to adequate minimum standards.
    Phlx believes that although the continued listing requirements are 
uniform among the other options exchanges, the application of both the 
original and continued listing standard in the current market 
environment have had an anti-competitive effect. Specifically, the 
Exchange notes that on several occasions it has been unable to list and 
trade options classes that trade elsewhere because the underlying 
security of such option did not at that time meet original listing 
standards. However, the other options exchange(s) may continue to trade 
such options (and list additional series) based on the lower 
maintenance listing standards, while Phlx may not list any options on 
such underlying security. The Exchange believes this clearly is anti-
competitive and inconsistent with the aims and goals of a national 
market system in options.
    To address this situation, the Exchange proposes to add new 
Commentary .01(6) to Phlx Rule 1009 and amend the current listing 
requirement adopted by the 2002 Filing. Specifically, proposed 
Commentary .01(6) provides that notwithstanding that a particular 
underlying security may not meet the requirements set forth in 
Paragraphs (1) through (4) of Commentary .01, the Exchange nonetheless 
could list and trade an option on such underlying security if (i) the 
underlying security meets continued listing requirements under Phlx 
Rule 1010; and (ii) options on such underlying security are listed and 
traded on at least one other registered national securities exchange. 
Consequently, the second half of Commentary .01(4)(ii) to Phlx Rule 
1009, which references an alternative original listing requirement for 
``uncovered securities,'' would be deleted. In connection with the 
proposed changes, the Exchange represents that the procedures currently 
employed to determine whether a particular underlying security meets 
the initial listing criteria will similarly be applied to the continued 
listing criteria.
    Phlx believes that this proposal is narrowly tailored to address 
the circumstances where an options class is currently ineligible for 
listing on the Exchange while at the same time, such option is trading 
on another options exchange(s). The Exchange submits that the adoption 
of the proposal is essential for competitive purposes and to promote a 
free and open market for the benefit of investors.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\6\ in general, and furthers the objectives of Section 
6(b)(5),\7\ specifically, in that it is designed to perfect the 
mechanism of a free and open market and the national market system, 
protect investors and the public interest and promotes just and 
equitable principles of trade. The proposal would achieve this by 
enabling Phlx to list an option that is listed and traded on another 
national securities exchange and the underlying security meets Phlx 
continued listing standards.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition 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 rule-comments@sec.gov. Please include 

File Number SR-Phlx-2007-73 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-2007-73. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of Phlx. 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-2007-73 and should

[[Page 62510]]

be submitted on or before November 26, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
regulations thereunder applicable to a national securities exchange.\8\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\9\ 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 proposal is narrowly tailored to 
address the circumstances where an equity option class is currently 
ineligible for initial listing on the Exchange even though it meets the 
Exchange's continued listing standards and is trading on another 
options exchange. Allowing Phlx to list and trade options on such 
underlying securities should help promote competition among the 
exchanges that list and trade options. The Commission notes, and the 
Exchange represents, that the procedures that the Exchange currently 
employs to determine whether a particular underlying security meets the 
initial equity option listing criteria for the Exchange will similarly 
be applied when determining whether an underlying security meets the 
Exchange's continued listing criteria.
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    \8\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause, pursuant to Section 19(b)(2)(B) of 
the Act,\10\ for approving the proposed rule change prior to the 30th 
day after the publication of the notice of the filing thereof in the 
Federal Register. The Commission notes that the proposed rule change is 
substantially identical to a proposed rule change submitted by the 
American Stock Exchange LLC,\11\ which was previously approved by the 
Commission after an opportunity for notice and comment, and therefore 
does not raise any new regulatory issues.
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    \10\ 15 U.S.C. 78s(b)(2)(B).
    \11\ See Securities Exchange Act Release No. 56598 (October 2, 
2007), 72 FR 57615 (October 10, 2007) (SR-Amex-2007-48). See also 
Securities Exchange Act Release No. 56647 (October 11, 2007), 72 FR 
58702 (October 16, 2007) (SR-ISE-2007-80) (substantially identical 
proposed rule change approved on an accelerated basis).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-Phlx-2007-73), as amended, 
be, and it hereby is, approved on an accelerated basis.
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    \12\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-21634 Filed 11-2-07; 8:45 am]

BILLING CODE 8011-01-P