Document ID: SEC-2007-0307-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-03-01T05:00Z

[Federal Register: March 1, 2007 (Volume 72, Number 40)]
[Notices]               
[Page 9371-9373]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01mr07-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55338; File No. SR-Phlx-2007-04]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Listing LEAPS Pursuant to the $2.50 Strike Price Program

February 23, 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 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. 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 clarify that LEAPS \5\ can be listed at $2.50 
strike price intervals pursuant to the $2.50 Strike Price Program set 
forth in Commentary .05 to Phlx Rule 1012 (Series of Options Open for 
Trading). There is no new rule text.
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    \5\ LEAPS are Long-term Equity Anticipation Securities or long-
term options series. See Phlx Rules 1079, 1012, and 1101A.
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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 proposal is to clarify that LEAPS can be listed 
at $2.50 strike price intervals pursuant to the $2.50 Strike Price 
Program.
    The current $2.50 Strike Price Program is set forth in Commentary 
.05 to Phlx Rule 1012. The $2.50 Strike Price Program permits the 
Exchange to list options with $2.50 strike price intervals for selected 
options trading at strike prices greater than $25 but less than $75. In 
addition, each options exchange is permitted to list options with $2.50 
strike price intervals on any option class that another options 
exchange selects under the $2.50 Strike Price Program.
    Initially adopted in 1995 as a pilot program, the pilot $2.50 
Strike Price Program allowed options exchanges to list options with 
$2.50 strike price intervals for options trading at strike prices 
greater than $25 but less than $50 on a total of up to 100 option 
classes.\6\ In 1998, the pilot program was permanently approved and 
expanded to allow the options exchanges to select up to 200 option 
classes for the $2.50 Strike

[[Page 9372]]

Price Program.\7\ Of the 200 options classes eligible for the $2.50 
Strike Price Program, 46 have been allocated to Phlx.\8\ In 2005, the 
$2.50 Strike Price Program was expanded to permit the listing of 
options with $2.50 strike price intervals for options with strike 
prices between $50 and $75, provided that the $2.50 strike price 
intervals are no more than $10 from the closing price of the underlying 
stock in its primary market \9\ on the preceding day.\10\ With the 
expansion of the $2.50 Strike Price Program to options with strike 
prices below $75, for example, if an option class has been selected as 
part of the $2.50 Strike Price Program, and the underlying stock closed 
at $48.50 in its primary market, the Exchange may list options with 
strike prices of $52.50 and $57.50 on the next business day; and if an 
underlying security closed at $54, the Exchange may list options with 
strike prices of $52.50, $57.50, and $62.50 on the next business day. 
Moreover, an option class would remain in the $2.50 Strike Price 
Program until the Exchange otherwise designates and sends a 
decertification notice to the Options Clearing Corporation.
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    \6\ See Securities Exchange Act Release No. 35993 (July 19, 
1995), 60 FR 38073 (July 25, 1995) (SR-Phlx-95-08, SR-Amex-95-12, 
SR-PSE-95-07, SR-CBOE-95-19, and SR-NYSE-95-12).
    \7\ See Securities Exchange Act Release No. 40662 (November 12, 
1998), 63 FR 64297 (November 19, 1998) (SR-Amex-98-21, SR-CBOE-98-
29, SR-PCX-98-31, and SR-Phlx-98-26).
    \8\ The allocation is not changed by this proposed rule filing.
    \9\ The term ``primary market'' is defined in Phlx Rule 1000 in 
respect of an underlying stock or Exchange-Traded Fund Share as the 
principal market in which the underlying stock or Exchange-Traded 
Fund Share is traded.
    \10\ See Securities Exchange Act Release No. 52961 (December 15, 
2005), 70 FR 76095 (December 22, 2005) (SR-Phlx-2005-77). See also 
Securities Exchange Act Release Nos. 52893 (December 5, 2005), 70 FR 
73488 (December 12, 2005) (SR-Amex-2005-067); 52892 (December 5, 
2005), 70 FR 73492 (December 12, 2005) (SR-CBOE-2005-39); 52960 
(December 15, 2005), 70 FR 76090 (December 22, 2005) (SR-ISE-2005-
59); and 52986 (December 20, 2005), 70 FR 76897 (December 28, 2005) 
(SR-PCX-2005-137).
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    The Exchange is hereby clarifying that it, like other options 
exchanges with the $2.50 Strike Price Program, may list LEAPS at $2.50 
strike price intervals at all strike prices that are available pursuant 
to the $2.50 Strike Price Program. The Exchange believes that the $2.50 
Strike Price Program has benefited the marketplace by creating 
additional trading opportunities for customers in all options including 
LEAPS by affording such customers the ability to more closely tailor 
investment strategies to the precise movement of the underlying 
security. The availability of $2.50 strike price intervals for LEAPS 
will likewise benefit the marketplace and is in conformity with current 
industry practice.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objective of Section 
6(b)(5) of the Act \12\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and the national market system.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 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 \13\ and Rule 19b-4(f)(6) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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.\15\ 
However, Rule 19b-4(f)(6)(iii) \16\ 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 so that it is clear 
that the Exchange has the immediate ability to list and trade LEAPS at 
$2.50 strike price intervals at all strike prices that are available 
pursuant to the $2.50 Strike Price Program. For this reason, the 
Commission designates the proposed rule change to be operative upon 
filing with the Commission.\17\
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    \15\ 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.
    \16\ Id.
    \17\ 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-2007-04 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-2007-04. 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 9373]]

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-2007-04 and should be submitted on or before March 22, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3563 Filed 2-28-07; 8:45 am]

BILLING CODE 8010-01-P