

[Federal Register: November 2, 2007 (Volume 72, Number 212)]
[Notices]               
[Page 62290-62291]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02no07-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56714; File No. SR-Phlx-2007-70]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing of a Proposed Rule Change as Modified by Amendment No. 
1 Thereto Relating to Rule 1034, Minimum Increments

October 29, 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 September 5, 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, II, 
and III below, which Items have been substantially prepared by Phlx. On 
October 11, 2007, the Exchange submitted Amendment No. 1 to the 
proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Phlx proposes to amend Rule 1034, Minimum Increments, to decrease 
the size of the minimum quoting and trading increments applicable to 
the Exchange's U.S. dollar-settled foreign currency options (``FCOs'').
    The text of the proposed rule change is available at 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, 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. 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 provide additional 
trading opportunities by reducing the minimum increments applicable to 
the Exchange's U.S. dollar-settled FCOs.\3\ Quoting and trading in 
smaller increments should enable investors to trade U.S. dollar-settled 
currency options with greater precision as to price. The changes would 
permit the trading of U.S. dollar-settled FCOs in the same minimum 
increments that have long been applicable (with one unrelated 
exception--the physical delivery British pound/Japanese yen option) to 
the Exchange's physical delivery FCO contracts.
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    \3\ On January 8, 2007, the Exchange began trading U.S. dollar-
settled options on the British pound and the Euro on the Exchange's 
electronic trading platform for options, Phlx XL. See Securities 
Exchange Act Release No. 54989 (December 21, 2006), 71 FR 78506 
(December 29, 2006) (approving SR-Phlx-2006-34). The Exchange 
subsequently listed U.S. dollar-settled FCOs on the Australian 
dollar, the Canadian dollar, the Swiss franc and the Japanese yen. 
See Securities Exchange Act Release No. 56034 (July 10, 2007), 72 FR 
38853 (July 16, 2007) (approving SR-Phlx-2007-34).
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    Currently, all U.S. dollar-settled FCOs other than the Japanese yen 
have minimum increments of $.0010 (expressed as .10) or $.0005 
(expressed as .05). Minimum increments for the Japanese yen are 
$.000010 (also expressed as .10) or $.000005 (expressed as .05). In 
each case the applicable minimum increment is determined by the price 
at which the option is quoting. For example, all U.S. dollar-settled 
FCO contracts (other than options on the Japanese yen) quoting at 
$.0300 (expressed as 3.00) or higher have a minimum trading increment 
of $.0010 (expressed as .10), while the minimum increment for these 
U.S. dollar-settled FCOs quoting under $.0300 (expressed as 3.00) is 
$.0005 (expressed as .05). These minimum increments were originally 
established in order to accommodate trading of U.S. dollar-settled FCOs 
on the Phlx XL platform, which did not have penny trading capability 
when the rules for the U.S. dollar-settled FCOs were first drafted and 
filed with the Commission.
    The proposed amendments to Rule 1034 would set the minimum 
increment for U.S. dollar-settled FCOs on currencies other than the 
Japanese yen at $.0001 and the minimum increment for U.S. dollar-
settled FCO contracts on the Japanese yen at $.000001 (in both cases 
expressed as .01), regardless of the price at which the option is 
quoting. This change would conform the minimum increments for U.S. 
dollar-settled FCOs to those applicable currently to the Exchange's 
physical delivery FCOs. Although U.S. dollar-settled FCOs would be 
trading in these narrower minimum increments, they would not actually 
be trading in pennies (the trading increment would actually be much 
smaller although it would be expressed as .01) and would not be 
considered part of the Exchange's pilot program currently applicable to 
certain equity options.\4\
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    \4\ The pilot, which permits certain options series to be quoted 
and traded in increments of $0.01, began on January 26, 2007. See 
Securities Exchange Act Release No. 55153 (January 23, 2007), 72 FR 
4553 (January 31, 2007) (SR-Phlx-2006-74). The pilot was extended 
through September 27, 2007. See Securities Exchange Act Release No. 
56141 (July 24, 2007), 72 FR 42216 (August 1, 2007) (SR-Phlx-2007-
53). The pilot program has been extended again through March 27, 
2009. See Securities Exchange Act Release No. 56563 (September 27, 
2007), 72 FR 56429 (October 3, 2007) (SR-Phlx-2007-62). With one 
exception all series in options included in the pilot trading at a 
price of less than $3.00 are currently quoted and traded in minimum 
increments of $0.01, and those with a price of $3.00 or higher are 
currently quoted and traded in minimum increments of $0.05. A list 
of all series of options in the pilot was communicated to membership 
via Exchange circular.
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    Currently, options on currency futures trade in these smaller 
trading increments on the Chicago Mercantile Exchange. As a competitive 
matter, the

[[Page 62291]]

Exchange seeks the opportunity to offer investors those same, more 
refined increments. Also, currencies trade on the cash market in these 
smaller increments. Additionally, as stated above, Phlx customers have 
been accustomed to trading in these more refined increments in the 
Exchange's physical delivery FCOs since 1982. Providing these more 
refined increments would permit Exchange specialists the opportunity to 
provide better fills (meaning less spread than the current wider 
minimum increments rules allow) to customers.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and with 
Section 6(b)(5) of the Act,\6\ in particular, 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 a free and 
open market and a national market system, and, in general, to protect 
investors and the public interest.
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    \5\ 15 U.S.C. 78f.
    \6\ 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 would 
result in 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

    Written comments were neither solicited nor received.

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which Amex consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2007-70 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-2007-70. 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 such filing also will be available for 
inspection and copying at the principal office of 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-2007-70 and should be 
submitted on or before November 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-21578 Filed 11-1-07; 8:45 am]

BILLING CODE 8011-01-P
