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Notice

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendment Nos. 1 and 2 to the Proposed Rule Change by the Philadelphia Stock Exchange, Inc., Related to PHLX Rule 1009A

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Start Preamble December 6, 2000.

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 September 7, 2000, the Philadelphia Stock Exchange, Inc. (“PHLX” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the PHLX.[3] The Commission is publishing this notice to solicit comments on the proposed rule change and Amendment Nos. 1 and 2 from interested persons and is simultaneously approving the proposal, as amended, on an accelerated basis.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The PHLX proposes to amend PHLX Rule 1009A, “Designation of the Index,” provide for the listing and trading of narrow-based stock index options pursuant to Rule 19b-4(e) under the Act.[4]

The text of the proposed rule change is available at the Office of the Secretary, PHLX, and at the Commission.

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 III 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 PHLX proposes to amend PHLX Rule 1009A(b) to provide for the listing and trading of narrow-based stock index options pursuant to Rule 19b-4(e) under the Act. The purpose of the proposal is to allow the PHLX to list and trade narrow-based index options immediately without filing a proposed rule change with the Commission under Section 19(b)(3)(A) of the Act prior to trading the product, as PHLX Rule 1009A(b) currently requires.

Currently, PHLX Rule 1009A(b) allows the PHLX to list and trade options on a narrow-based index 30 days after the Exchange files a proposal under Section 19(b)(3)(A) of the Act describing the index option, provided that the index meets the generic listing criteria set forth in PHLX Rule 1009A(b). The Commission release adopting Rule 19b-4(e) under the Act (“New Products Release”),[5] however, no longer requires a Section 19(b)(3)(A) filing and subsequent waiting period so long as the exchange relying on Rule 19b-4(e) under the Act has generic listing criteria approved by the Commission and meets certain other requirements.

The New Products Release indicated that products meeting the listing criteria Start Printed Page 78236approved by the Commission in its 1994 Generic Narrow-Based Index Options Approval Order (as set forth in PHLX Rule 1009A(b)) [6] qualified for filing under Rule 19b-4(e) under the Act, so long as the exchange eliminated the Section 19(b)(3)(A) rule filing requirement from its existing rules.[7] Therefore, the PHLX proposes to eliminate the Section 19(b)(3)(A) rule riling requirement in PHLX Rule 1009A(b) the instead incorporate the provisions of new Rule 19b-4(e) under the Act. The PHLX represents that the Exchange will use Rule 19b-4(e) under the Act in accordance with the terms and conditions set forth in the order approving Rule 19b-4(e) under the Act.[8] The PHLX believes that the proposal should allow the Exchange to list and trade narrow-based index options that comply with the PHLX Rule 1009A(b) standards immediately, thereby providing a more expeditious method of offering these products in the marketplace.

(2) Basis

For these reasons, the PHLX believes that the proposed rule change is consistent with Section 6(b) of the Act, in general, and, in particular, with Section 6(b)(5), in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and practices and to facilitate transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, as well as to protect investors and the public interest by providing a quicker method of putting important hedging tools in the marketplace.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The PHLX does not believe that the proposed rule change will impose any inappropriate burden on competition.

(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. Solicitation of Comments

Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether it is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 at the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC. Copies of such filing will also be available for inspection and copying at the principal office of the PHLX. All submissions should refer to File No. SR-PHLX-00-67 and should be submitted by January 4, 2000.

IV. Commission's Findings and Order Grating Accelerated Approval of the Proposed Rule Change

After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulation thereunder applicable to a national securities exchange and, in particular, with the requirements of section 6(b)(5) [9] in that it is designed to prevent fraudulent and manipulative acts and practices, 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.[10] Specifically, the Commission finds that the proposal furthers the objectives of the New Products Release, which indicated, among other things, that a self-regulatory organization (“SRO”) could submit a proposal to eliminate the 19(b)(3)(A) rule filing requirement from an existing SRO rule, such as PHLX Rule 1009A(b), that permits the listing and trading of narrow-based index options that satisfy the criteria approved in the Generic Index Narrow-Based Index Options Approval Order.[11] The Commission notes that the Chicago Board Options Exchange, Inc. (“CBOE”) and the American Stock Exchange LLC (“Amex”) have eliminated the 19(b)(3)(A) rule filing requirement from their rules permitting the listing and trading of options pursuant to the Generic Narrow-Based Index Options Approval Order,[12] and that the PHLX's proposal is substantially identical to the CBOE and Amex proposals. Accordingly, Commission finds that the PHLX's proposal does not raise new regulatory issues.

The Commission finds good cause for approving the proposal and Amendment Nos. 1 and 2 prior to the thirtieth day after the date of publication of notice thereof in the Federal Register pursuant to section 19(b)(2) of the Act. As noted above, the PHLX's proposal is consistent with the New Products Release and is substantially identical to rule changes adopted previously by the CBOE and the Amex. In addition, the Commission believes that approving the proposal on an accelerated basis will help to ensure that PHLX is not disadvantaged in the listing of new index option products vis-a-vis the Amex and the CBOE. Because Amendment No. 1 reflects the adoption of PHLX Rule 1009A(b)(6)(i), which the Commission approved previously,[13] Amendment No. 1 does not raise new regulatory issues. Amendment No. 2 strengthens the PHLX's proposal by indicating that the PHLX will use rule 19b-4(e) under the Act in accordance with the terms and conditions set forth in the order approving Rule 19b-4(e) under the Act. Accordingly, the Commission finds that it is consistent with sections 6(b) and 19(b)(2) of the Act to approve the proposal and Amendment Nos. 1 and 2 on an accelerated basis.

V. Conclusion

It is therefore ordered, pursuant to section 19(b)(2) of the Act,[14] that the proposed rule change (SR-PHLX-00-67), as amended, is approved on an accelerated basis.

Start Printed Page 78237

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[15]

Start Signature

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  On September 18, 2000, the PHLX amended the proposal to reflect the PHLX Rule 1009A(b)(6)(i), which established a concentration requirement for the Gold/Silver Index. See letter from Nandita Yagnik, PHLX, to Nancy Sanow, Senior Special Counsel, Division of Market Regulation (“Division”), Commission, dated September 15, 2000 (“Amendment No. 1”). The Commission approved the adoption of PHLX Rule 1009A(b)(6)(i) on July 25, 2000. See Securities Exchange Act Release No. 43070 (July 25, 2000), 65 FR 47551 (August 2, 2000) (order approving File No. SR-PHLX-00-69) (“July 25 Order”). On November 30, 2000, the PHLX amended the proposal to indicate that the PHLX will use Rule 19b-4(e) under the Act in accordance with the terms and conditions set forth in the order approving Rule 19b-4(e) under the Act. See letter from Carla Behnfeldt, Director, Legal Department New Product Development Group, PHLX, to Nancy Sanow, Division, Commission, dated November 30, 2000 (“Amendment No. 2”).

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5.  See Amendment to Rule Filing Requirements for Self-Regulatory Organizations Regarding New Derivative Securities Products, Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998).

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6.  See Securities Exchange Act Release No. 34157 (June 3, 1994), 59 FR 30062 (June 10, 1994) (order approving File Nos. SR-Amex-92-35; SR-CBOE-93-59; SR-NYSE-94-17; SR-PSE-94-07; and SR-PHLX-94-10) (“Generic Index Narrow-Based Index Options Approval Order”). The Generic Narrow-Based Index Options Approval Order established generic listing standards for options on narrow-based indexes and adopted streamlined procedures for introducing trading in options satisfying the generic listing standards.

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7.  See New Products Release at note 89.

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8.  See Amendment No. 2, supra note 3.

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10.  In approving the proposed rule, 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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11.  See New Products Release at note 89.

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12.  See Securities Exchange Act Release Nos. 41374 (May 5, 1999), 64 FR 25936 (May 13, 1999) (File No. SR-CBOE-99-16); and 41091 (February 23, 1999), 64 FR 10515 (March 4, 1999) (File No. SR-Amex-99-07).

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13.  See July 25 Order, supra note 3.

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[FR Doc. 00-31802 Filed 12-13-00; 8:45 am]

BILLING CODE 8010-01-M