Document ID: SEC-2007-0244-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-02-16T05:00Z

[Federal Register: February 16, 2007 (Volume 72, Number 32)]
[Notices]               
[Page 7706-7708]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16fe07-143]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55261; File No. SR-Phlx-2007-01]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Calculation and Dissemination 
of PHLX/KBW Bank Index Values

February 8, 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 January 18, 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 the Phlx. On 
February 2, 2007, the Phlx filed Amendment No. 1 to the proposed rule 
change. The Phlx filed the proposed rule change as a ``non-
controversial'' rule change pursuant to Section 19(b)(3)(A) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder,\4\ which renders 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.\5\
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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).
    \5\ Certain additions and technical corrections were made 
throughout the discussion of the proposed rule change pursuant to 
conversations with Phlx staff. Telephone conversation between Jurij 
Trypupenko, Director and Counsel, Phlx, and Kate Robbins, Attorney, 
Division of Market Regulation, Commission, on February 5, 2007.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes that Dow Jones & Company, Inc. (``Dow Jones'') 
will replace the Exchange as the party solely responsible for the 
calculation and dissemination of the current index values \6\ of the 
PHLX/KBW Bank Index (``Bank Index'' or ``Index'').\7\
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    \6\ Bridge Data, which merged into Reuters, at various times has 
calculated and disseminated relevant index values on behalf of the 
Exchange.
    \7\ KBW is a registered broker-dealer that, among other things, 
specializes in U.S. bank stocks and is recognized as the ``financial 
services industry authority.'' The Bank Index (BKX), also known as 
the KBW Bank Index and as a sector index, is a European-style 
modified-capitalization-weighted index composed of 24 geographically 
dispersed companies representing national money center banks and 
leading regional institutions. KBW has informed the Exchange that an 
independent third party, Dow Jones, on behalf of KBW will calculate 
and publicly disseminate the current values of the Bank Index and 
will follow necessary procedures such as publicly reporting the 
current underlying index values at least once every 15 seconds 
during the periods that options on the Bank Index are traded.
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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 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 provide that Dow 
Jones, rather than the Exchange, will calculate and disseminate the 
current index values of the Bank Index. No other changes are proposed 
in respect of the Index.
    Options on the Bank Index, a narrow-based (industry) index, were 
originally listed in 1992.\8\ The Commission's Approval Order regarding 
the Bank Index and options on it contains the following language about 
the calculation of the underlying current index value:
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    \8\ See Securities Exchange Act Release No. 31145 (September 3, 
1992), 57 FR 41531 (September 10, 1992) (SR-Phlx-91-27) (``Approval 
Order'').

    Even though the Index will be maintained by KBW, the Phlx 
represents that the Exchange will be solely responsible for the 
calculation of the Index and that the Index value will be calculated 
and disseminated in such a way that neither KBW nor any other party 
will be in receipt of the Index value prior to the public 
dissemination of the

[[Page 7707]]

value. In this connection, the Phlx has made arrangements for the 
Index to be calculated by an independent third party, Bridge Data, a 
vendor of financial information.\9\
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    \9\ Id.

In June 2006, the Exchange filed a proposal that it would calculate and 
disseminate the Bank Index values in the event that Bridge Data was 
temporarily unable to calculate and disseminate the values due to 
technical difficulties.\10\ The Exchange is proposing in this filing 
that it (and any third party on the Exchange's behalf) will cease 
calculating and disseminating the Bank Index values and, in its place, 
Dow Jones \11\ will be solely responsible for such calculation and 
dissemination.\12\
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    \10\ See Securities Exchange Act Release No. 53933 (June 1, 
2006), 71 FR 33330 (June 8, 2006) (SR-Phlx-2006-29).
    \11\ Dow Jones is an independent third party vis a vis KBW, and 
KBW has informed the Exchange that Dow Jones will publicly report 
the underlying values of the Bank Index at least once every 15 
seconds during the times that options on the Bank Index are traded 
on the Exchange.,
    \12\ Although Dow Jones will take over from Phlx the 
responsibility to calculate and disseminate current index values of 
four additional KBW indexes, this is not part of the proposed filing 
because such indexes were listed pursuant to Rule 19b-4(e).
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    The Exchange notes that the listing of options on the Bank Index 
preceded the adoption of the Exchange's generic index option listing 
standards in Phlx Rule 1009A. This rule permits the Exchange to list 
qualifying index options pursuant to a form filing per Rule 19b-4(e) 
under the Exchange Act (instead of a rule filing as with the Bank 
Index), and does not require a filing regarding the identity of the 
entity calculating or disseminating the current index values, so long 
as such values are publicly reported at least once every 15 seconds 
during the periods that the index options are traded on the 
Exchange.\13\
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    \13\ Where an underlying index is maintained by a broker-dealer, 
the index must be calculated by a third party who is not a broker-
dealer, and the broker-dealer will have to erect a ``Chinese Wall'' 
around its personnel who have access to information concerning 
changes in and adjustments to the index. See Phlx Rule 1009A(b)(12).
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2. Statutory Basis
    The Exchange believes that its proposed rule change to make Dow 
Jones responsible for calculating and disseminating the Bank Index 
values is consistent with Section 6(b) of the Act \14\ in general, and 
furthers the objectives of Section 6(b)(5) of the Act \15\ 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 to protect 
investors and the public interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6).
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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.\18\
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    \18\ 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 February 2, 2007, the date on which the Phlx 
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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.\19\ 
However, Rule 19b-4(f)(6)(iii) \20\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Phlx provided the Commission 
with written notice of its intent to file this proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change. In addition, the Phlx has requested that the Commission 
waive the 30-day operative delay. The Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest because it will assure the continued 
availability of the current Bank Index values. For this reason, the 
Commission designates the proposal to be effective and operative upon 
filing with the Commission.\21\
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    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ Id.
    \21\ 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. See 15 U.S.C. 
78c(f).
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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-2007-01 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-2007-01. 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

[[Page 7708]]

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. Copies of such 
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-2007-01 and should be submitted on or before March 
9, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-2764 Filed 2-15-07; 8:45 am]

BILLING CODE 8010-01-P