Document ID: SEC-2008-0651-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2008-05-06T04:00Z

[Federal Register: May 6, 2008 (Volume 73, Number 88)]
[Notices]               
[Page 25073-25074]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my08-125]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57737; File No. SR-Phlx-2008-28]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Position and Exercise Limits for Options on the DIAMONDS 
Trust

April 29, 2008.
    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 April 24, 2008, the Philadelphia Stock Exchange, Inc. (``Exchange'' 
or ``Phlx'') 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 Exchange. 
The Exchange has designated this proposal as non-controversial under 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposed rule change 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)(iii).
    \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 amend Rule 1001 (Position Limits) to 
establish increased position limits for options on the Diamonds Trust, 
Series 1 (``DIA'' or ``DIA Options'').
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.Phlx.com), at the offices of the Exchange, and at 
the Commission's Public Reference Room.

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 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 Exchange is proposing to amend Phlx Rule 1001 pertaining to 
position limits for options on DIA. In particular, the Exchange 
proposes to increase position limits for DIA Options to 300,000 
contracts on the same side of the market, which should encourage a more 
liquid and competitive market environment to the benefit of customers 
interested in the product. The Commission previously approved a similar 
proposal of the Chicago Board Options Exchange (``CBOE'').\5\
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    \5\ See Securities Exchange Act Release No. 47346 (February 11, 
2003), 68 FR 8316 (February 20, 2003) (SR-CBOE-2002-26) (approving 
an increase in the position limits and exercise limits to 300,000 
for DIA options). The Commission stated that ``given the 
surveillance capabilities of the [CBOE] and the depth and liquidity 
in both the DIA options and the underlying cash market in DIAs, the 
Commission believes it is permissible to significantly raise 
position and exercise limits for DIA options without risk of 
disruption to the options or underlying cash markets.'' The 
Commission also stated that ``financial and reporting requirements . 
. . should allow [CBOE] to detect and deter trading abuses arising 
from the increased position and exercise limits, and will also allow 
[CBOE] to monitor large positions in order to identify instances of 
potential risk and to assess additional margin and/or capital 
charges, if deemed necessary.''
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    The Exchange also recently made permanent increased position limits 
for certain equity options on Phlx, which were in effect on a pilot 
basis.\6\ The Exchange stipulated, as part of its proposal for such 
permanent approval, that ``its surveillance procedures . . . and 
reporting procedures, in conjunction with the financial requirements 
and risk management review procedures already in place at the clearing 
firms and the Options Clearing Corporation, will serve to adequately 
address any concerns the Commission may have respecting account(s) 
engaging in manipulative schemes or assuming too high a level of risk 
exposure.'' \7\ These representations also apply to the current 
proposal to increase the position limits for DIA Options. The Exchange 
now seeks to increase the position and exercise limits for options on 
DIA on Phlx to the level that such limits are in effect on other 
options exchanges such as BOX and CBOE (300,000 contracts on the same 
side of the market).
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    \6\ See Securities Exchange Act Release No. 57418 (March 3, 
2008), 73 FR 12493 (March 7, 2008) (SR-Phlx-2008-14).
    \7\ Id.
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    The Exchange believes that the justifications behind the 
Commission's approval of CBOE's proposal to increase position limits on 
DIA Options should support the same increased position limits on such 
options on Phlx. Specifically, the Exchange believes that the 
``structure of the DIA options and the considerable liquidity of both 
the underlying cash and options market for DIA options lessen the 
opportunity for manipulation of this product and disruption in the 
underlying market that a lower position limit may protect against.'' 
\8\ The Exchange believes that the reporting requirements imposed under 
the Phlx rules will help protect against potential manipulation.\9\ 
Additionally, the Exchange believes that an increase in position limits 
on DIA Options on Phlx is also required for competitive purposes as 
well as for purposes of consistency and uniformity among the competing 
options exchanges. This, taken in conjunction with the permanent 
establishment of other increased position limits for certain equity 
options on Phlx,\10\ supports the Exchange's proposal related to 
increased position limits applicable to DIA Options.
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    \8\ See Securities Exchange Act Release No. 47346, supra note 5.
    \9\ See Phlx Rule 1003.
    \10\ See Securities Exchange Act Release No. 57418, supra note 
6. See also Securities Exchange Act Release No. 57597 (April 1, 
2008), 73 FR 18846 (April 7, 2008) (SR-Phlx-2008-24) (IWM position 
limits).

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[[Page 25074]]

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ in particular, in that it is designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
Specifically, the Exchange believes that the structure of the DIA 
Options and the considerable liquidity of the market for such options 
diminish the opportunity for manipulation of this product and for 
disruption in the underlying market that a lower position limit may 
protect against.
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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

    The Exchange has designated the proposed rule change as one that: 
(1) Does not significantly affect the protection of investors or the 
public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \13\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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. The Exchange has fulfilled this requirement.
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    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Exchange states that waiving the operative 
delay will allow the Exchange to immediately use position limits that 
are currently available to other options exchanges. The Exchange 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest in that it would 
establish the same position limits that are available to other options 
exchanges.
    The Commission believes that waiving the 30-day operative delay of 
the Exchange's proposal is consistent with the protection of investors 
and the public interest.\15\ Therefore, the Commission designates the 
proposal to be operative upon filing.
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    \15\ 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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    At any time within 60 days of 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 No. SR-Phlx-2008-28 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-2008-28. 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 Commissions 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 such filing also will be available for inspection and 
copying at the principal office of the Exchange. 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-2008-28 and should be submitted on 
or before May 27, 2008.

    For the Commission, by the Division of Trading and Markets, 
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. E8-9867 Filed 5-5-08; 8:45 am]

BILLING CODE 8010-01-P