Document ID: SEC-2006-0318-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2006-03-13T05:00Z

[Federal Register: March 13, 2006 (Volume 71, Number 48)]
[Notices]               
[Page 12764-12765]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr06-97]                         

[[Page 12764]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53407; File No. SR-Phlx-2006-12]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Expansion of Time for Exercising Expiring Options and 
Submitting Contrary Exercise Advices

March 3, 2006.
    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 February 13, 2006, 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 prepared by the Exchange. The Phlx 
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 renders it effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change 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 Phlx, pursuant to Section 19(b)(1) of the Act \5\ and Rule 19b-
4 thereunder,\6\ proposes to amend Phlx Rule 1042 to add two additional 
minutes within which one may make a final decision to exercise or not 
exercise an option or deliver a contrary exercise advice (``CEA'') \7\ 
to the Exchange. The proposal is intended to conform Phlx Rule 1042 to 
a change in the closing time for equity options and narrow-based index 
options from 4:02 p.m. to 4 p.m. (EST).\8\ The text of the proposed 
rule change is available on the Phlx's Web site (http://www.phlx.com), 

at the Phlx's principal office, and at the Commission's Public 
Reference Room.
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    \5\ 15 U.S.C. 78s(b)(1).
    \6\ 17 CFR 240.19b-4.
    \7\ A CEA is a communication either to not exercise an option 
that would be automatically exercised pursuant to the Options 
Clearing Corporation's (``OCC'') Exercise-by-Exception (``Ex-by-
Ex'') procedure, or to exercise an option that would not be 
automatically exercised pursuant to the OCC's Ex-by-Ex procedure.
    \8\ See Securities Exchange Act Release No. 53247 (February 7, 
2006), 71 FR 8037 (February 15, 2006) (approving SR-Phlx-2006-01, 
which amended Phlx Rules 101, 1012, 1047, 1047A, and 1101A and Phlx 
Floor Procedure Advice (``OFPA'') G-2, so that equity options and 
narrow-based index options may trade until 4 p.m. instead of 4:02 
p.m. (EST). The proposed rule change did not affect broad-based 
index options or exchange traded fund options trading until 4:15 
p.m.). The 4 p.m. (EST) closing time was implemented on February 13, 
2006 on an industry-wide basis.
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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 Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposal. 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 amendment to Phlx Rule 1042 is to 
change the time for deciding whether to exercise an option and for 
delivering a contrary exercise advice to conform to the new trading 
hours for equity options and narrow-based index options.\9\
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    \9\ See supra note 8.
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    Currently, Phlx Rule 1042(c) establishes that on the business day 
immediately prior to an expiration date, option holders may make final 
decisions to exercise or not exercise options, and members and member 
organizations may accept exercise instructions and submit CEAs to the 
Exchange as late as 5:30 p.m. or 6:30 p.m. (EST), pursuant to 
circumstances set forth in Phlx Rule 1042(c). Phlx Rule 1042(g) 
establishes that where, on the last business day before the day of 
expiration, the Exchange provides advance notice of a modified time for 
the close of trading in equity options, the deadline to make a final 
decision to exercise or not exercise an expiring option and to deliver 
a CEA to the Exchange will be 1 hour 28 minutes or 2 hours 28 minutes 
after the announced modified closing time, instead of the 5:30 p.m. or 
6:30 p.m. (EST) deadline set by Phlx Rule 1042(c). The Exchange 
proposes to add two minutes to each of these timeframes to correspond 
to the two minute difference in trading time created by the change in 
the close of trading time from 4:02 p.m. to 4 p.m. (EST).
    According to the Exchange, this proposal seeks only to change the 
exercise timeframes for equity options, not index options, because the 
Phlx Rule governing index options does not have pre-set times. 
Accordingly, for index options, exercise forms submitted by 
specialists, traders, and others must be time stamped no later than 
five minutes after the close of trading on the day of the exercise.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \11\ in particular, because 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, by establishing expiring option 
exercise and CEA timeframes similar to that of other options exchanges 
and in conformity with new trading hours for equity options and narrow-
based index options.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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

    The Phlx has neither solicited nor received comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30-days after 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, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).

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[[Page 12765]]

    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30-days after the date of filing. 
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. The Phlx has asked the Commission 
waive the 30-day operative delay and the 5-day pre-filing requirement. 
The Commission believes that waiving the 30-day operative delay and the 
5-day pre-filing requirement is consistent with the protection of 
investors and the public interest because such waiver will allow the 
Phlx to immediately clarify its rule and conform it to the industry-
wide close of trading times now in effect. Accelerating the operative 
date will allow for a more efficient and effective market operation by 
offering clarity and internal consistency with existing Phlx rules. For 
these reasons, the Commission designates the proposed rule change as 
effective and operative immediately upon filing with the 
Commission.\15\
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    \14\ Id.
    \15\ For the purposes only of waiving the 30-day operative date 
of this proposal, 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 after the filing of the proposed rule 
change, the Commission may summarily abrogate the 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.

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-2006-12 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-2006-12. 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. 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-2006-12 and should be submitted on or before April 
3, 2006.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
Nancy M. Morris,
Secretary.
 [FR Doc. E6-3493 Filed 3-10-06; 8:45 am]

BILLING CODE 8010-01-P