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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Elimination of the Prospectus Delivery Requirement

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Start Preamble May 28, 2003.

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 May 5, 2003, the Philadelphia Stock Exchange LLC (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The proposed rule change has been filed by Phlx as a “non-controversial” rule change under Rule 19b-4(f)(6) under the Act.[3] The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

Phlx proposes to eliminate all references in its rules to “prospectus” in connection with options trading, due to the fact that standardized options issued by The Options Clearing Corporation (the “OCC”) have become exempt from the Securities Act of 1933 (“Securities Act”) (except for its antifraud provisions) and from the registration provisions of the Act [4] .

Phlx Rule 1029(b) requires that every member and member organization deliver a current OCC Prospectus to each customer on request (the “Prospectus Delivery Requirement”). The Exchange is proposing to delete Phlx Rule 1029(b) and renumber current Phlx Rule 1029(c) as Phlx Rule 1029(b). A conforming change is being made to the title of Phlx Rule 1029 and to Commentary .03 to eliminate references to a prospectus.

Other Phlx rules refer tangentially to the Prospectus Delivery Requirement, such as Phlx Rules 213 and 454 (each of which refer to exchange-traded options “covered by a prospectus”) and Commentary .05 to Phlx Rule 1024 (which makes reference to Phlx Rule 1029).[5] The Exchange is proposing to delete references to a prospectus in each of these rules. The text of the proposed rule change is available at the Exchange 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 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 parts 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 eliminate all references to a “prospectus” in connection with options trading on the Exchange due to the fact that standardized options issued by the OCC have become exempt from the Securities Act (except for its Start Printed Page 33755antifraud provisions)[6] and from the registration provisions of the Act.

On January 2, 2003, final Commission rules became effective regarding whether standardized options should be registered with the Commission under the Securities Act or the Act.[7] In this release, the Commission concluded that standardized options issued by registered clearing agencies, such as the OCC, and traded on a registered national securities exchange or a registered national securities association, shall be exempt from all provisions of the Securities Act (other than the anti-fraud provisions) and shall be exempt from the registration requirements of the Act.

Given this recent development, there is no longer a need for the delivery of OCC Prospectuses to options customers on request pursuant to Phlx Rule 1029(b). Other references to a “prospectus” in connection with options trading on the Exchange are no longer necessary. These changes do not affect the requirement that an Options Disclosure Document be delivered to customers of members and member organizations at the time such customer's account is approved to trade options.[8]

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act [9] in general, and furthers the objectives of section 6(b)(5) of the Act [10] in particular, in that it is designed to facilitate transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange 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

Written comments were neither solicited nor received with respect to the proposed rule change.

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

Because, the foregoing proposed rule change (1) does not significantly affect the protection of investors or the public interest; (2) does not impose any significant burden on competition; and (3) by its terms, does not become operative until 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, and the exchange provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change,[11] it has become effective pursuant to section 19(b)(3)(A) of the Act [12] and Rule 19b-4(f)(6) thereunder.[13]

At any time within 60 days of the filing of this 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.

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. 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 in the Commission's Public Reference Section. 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-2003-22 and should be submitted by June 26, 2003.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[14]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

4.  See Exemption for Standardized Options From Provisions of the Securities Act of 1933 and From the Registration Requirements of the Securities Exchange Act of 1934, Securities Act Release No. 8171 and Securities Exchange Act Release No. 47082 (December 23, 2002), 68 FR 188 (January 2, 2003).

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5.  Phlx Rule 784 refers to a prospectus in respect of “options.” However, the Exchange represents that the rule is not applied to standardized options, so Phlx is not proposing to amend the language in Phlx Rule 784. Information about standardized options positions held by members and member organizations, that is also requested by Phlx Rule 784 in respect of options, is instead obtained by the Exchange pursuant to Phlx Rule 1003.

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6.  On January 10, 2003, the OCC filed a post-effective amendment to its registration statement under the Securities Act to remove from registration all put and call options that remain unsold as of the date of the post-effective amendment.

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7.  See supra note 4.

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8.  See Phlx Rule 1029(a).

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11.  See e-mail from Mark Salvacion, Director and Counsel, Phlx, to Frank N. Genco, Attorney, Division of Market Regulation, Commission, dated April 30, 2003.

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[FR Doc. 03-14172 Filed 6-4-03; 8:45 am]

BILLING CODE 8010-01-P