Document ID: SEC-2007-1798-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Philadelphia Stock Exchange, Inc.
Posted Date: 2007-12-31T05:00Z

[Federal Register: December 31, 2007 (Volume 72, Number 249)]
[Notices]               
[Page 74396-74398]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31de07-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57038; File No. SR-Phlx-2007-93]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to $5 Strike Price Intervals of Options on Exchange-Traded 
Fund Shares above $200

December 21, 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 December 19, 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. The 
Exchange 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 rendered the proposal effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit

[[Page 74397]]

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 amend Commentary .05 to Exchange Rule 1012 
(``Series of Options Open for Trading'') to clarify that strike price 
intervals of options on Exchange-Traded Fund Shares (``ETFs'') will be 
$5 or greater where the strike price is over $200.\5\
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    \5\ Strike price intervals for series of options on ETFs were 
initially established at $1 or greater where the strike price is 
$200 or less. See Securities Exchange Act Release No. 44055 (March 
8, 2001), 66 FR 15310 (March 16, 2001) (SR-Phlx-2001-32) (filing 
silent regarding strike price intervals where the strike price is 
over $200).
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    The text of the proposed rule change is available at the Phlx, the 
Commission's Public Reference Room, and http://www.phlx.com.

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 clarify that strike 
price intervals of options on ETFs will be $5 or greater where the 
strike price is over $200. Commentary .05 to Phlx Rule 1012 currently 
states that strike price intervals of options on ETFs will be $1 or 
greater when the strike price of the underlying asset is $200 or less. 
As such, most ETF options, which have become popular investment tools, 
are priced at $1 strike price intervals.\6\ However, some ETF options 
are listed at $10 strike price intervals at strike prices greater than 
$200.\7\ According to the Exchange, within the last few months, the 
Phlx has received requests from Phlx traders to price ETF options at $5 
strike price intervals above $200. Because the Exchange does not 
currently have a provision that allows ETF options to list and trade at 
$5 or greater strike price intervals where the strike price is more 
than $200, however, the Exchange has only been able to list these ETF 
options at $10 or greater strike price intervals.\8\ This has put Phlx 
at a competitive disadvantage, particularly with respect to options 
exchanges that allow $5 strike price intervals for ETF options.\9\
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    \6\ The proposal establishing strike price intervals for series 
of options on ETFs at $1 or greater where the strike price is $200 
or less did not discuss strike price intervals where the strike 
price is over $200. See Securities Exchange Act Release No. 44055 
(March 8, 2001), 66 FR 15310 (March 16, 2001)(SR-Phlx-2001-32).
    \7\ For example, ETF options trading under the symbols ILF, FXI, 
MDY, and EEM are all listed at strike prices greater than $200.
    \8\ Commentary .05(a) to Phlx Rule 1012 states, among other 
things, that strike prices of options may be $2.50 or greater where 
the strike price is $25 or less, $5 or greater where the strike 
price is more than $25 but less than $200, and $10 or greater where 
the strike price is $200 or more.
    \9\ See, e.g., Amex Rule 903 stating that options on ETFs may 
trade at $5 strike price intervals where the strike price is over 
$200. See Securities Exchange Act Release Nos. 40157 (July 1, 1998), 
63 FR 37426 (July 10, 1998) (SR-AMEX-1996-44) and 48024 (June 12, 
2003), 68 FR 36617 (June 18, 2003) (SR-AMEX-2003-36). Supplementary 
Material .01 to Chapter IV, Sec. 6 of BOX rules similarly allows 
listing and trading of ETF options at $5 strike price intervals 
where the strike price is over $200.
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    The Exchange believes that the rule proposal to clarify the 
availability of $5 strike price intervals for ETF options above $200 
should enable Phlx to competitively list and trade ETF options at 
appropriate strike price intervals to the benefit of public customers, 
traders on the Exchange, and the Exchange itself.
2. Statutory Basis
    The Exchange believes that its proposal 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, in that it is designed to 
promote just and equitable principles of trade, 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 proposal would achieve this by allowing 
listing and trading of options on ETFs at $5 strike price intervals 
within certain parameters, commensurate with the rules of other options 
exchanges.
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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

    No written comments were either solicited or received by the 
Exchange.

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

    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\ 
because the foregoing proposed rule 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 if consistent with the protection of investors 
and the public interest. As required under Rule 19b-4(f)(6)(iii) under 
the Act,\14\ Phlx provided 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, prior to the date of the filing 
of the proposed rule change.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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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.\15\
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    \15\ See 15 U.S.C. 78s(b)(3)(C).
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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-2007-93 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission,

[[Page 74398]]

100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2007-93. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the 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-2007-93 and should be 
submitted on or before January 22, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Nancy M. Morris,
Secretary.
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    \16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-25366 Filed 12-28-07; 8:45 am]

BILLING CODE 8011-01-P