
[Federal Register: April 2, 2008 (Volume 73, Number 64)]
[Notices]               
[Page 18028-18029]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap08-111]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57567; File No. SR-Phlx-2008-25]

 
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Implementation of Phase II of the Penny Pilot Program

March 26, 2008.
    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 March 20, 2008, 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 the 
Phlx. The Exchange has designated this proposal as one constituting a 
stated policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule under Section 
19(b)(3)(A)(i) of the Act \3\ and Rule 19b-4(f)(1) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Phlx proposes to implement Phase II of a pilot program (the 
``pilot'') that permits certain options series to be quoted and traded 
in increments of $0.01. Phase II will include all options included in 
the current pilot, together with additional options, as described more 
fully below. Phase II of the pilot (``Phase II'') will extend through 
March 27, 2009.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.Phlx.com/exchange/phlx-rule-fil.htm), at the Phlx, 
and at the Commission's Public Reference Room.

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 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 implement Phase II of 
the pilot. The Exchange believes that including additional options to 
the pilot should provide greater breadth and depth of experience in 
quoting and trading options series in increments of $0.01, and should 
therefore enable the Exchange and the Commission to better analyze the 
impact of the pilot on the options marketplace.
    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 pilot options with a price of $3.00 or higher are 
currently quoted and traded in minimum increments of $0.05, except that 
options overlying the PowerShares QQQ Trust (``QQQQ'') are quoted and 
traded in minimum increments of $0.01 for all series regardless of the 
price.
    The pilot began on January 26, 2007,\5\ was thereafter extended 
through September 27, 2007,\6\ and was then extended and expanded to 
include additional options.\7\ Phase I of the expansion, which began on 
September 28, 2007, added 22 options that are among the most actively 
traded, multiply-listed options based on average daily volume, and 
together with the original 13 options in the initial pilot, represented 
approximately 35% of the total industry volume. A list of all pilot 
options was communicated to membership via Exchange circular for the 
initial pilot and for Phase I.
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    \5\ See Securities Exchange Act Release No. 55153 (January 23, 
2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-2006-74). In that 
filing, the Exchange also made conforming amendments to various 
Exchange rules in order to be consistent with the pilot.
    \6\ See Securities Exchange Act Release No. 56141 (July 24, 
2007), 72 FR 42216 (August 1, 2007) (SR-Phlx-2007-53).
    \7\ See Securities Exchange Act Release No. 56563 (September 27, 
2007), 72 FR 56429 (October 3, 2007) (SR-Phlx-2007-62).
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    The Exchange now proposes to implement Phase II of the expansion. 
Phase II will begin March 28, 2008, and will extend for one year, 
through March 27, 2009. Phase II will add 28 options to the pilot, 
bringing the total number of options included in the pilot to 63. An 
Exchange Circular, attached as Exhibit 2 to the proposed rule change, 
identifies these additional underlying securities.\8\
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    \8\ 8 The Exchange Circular attached as Exhibit 2 to the 
proposal contained an inaccurate date. The Exchange has represented 
that it will correct this inaccuracy before the Exchange Circular is 
circulated. Telephone conversation between Richard Rudolph, Vice 
President and Counsel, Phlx, and Jennifer Colihan, Special Counsel, 
Division of Trading and Markets, Commission, on March 26, 2008.
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    Again, all penny options in Phase II will trade in $0.01 increments 
in series trading below $3.00, and in $0.05 increments in series 
trading at $3.00 and above. Options on QQQQ will continue to trade in 
increments of $0.01 for all series.
2. Statutory Basis
    The Exchange believes that its proposal 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 
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, by expanding the pilot to include more options series.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 will 
impose 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

    No written comments were either solicited or received.

[[Page 18029]]

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(i) of the Act \11\ and Rule 19b-4(f)(1) thereunder,\12\ 
because it constitutes a stated policy, practice, or interpretation 
with respect to the meaning, administration, or enforcement of an 
existing rule.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(i).
    \12\ 17 CFR 240.19b-4(f)(1).
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    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 purposes of the Act.\13\
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    \13\ See 15 U.S.C. 78s(b)(3)(C).
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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-2008-25 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-2008-25. 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 the filing also will 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 Number SR-Phlx-2008-25 and should be 
submitted on or before April 23, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-6732 Filed 4-1-08; 8:45 am]

BILLING CODE 8011-01-P
