[Federal Register Volume 62, Number 23 (Tuesday, February 4, 1997)]
[Notices]
[Pages 5268-5270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2629]
[[Page 5268]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38207; File No. SR-PHLX-97-02]
Self-Regulatory Organizations; Notice of Filing of and Immediate
Effectiveness of Proposed Rule Change by the Philadelphia Stock
Exchange, Inc. Proposing to List and Trade Options and LEAPS on the
PHLX Oil Service Index
January 27, 1997.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on January 22,
1997, the Philadelphia Stock Exchange Inc. filed with the Securities
and Exchange Commission the proposed rule change as described in Items
I, II, and III below, which Items have been prepared by the self-
regulatory organization.\1\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ On January 24, 1997, the Exchange filed with the Commission
an amendment (``Amendment No. 1'') to the proposed rule change. The
amendment, among other things, clarifies what actions the Exchange
may take in consultation with the Commission in the event that the
Index fails to meet certain maintenance criteria. Letter from
Nandita Yagnik, Esq., New Product Development, PHLX, to Janet
Russell-Hunter, Esq., Special Counsel, Office of Market Supervision,
Division of Market Regulation, SEC, dated January 23, 1997.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Philadelphia Stock Exchange, Inc. (``PHLX'' or the
``Exchange'') pursuant to Rule 19b-4 of the Securities Exchange Act of
1934 (``Act'') proposes to list and trade options and LEAPS on the PHLX
Oil Service Index (``Oil Service Index'' or ``Index'') composed of the
stocks of 15 corporations involved in the oil service industry.
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 self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments its received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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
The purpose of the proposed rule change is to list for trading
European style options on the PHLX Oil Service Index, a new index
developed by the Exchange. The Oil Service Index is comprised of 15
companies operating in the oil service industry. The companies included
within the index provide drilling and production services, oil field
equipment, onshore and offshore drilling and support services and
geophysical/reservoir services.\2\ The Exchange also represents that
the Oil Service Index meets the generic criteria for listing options on
narrow-based indexes as set forth in PHLX Rule 1009A. Accordingly, the
Exchange is submitting this proposed rule change pursuant to and in
accordance with the procedures set forth in the Commission's generic
index approval order \3\ and the PHLX proposes to list and trade
options on the Index no sooner than 30 days after the filing date of
this proposed rule change.
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\2\ A list of the specific issues together with their number of
shares and percentage in the Oil Service Index as of December 23,
1996 is attached to the filing as Exhibit B.
\3\ Securities exchange Act Release No. 34157 (June 3, 1994), 59
FR 30062 (``Generic Index Approval Order'').
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Ticker Symbol: OSX.
Settlement Value Symbol: OSV.
Underlying Index: The PHLX Oil Service Index is a price weighted
index composed of 15 stocks from the Oil Service industry that are
traded on either in the New York Stock Exchange (``NYSE'') or the
NASDAQ market (``NASDAQ''), and are, therefore, reported securities as
defined in Rule 11Aa3-1 under the Act. Further, they all presently meet
the Exchange's listing criteria for equity options contained in PHLX
Rule 1009 and are currently the subject of listed options on U.S.
options exchanges.
As of December 23, 1996, the market capitalization of all stocks in
the index exceeded $60 billion and such individual capitalizations
ranged from $392 million to $25 billion. All 15 component issues in the
Index had monthly trading volumes in excess of one million shares over
each of the past six months from July through December 1996.
Accordingly, the Exchange represents that with respect to the criteria
for market capitalization and trading volume, the Index satisfies the
generic listing standards as stated in PHLX Rule 1009A. Further, the
largest single component represents 16.6% of the weight of the index
and the five highest weighted components do not in the aggregate
account for more than 60% of the weight of the index. The value of the
index is set at 75 as of December 31, 1996.
Index Calculation: The Index is a price weighted index. To compute
the Oil Service Index, the following formula would be used:
[GRAPHIC] [TIFF OMITTED] TN04FE97.006
Where:
SP- current stock price
divisor = number of stocks in the index
Index Maintenance: To maintain the continuity of the Index, the
divisor will be adjusted to reflect non-market changes in the price of
the component securities as well as changes in the composition of the
index. Changes which may result in divisor adjustments include but are
not limited to stock splits, dividends, spin-offs, certain rights
issuances and mergers and acquisitions.
The Exchange shall maintain the index in accordance with the
Generic Index Approval Order.\4\ If the Index fails at any time to
satisfy the maintenance criteria set forth in the Generic Index
Approval Order, the Exchange will immediately notify the Commission of
that fact and will not open for trading any additional series of
options on the Index unless failure is determined by the Exchange not
to be significant and the Commission concurs in that determination or
unless the continued listing of options on the PHLX Oil Service Index
has been approved by the Commission under Section 19(b)(2) of the Act.
In addition to not opening for trading any additional series, the
Exchange may, in consultation with the Commission, prohibit opening
purchase transactions in series of options
[[Page 5269]]
previously opened for trading. (e.g., PHLX Rule 1010).
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\4\ Supra note 3.
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Absent Commission approval, the Exchange will not increase the
number of components to more than 20 or decrease the number to fewer
than 10, and in no event will the Exchange decrease the number of
components within the index to less than nine components. The PHLX will
not make any change in the composition of the Index that would cause
fewer than 90% of the stocks, by weight or fewer than 80% of the total
number of stocks in the index to qualify as stocks eligible for equity
options trading under PHLX Rule 1009. The Exchange represents that only
U.S. companies are represented in the Oil Service Index. However, if
non-U.S. components (stocks or American Depositary Receipts) are added
that are not subject to comprehensive surveillance sharing agreements
between the PHLX and the primary exchange on which the components are
traded, those components will account for no more than 20% of the index
by weight.
The PHLX Oil Service Index value will be disseminated every 15
seconds during the trading day. The PHLX has retained Bridge Data Inc.
to compute and to do all necessary maintenance of the Index.\5\
Pursuant to PHLX Rule 1100A, updated Index values will be disseminated
and displayed by means of primary market prints reported by the
Consolidated Tape Association and over the facilities of the Options
Price Reporting Authority. The Index value will also be available on
broker-dealer interrogation devices to subscribers of the options
information.
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\5\ Pending approval by the Commission, the PHLX proposes to
utilize its own internal system's calculation of index values in
certain circumstances. See SR-PHLX-96-36 Regarding Index Value
Calculations by the Index Calculation Engine (``ICE'') System.
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Unit of Trading: Each options contract will represent $100, the
index multiplier, times the Index value. For example, an Index value of
200 will result in an option contract value of $20,000 (100 x 200).
Exercise Price: The Exercise prices will be set in accordance with
PHLX Rule 1101A(a).
Settlement Value: The Index value for purposes of setting
outstanding Index options and Index LEAPS contracts upon expiration
will be calculated based upon the regular way opening sale prices for
each of the Index's component stocks in their primary market on the
last trading day prior to expiration. In the case of the National
Market Securities traded through NASDAQ, the first reported sale price
will be used for the final settlement value for expiring Index options
contracts. If any of the component stocks do not open for trading on
the last trading day before expiration, then the settlement value will
be determined in accordance with the by-laws and rules of the Options
Clearing Corporation (``OCC'').\6\
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\6\ The Commission notes that pursuant to Article XVII, Section
4 of the Options Clearing Corporation's (``OCC'') by-laws, OCC is
empowered to fix an exercise settlement amount in the event it
determines a current index value is unreported or otherwise
unavailable. Further, OCC has the authority to fix an exercise
settlement amount whenever the primary market for the securities
representing a substantial part of the value of an underlying index
is not open for trading at the time when the current index value
(i.e., the value used for exercise settlement purposes) ordinary
would be determined. See Securities Exchange Act Release No. 37315
(June 17, 1996), 61 FR 42671 (order approving SR-OCC-95-19).
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Last Trading Day: The last trading day will be the Thursday prior
to the third Friday of the month for options which expire on the
Saturday following the third Friday of that month.
Trading Hours: 9:30 a.m. to 4:10 p.m. EST.
Position and Exercise Limits: The PHLX Oil Service Index is an
industry index. The PHLX will employ position and exercise limits
pursuant to PHLX Rules 1001A(b)(i) and 1002A, respectively. The
position and exercise limits will, therefore, be 15,000 contracts.
Expiration Cycles: Three-months from the March, June, September,
December cycle plus at least 2 additional near-term months. LEAPS will
also be traded on the Index pursuant to PHLX Rule 1101A(b)(iii).
Exercise Style: Exercise style will be European.
Premium Quotations: Premiums will be expressed in terms of dollars
and fractions of dollars pursuant to PHLX Rule 1033A. For example, a
bid or offer of 1\1/2\ will represent a premium per options contract of
$150 (1\1/2\ x 100).
The options will be traded pursuant to current PHLX Rules governing
the trading of index options (see, particularly, PHLX Rule 1000A
through 1102A and generally PHLX Rules 1000 through 1072). The Exchange
also represents that surveillance procedures currently used to monitor
trading in index options will be applicable to this Index. These
procedures include having complete access to trading activity in the
underlying securities which are all traded on either the NYSE or
NASDAQ. In addition, the Intermarket Surveillance Group Agreement
(``ISG Agreement'') dated July 14, 1983, as amended on January 29, 1990
will be applicable to the trading of options on the Index.
The proposed rule change is consistent with Section 6 of the Act in
general, and in particular with Section 6(b)(5), in that it is designed
to promote just and equitable principles of free trade, prevent
fraudulent and manipulative acts and practices, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to and facilitating
transactions in securities to remove impediments to and perfect the
mechanism of a free and open market and a national market system, as
well as to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on the Burden on
Competition
The PHLX 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
No written comments were solicited or received at the time of the
filing.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule change complies with the standards set
forth in the Generic Index Approval Order,\7\ it has become effective
pursuant to Section 19(b)(3)(A) of the Act and subparagraph (e) of Rule
19b-4 thereunder. Pursuant to the Generic Index Approval Order, the
Exchange may not list Index options for trading prior to 30 days after
the date that the amended proposed rule change was formally filed with
the Commission. At any time within 60 days of the filing of such
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.
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\7\ Supra note 3.
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, N.W.,
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Washington, D.C. 20549. 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 at the Commission's Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such filing will also be available for inspection and copying
at the principal office at the PHLX. All submissions should refer to
File No. SR-PHLX-97-02, and should be submitted by February 25, 1997.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-2629 Filed 2-3-97; 8:45 am]
BILLING CODE 8010-01-M