Document ID: SEC-2007-1027-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-08-01T04:00Z

[Federal Register: August 1, 2007 (Volume 72, Number 147)]
[Notices]               
[Page 42216-42218]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01au07-137]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56141; File No. SR-Phlx-2007-53]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change as 
Modified by Amendment No. 1 Thereto Relating to the Extension of a 
Pilot Program to Quote and Trade Options in Penny Increments

July 24, 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 July 24, 2007, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change asescribed in Items I and II 
below, which Items have been substantially prepared by the Phlx. On 
July 25, 2007 the Exchange filed Amendment No. 1 to the proposal. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which rendered the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend a pilot (the ``Pilot'') that 
permits certain options series to be quoted and traded in increments of 
$0.01. The text of the proposed rule change is available at Phlx, the 
Commission's Public Reference Room, and http://www.phlx.com.

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 Phlx 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 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 purpose of the proposed rule change is to continue to permit 
specified options series to be quoted and traded in increments of $0.01 
by extending the Pilot through September 27, 2007.

[[Page 42217]]

    The Pilot began on January 26, 2007.\5\ All series in options 
included in the Pilot (``Pilot Options,'' listed below) trading at a 
price of less than $3.00 are currently quoted and traded in minimum 
increments of $0.01, and Pilot Options with a price of $3.00 or higher 
are currently quoted and traded in minimum increments of $0.05, except 
that options overlying the Nasdaq-100 Index Tracking Stock (``QQQQ'') 
\6\ are quoted and traded in minimum increments of $0.01 for all series 
regardless of the price. A list of all Pilot Options was communicated 
to membership via Exchange circular.
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    \5\ See Securities Exchange Act Release No. 55153 (January 23, 
2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-2006-74). In that 
filing, the Exchange also made conforming amendments to various 
Exchange rules in order to be consistent with the pilot. These 
conforming changes were also approved on a six-month pilot basis. 
Therefore, the Exchange is proposing to extend the effective date 
for these rules through September 27, 2007.
    \6\ The Nasdaq-100[supreg], Nasdaq-100 Index[supreg], 
Nasdaq[supreg], The Nasdaq Stock Market[supreg], Nasdaq-100 
SharesSM, Nasdaq-100 TrustSM, Nasdaq-100 Index 
Tracking StockSM, and QQQSM are trademarks or 
service marks of The Nasdaq Stock Market, Inc. (Nasdaq) and have 
been licensed for use for certain purposes by the Philadelphia Stock 
Exchange pursuant to a License Agreement with Nasdaq. The Nasdaq-100 
Index[supreg] (the Index) is determined, composed, and calculated by 
Nasdaq without regard to the Licensee, the Nasdaq-100 
TrustSM, or the beneficial owners of Nasdaq-100 
SharesSM. Nasdaq has complete control and sole discretion 
in determining, comprising, or calculating the Index or in modifying 
in any way its method for determining, comprising, or calculating 
the Index in the future.
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    The options included in the Pilot are:

------------------------------------------------------------------------
                  Symbol                         Underlying security
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IWM.......................................  Ishares Russell 2000.
QQQQ......................................  QQQQ.
SMH.......................................  SemiConductor Holders.
GE........................................  General Electric.
AMD.......................................  Advanced Micro Devices.
MSFT......................................  Microsoft.
INTC......................................  Intel.
CAT.......................................  Caterpillar.
WFMI......................................  Whole Foods.
TXN.......................................  Texas Instruments.
A.........................................  Agilent Tech Inc.
FLEX......................................  Flextronics International.
SUNW......................................  Sun Micro.
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Report to the Commission
    Phlx Rule 1034(a)(i)(B)(2) required the Exchange to prepare and 
submit an analytical report (``Report'') to the Commission that 
addressed the impact of the first three months of the Pilot on the 
quality of the Exchange's markets and option quote traffic and capacity 
on or before the last day of the fourth month of the Pilot. The 
Exchange submitted the Report on May 31, 2007, within the timeframe 
specified in the rule. The Exchange proposes to delete Phlx Rule 
1034(a)(i)(B)(2) because it is no longer applicable, and to make a 
technical numbering change to the rule.
    The Exchange anticipates that it will submit further reports as the 
Pilot continues. The Exchange will amend its rules accordingly.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with section 
6(b) of the Act \7\ in general, and furthers the objectives of section 
6(b)(5) of the Act \8\ in particular, in that it is designed 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.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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 by the 
Exchange.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder,\10\ because 
the foregoing proposed rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30-days after the date of filing.\11\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\12\ The Exchange has requested that 
the Commission waive the 5-day notice requirement and the 30-day 
operative delay. The Commission believes that waiving the 5-day notice 
requirement and the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
will ensure continuity of the Exchange's rules and will allow the Pilot 
to remain in effect without interruption. For these reasons, the 
Commission designates the proposal to be operative upon filing with the 
Commission.\13\
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    \11\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission.
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    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.\14\
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    \14\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on July 25, 2007, the date on which Phlx submitted 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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 rule-comments@sec.gov. Please include 

File Number SR-Phlx-2007-53 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-2007-53. This file 
number should be included on the

[[Page 42218]]

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 the 
filing also will be available for inspection and copying at the 
principal office of the 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-2007-53 and should be submitted on or before August 
22, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\

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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-14844 Filed 7-31-07; 8:45 am]

BILLING CODE 8010-01-P