Document ID: SEC-2007-0263-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-02-22T05:00Z

[Federal Register: February 22, 2007 (Volume 72, Number 35)]
[Notices]               
[Page 8053-8054]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22fe07-102]                         

[[Page 8053]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55285; File No. SR-Phlx-2007-10]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Extension of the Position Limits Pilot Program

February 13, 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 February 12, 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. The 
Exchange has filed the proposal 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 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

    Phlx proposes to extend an existing pilot program applicable to 
Exchange Rule 1001, Position Limits, which increases the standard 
position and exercise limits for equity option contracts, including 
options on the Nasdaq-100 Index Tracking Stock \5\ (``QQQQ'') (``Pilot 
Program''). The Exchange proposes to extend the Pilot Program through 
September 1, 2007. The text of the proposed rule change is available at 
Phlx, the Commission's Public Reference Room, and http://www.phlx.com.

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    \5\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg], The 
Nasdaq Stock Market[reg], Nasdaq-100 SharesSM, Nasdaq-100 
TrustSM, Nasdaq-100 Index Tracking StockSM, 
and QQQSM are trademarks or service marks of The NASDAQ 
Stock Market LLC (``Nasdaq'') and have been licensed for use for 
certain purposes by Phlx pursuant to a License Agreement 
(``License'') with Nasdaq. The Nasdaq-100 Index[reg] (``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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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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 extend the existing 
Pilot Program, which is scheduled to expire March 1, 2007,\6\ for an 
additional six-month period, through September 1, 2007.
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    \6\ See Securities Exchange Act Release Nos. 51322 (March 4, 
2005), 70 FR 12260 (March 11, 2005) (SR-Phlx-2005-17); 52261 (August 
15, 2005), 70 FR 49004 (August 22, 2005) (SR-Phlx-2005-51); 53388 
(February 28, 2006), 71 FR 11458 (March 7, 2006) (SR-Phlx-2006-13); 
and 54387 (August 30, 2006), 71 FR 52842 (September 7, 2006) (SR-
Phlx-2006-48).
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    Position limits impose a ceiling on the number of option contracts 
in each class on the same side of the market relating to the same 
underlying security that can be held or written by an investor or group 
of investors acting in concert. Exchange Rule 1002 (not proposed to be 
amended herein) establishes corresponding exercise limits. Exercise 
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.
    Rule 1001 subjects equity options to one of five different position 
limits depending on the trading volume and outstanding shares of the 
underlying security. Rule 1002 establishes exercise limits for the 
corresponding options at the same levels as the corresponding 
security's position limits.\7\
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    \7\ Rule 1002 states, in relevant part, `` * * * no member or 
member organization shall exercise, for any account in which such 
member or member organization has an interest or for the account of 
any partner, officer, director or employee thereof or for the 
account of any customer, a long position in any option contract of a 
class of options dealt in on the Exchange (or, respecting an option 
not dealt in on the Exchange, another exchange if the member or 
member organization is not a member of that exchange) if as a result 
thereof such member or member organization, or partner, officer, 
director or employee thereof or customer, acting alone or in concert 
with others, directly or indirectly, has or will have exercised 
within any five (5) consecutive business days aggregate long 
positions in that class (put or call) as set forth as the position 
limit in Rule 1001, in the case of options on a stock or on an 
Exchange-Traded Fund Share* * *.''
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Standard Position and Exercise Limit

    The Pilot Program increases the standard position and exercise 
limits for equity options traded on the Exchange and for options 
overlying QQQQ to the following levels:

------------------------------------------------------------------------
                                             Pilot program equity option
 Standard equity option contract limit \8\         contract limit
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 13,500...................................                        25,000
 22,500...................................                        50,000
 31,500...................................                        75,000
 60,000...................................                       200,000
 75,000...................................                       250,000
300,000...................................                       900,000
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    To date, the Exchange believes that there have been no adverse 
affects on the market as a result of these increases in the limits for 
equity option contracts and options overlying QQQQ.
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    \8\ Except when the Pilot Program is in effect.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objective of Section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanisms of a free and open market and the 
national market system, and, in general to protect investors and the 
public interest, by extending the Pilot Program for an additional six 
months.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 rule change does not: (1) Significantly 
affect the

[[Page 8054]]

protection of investors or the public interest; (2) impose any 
significant burden on competition; and (3) become operative for 30 days 
from the date of this filing, or such shorter time as the Commission 
may designate, it has become effective pursuant to Section 19(b)(3)(A) 
of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii) \14\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange 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 in the public interest because it will 
allow the Pilot Program to continue uninterrupted.\15\
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    \13\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization submit to 
the Commission written 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. Phlx has satisfied the five-day pre-filing 
requirement.
    \14\ Id.
    \15\ For purposes only of waiving the 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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    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 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 No. SR-Phlx-2007-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-Phlx-2007-10. 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 will also 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 No. SR-
Phlx-2007-10 and should be submitted on or before March 15, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-2987 Filed 2-21-07; 8:45 am]

BILLING CODE 8010-01-P