

[Federal Register: March 7, 2006 (Volume 71, Number 44)]
[Notices]               
[Page 11458-11459]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07mr06-98]                         


[[Page 11458]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53388; File No. SR-Phlx-2006-13]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Extension of a Pilot Program Concerning Option Position 
Limits

February 28, 2006.
    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 28, 2006, 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 prepared by the 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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

    The Phlx proposes to extend, for a period of approximately six 
months, through September 1, 2006, a pilot program applicable to 
Exchange Rule 1001, Position Limits, which increases the standard 
position and exercise limits for equity option contracts and options on 
the Nasdaq-100 Index Tracking Stock \5\ (``QQQQ'') (``Pilot Program''). 
The text of the proposed rule change is available on the Phlx's Web 
site (http://www.phlx.com), at the Phlx's principal office, and at the 

Commission's Public Reference Room.
---------------------------------------------------------------------------

    \5\ The Nasdaq-100[reg], Nasdaq-100 Index[reg], Nasdaq[reg], The 
Nasdaq Stock Market[reg], Nasdaq-100 SharesSM, Nasdaq-100 
TrustSM, Nasdaq-100 Index Tracking StockSM, 
and QQQSM are trademarks or service marks of The Nasdaq 
Stock Market, Inc. (``Nasdaq'') and have been licensed for use for 
certain purposes by the Phlx pursuant to a License Agreement 
(``License'') with Nasdaq. The Nasdaq-100 Index[reg] (``Index'') is 
determined, composed, and calculated by Nasdaq without regard to the 
Licensee, the Nasdaq-100 TrustSM, or the beneficial 
owners of Nasdaq-100 SharesSM. Nasdaq has complete 
control and sole discretion in determining, comprising, or 
calculating the Index or in modifying in any way its method for 
determining, comprising, or calculating the Index in the future.
---------------------------------------------------------------------------

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 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 proposed rule change is to extend the Pilot 
Program, which is scheduled to expire March 3, 2006,\6\ for 
approximately an additional six-month period, through September 1, 
2006.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 51322 (March 4, 
2005), 70 FR 12260 (March 11, 2005) (notice of filing and immediate 
effectiveness of File No. SR-Phlx-2005-17). See also Securities 
Exchange Act Release No. 52261 (August 15, 2005), 70 FR 49004 
(August 22, 2005) (notice of filing and immediate effectiveness of 
File No. SR-Phlx-2005-51, which extended the Pilot Program).
---------------------------------------------------------------------------

    Position limits impose a ceiling on the number of option contracts 
in each class on the same side of the market relating to the same 
underlying security that can be held or written by an investor or group 
of investors acting in concert. Exchange Rule 1002 (not proposed to be 
amended herein) establishes corresponding exercise limits. Exercise 
limits prohibit an investor or group of investors acting in concert 
from exercising more than a specified number of puts or calls in a 
particular class within five consecutive business days.
    Exchange Rule 1001 subjects equity options to one of five different 
position limits depending on the trading volume and outstanding shares 
of the underlying security. Exchange Rule 1002 establishes exercise 
limits for the corresponding options at the same levels as the 
corresponding security's position limits.\7\
---------------------------------------------------------------------------

    \7\ Exchange Rule 1002 states, in relevant part, ``* * * no 
member or member organization shall exercise, for any account in 
which such member or member organization has an interest or for the 
account of any partner, officer, director or employee thereof or for 
the account of any customer, a long position in any option contract 
of a class of options dealt in on the Exchange (or, respecting an 
option not dealt in on the Exchange, another exchange if the member 
or member organization is not a member of that exchange) if as a 
result thereof such member or member organization, or partner, 
officer, director or employee thereof or customer, acting alone or 
in concert with others, directly or indirectly, has or will have 
exercised within any five (5) consecutive business days aggregate 
long positions in that class (put or call) as set forth as the 
position limit in Rule 1001, in the case of options on a stock or on 
an Exchange-Traded Fund Share.* * *''
---------------------------------------------------------------------------

Standard Position and Exercise Limit

    The Pilot Program increases the standard position and exercise 
limits for equity options traded on the Exchange and for options 
overlying QQQQ to the following levels:
---------------------------------------------------------------------------

    \8\ Except when the Pilot Program is in effect.

------------------------------------------------------------------------
  Standard equity option contract        Pilot program equity option
             limit \8\                          contract limit
------------------------------------------------------------------------
                         13,500                               25,000
                         22,500                               50,000
                         31,500                               75,000
                         60,000                              200,000
                         75,000                              250,000
------------------------------------------------------------------------
Standard QQQQ option contract limit  Pilot program QQQQ option contract
                                                               limit
------------------------------------------------------------------------
                        300,000                              900,000
------------------------------------------------------------------------


[[Page 11459]]

    To date the Exchange believes that there have been no adverse 
effects on the market as a result of these increases in the limits for 
equity option contracts and options overlying QQQQ.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objective of Section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanisms of a free and open market and the 
national market system, and, in general to protect investors and the 
public interest, by extending the Pilot Program for approximately an 
additional six months.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 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 after 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 \11\ and Rule 19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\13\ 
However, Rule 19b-4(f)(6)(iii)\14\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange provided the Commission 
with written notice of its intent to file this proposed rule change at 
least five business days prior to the date of filing the proposed rule 
change. In addition, the Exchange has requested that the Commission 
waive the 30-day pre-operative delay. The Commission believes that 
waiving the 30-day pre-operative delay is consistent with the 
protection of investors and in the public interest because it will 
allow the Pilot Program to continue uninterrupted.\15\
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19-4(f)(6)(iii).
    \14\ Id.
    \15\ For the purposes only of waiving the pre-operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    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-2006-13 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-2006-13. 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. Copies of such filing will also 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 No. SR-Phlx-2006-13 and should be 
submitted on or before March 28, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-3163 Filed 3-6-06; 8:45 am]

BILLING CODE 8010-01-P
