

[Federal Register: December 14, 2007 (Volume 72, Number 240)]
[Notices]               
[Page 71185]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de07-81]                         


[[Page 71185]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56933; File No. SR-Phlx-2007-70]

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

December 7, 2007.
    On September 5, 2007, the Philadelphia Stock Exchange, Inc. 
(``Phlx'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934, as amended (``Act'') \1\ and Rule 19b-
4 thereunder,\2\ a proposed rule change 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''). On October 11, 2007, the Exchange 
submitted Amendment No. 1 to the proposed rule change. The proposed 
rule change, as amended, was published for comment in the Federal 
Register on November 02, 2007.\3\ The Commission received no comments 
on the proposal. This order approves the proposed rule change, as 
modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 56714 (October 29, 
2007), 72 FR 56714 (SR-Phlx-2007-70).
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    Phlx proposed 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 FCOs.\4\ 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. 
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.
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    \4\ 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).
    The Exchange plans to implement the proposed rule change on 
January 2, 2008. Telephone conversation between Carla Behnfeldt, 
Director and Counsel, Phlx, and Natasha Cowen, Special Counsel, 
Division of Trading and Markets, Commission, on December 6, 2007.
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    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. The Exchange believes that quoting and trading U.S. dollar-
settled FCOs in smaller increments should provide additional trading 
opportunities and enable investors to trade these options with greater 
precision as to price. According to the Exchange, the changes would 
permit the trading of U.S. dollar-settled FCOs in the same minimum 
increments that have long been applicable to the Exchange's physical 
delivery FCO contracts.\5\
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    \5\ Although U.S. dollar-settled FCOs would be trading in these 
narrower minimum increments, the Exchange notes that 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. The pilot, which permits 
certain options series to be quoted and traded in increments of $ 
0.01, began on January 26, 2007. See, e.g., Securities Exchange Act 
Release No. 56563 (September 27, 2007), 72 FR 56429 (October 3, 
2007) (SR-Phlx-2007-62).
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    The Commission finds, after careful consideration, that the 
proposed rule change, as amended, is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\6\ In particular, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act,\7\ which requires that an exchange have rules designed, among 
other things, 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. The proposed rule change will allow 
U.S. dollar-settled FCOs to trade in the same increments as applicable 
to the Exchange's physical delivery FCOs.
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    \6\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (SR-Phlx-2007-70), as modified by 
Amendment No. 1, be, and it hereby is, approved.
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    \8\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-24195 Filed 12-13-07; 8:45 am]

BILLING CODE 8011-01-P
