[Federal Register Volume 62, Number 186 (Thursday, September 25, 1997)]
[Notices]
[Pages 50422-50426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25376]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39087; File No. SR-PCX-97-29]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change and Amendment No. 1 Thereto and Notice of Filing and Order
Granting Accelerated Approval of Amendment No. 2 Thereto by the Pacific
Exchange, Inc. Relating to the Listing and Trading of Options on the
Morgan Stanley Emerging Growth Index
September 17, 1997.
I. Introduction
On July 8, 1997, the Pacific Exchange, Inc. (``PCX'' or
``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade options on the
Morgan Stanley Emerging Growth Index (``Index''). On July 29, 1997, the
Exchange submitted an amendment to the proposal.\3\ Notice of the
proposed rule change and Amendment No. 1 appeared in the Federal
Register on August 5, 1997.\4\ No comment letters were received
concerning the proposed rule change. On September 17, 1997, the
Exchange submitted Amendment No. 2.\5\ This order approves the PCX's
proposal, as amended.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Michael D. Pierson, Senior Attorney,
Regulatory Policy, PCX to James T. McHale, Special Counsel, Division
of Market Regulation (``Division''), SEC, dated July 29, 1997
(``Amendment No. 1''). Amendment No. 1, among other issues,
addressed maintenance standards and revised the Exchange's
limitation of liability rule, PCX Rule 7.13.
\4\ See Securities Exchange Act Release No. 38884 (July 29,
1997), 62 FR 42150 (August 5, 1997).
\5\ See Letter from Michael D. Pierson, Senior Attorney,
Regulatory Policy, PCX to Marianne H. Duffy, Special Counsel,
Division, SEC, dated September 17, 1997 (``Amendment No. 2'').
Amendment No. 2 proposed an additional maintenance standard
regarding options eligibility of the Index components.
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II. Description of the Proposal
The purpose of the proposed rule change is to permit the Exchange
to list and trade European-style, cash-settled options on the Index, a
market capitalization-weighted, broad-based index developed by Morgan
Stanley & Co. Incorporated (``Morgan Stanley'') comprised of the common
stocks of 50 domestic emerging growth securities representing 26
different industry groups.
A. Design of the Index
The Index is comprised of 50 representative stocks \6\ traded on
the New York Stock Exchange, Incorporated (``NYSE''), the American
Stock Exchange, Incorporated (``Amex'') and through the facilities of
the National Association of Securities Dealers, Incorporated (``NASD'')
automated quotation system and are reported national market system
securities.
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\6\ The 50 stocks comprising the Index are: BMC Software Inc.
(BMCS), Parametric Technology Corp. (PMTC), Diamond Offshore
Drilling, Inc. (DO), Ascend Communications Inc. (ASND), Cabletron
Systems (CS), Altera Corp. (ALTR), Ciena Corp. (CIEN), Linear
Technology Inc. (LLTC), Paychex Inc. (PAYX), Compuware Corp. (CPWR),
XILINX Inc. (XLNX), Maxim Integrated Products (MXIM), Health
Management Assoc. (HMA), McAfee Associates Inc. (MCAF), Sterling
Commerce Inc. (SE), Iomega Corp. (IOM), Robert Half Intl. Inc.
(RHI), ATMEL Corp. (ATML), Bed Bath & Beyond Inc. (BBBY), American
Power Conversion (APCC), Planet Hollywood Intl. Inc. (PHII),
Synopsys Inc. (SNPS), Reading and Bates Corp. (RB), Viking Office
Prods. Inc. (VKNG), Micron Electronics Inc. (MUEI), Cambridge
Technology Partners (CAPT), Blyth Industries Inc. (BTH), Jabil
Circuit Inc. (JBIL), Novellus Systems Inc. (NVLS), Dollar Tree
Stores Inc. (DLTR), Jones Medical Inds. Inc. (JMED), Pairgain
Technologies Inc. (PAIR), Rexall Sundown Inc. (RXSD), CDW Computer
Centers Inc. (CDWC), Titanium Metals Corp. (TIMT), Remedy Corp.
(RMDY), Aspect Telecommunications (ASPT), Delta & Pine Land Co.
(DLP), Telco Communications Grp. Inc. (TCGX), APAC Teleservices Inc.
(APAC), Learning Tree Intl. Inc. (LTRE), Visio Corp. (VSIO),
Catalina Marketing Corp. (POS), Nautica Enterprises Inc. (NAUT),
Boston Technology Inc. (BSN), ETEC Systems Inc. (ETEC), Mentor Corp.
(MNTR), Gentex Corp. (GNTX), Veritas Software Co. (VRTS), and Bio
Technology General Corp. (BTGS).
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The Index was designed by Morgan Stanley to reflect the emerging
growth equity market. The component securities were selected for their
market capitalization, price per share, longterm debt as a percentage
of total capital, mean estimated longterm (three year) earnings per
share growth rate, net sales and return on average total equity.
Specifically, stocks were selected based on whether they are
``emerging'' stocks (in general, having current sales figures of
between $25 million and $2 billion annually) and ``growth'' stocks (in
general, having a high mean I/B/E/S \7\ anticipated earnings growth
rate). A primary consideration in determining ``growth'' is whether a
stock's expected growth rate is significantly higher than that of other
stocks. In addition, currently all of the issues are traded in the
United States and there are no foreign issues or American Depositary
Receipts (``ADRs'') included in the Index.\8\
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\7\ The term I/B/E/S refers to the Institutional Broker's
Estimate System, a source of analysts' earnings expectation data
that is obtained from over 7,000 analysts working for approximately
750 research organizations.
\8\ In the future, should the Index include non-U.S. registered
securities, such securities will not in the aggregate comprise more
than 10% of the Index weight and will not represent more than 3
Index components. Prior to reaching these limits, PCX will notify
the Commission to determine if a new filing under Rule 19b-4 is
required.
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The Exchange represents that the Index currently is representative
of the domestic emerging growth stock market as a whole, and therefore,
believes it is a broad-based index. In support of this, the PCX notes
that the Index is comprised of companies in 26 different industry
groups, which range from apparel (.76%) to auto parts (.63%) to
restaurants (1.79%).\9\ Although
[[Page 50423]]
technology issues comprise 61% of the market capitalization of the
Index, these companies are included in nine different industries
ranging from computer software to semiconductors to computer services.
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\9\ The industry groupings and their Index weight are as
follows: apparel (0.76%); auto parts (0.63%); biotechnology (0.56%);
catalog/specialty distribution (2.55%); computer communications
(5.66%); computer local area networks (4.52%); computer software
(20.45%); contract drilling (6.29%); discount stores (1.14%);
diversified commercial services (8.37%); electronic data processing
peripherals (2.55%); electronic data processing services (4.06%);
electrical products (1.82%); electronic data processing (1.53%);
electronic production equipment (3.18%); farming/seeds/milling
(0.86%); hospital/nursing management (2.88%); medical specialties
(0.64%); other metals/minerals (0.91%); other pharmaceuticals
(2.15%); other speciality stores (1.89%); other telephone/
communications (0.84%); packaged goods/cosmetics (1.35%);
restaurants (1.79%); semiconductors (16.99%); and telecommunications
equipment (5.63%). The industry groupings are based upon the
classifications used by FactSet Research Systems, Inc., an
electronic market data provider of information that is available by
subscription in the securities industry.
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The Index is weighted by the market capitalization of the component
stocks. As of June 18, 1997, the total market capitalization of the
Index was $112.7 billion, and the average market capitalization of the
component stocks was $2.3 billion. The individual market capitalization
of the stocks ranged from $629 million (Bio Technology General Corp.)
to $5.9 billion (BMC Software, Inc.) on the same date. The largest
component stock accounted for 5.20% of the Index, while the smallest
accounted for 0.56%. The top five stocks in the Index by weight
accounted for 24.05% of the Index. The average daily trading volume in
the component securities for the period from December 18, 1996 through
June 18, 1997, ranged from a low of 94,688 shares to a high of
6,291,777 shares, with an average daily trading volume for all the
component stocks of approximately 926,131 shares per day.
B. Maintenance of the Index
The Index will be maintained by PCX in conjunction with Morgan
Stanley. Index maintenance includes monitoring Index criteria and
completing the adjustments for company additions and deletions, share
changes, stock splits, stock dividends and stock price adjustments due
to events such as company restructurings or spin-offs, as well as a
semi-annual rebalancing and quarterly review.\10\ In order to ensure
that the Index continues to represent the overall character of the
emerging growth equity market, any changes made to the Index, including
those made at the time of semi-annual rebalancing and quarterly review,
will be in compliance with the following initial inclusion and
maintenance criteria: (a) the number of component stocks in the Index
will be no less than 42 and no greater than 58; (b) the top weighted
component stock will not account for more than 25% of the weight of the
Index; (c) the top five weighted component stocks will not account for
more than 50% of the weight of the Index; (d) no component stock will
have a market capitalization of below $75 million; (e) no component
issue will have an average trading volume of less than 20,000 shares
per day; (f) no component issue will have an average trading value of
less than $100,000 per day; (g) no component will have a price per
share of less than $3; (h) at least 80% of the issues comprising the
Index and at least 90% of the Index weight will meet the initial
listing requirements for options trading pursuant to PCX Rule 3.6; and
(i) the minimum market capitalization for all of the issues included in
the Index, collectively, will be $60 billion.
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\10\ Routine corporate actions, such as stock splits and stock
dividends that require simple changes in the common shares
outstanding and the stock prices of the companies in the Index will
be handled by PCX through a contract with Bridge Data. Non-routine
corporate actions and other material changes such as share issuances
that change the market value of the Index and require an Index
divisor adjustment are performed by Morgan Stanley. In addition,
Morgan Stanley will select all of the stocks that are added to the
Index at the time of the semi-annual rebalancing and quarterly
review.
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In the event that the Index does not comply with any of these
criteria at the time of semi-annual rebalancing and quarterly review,
the Exchange either will: (i) make adjustments to the composition of
the Index to place it in compliance with such criteria; or (ii) notify
Commission staff to determine the appropriate regulatory response,
which could include, but is not limited to, the removal of securities
from the Index, prohibiting opening transactions, or discontinuing the
listing of new series of Index options.
C. Calculation and Dissemination of Index Value
The value of the Index is determined by multiplying the price of
each stock by the number of shares outstanding, adding those sums and
dividing by a divisor which resulted in an Index value of 300.00 on its
base date of February 7, 1997. The Index value will be calculated by
Bridge Data Corporation and will be disseminated at 15-second intervals
during regular PCX trading hours to market information vendors via the
Consolidated Tape Authority. Notice of component changes will be
disseminated to vendors and Member Firms via facsimile and over the
Options News Network.
D. Trading of the Index Options
The Exchange proposes to base trading in options on the Index on
the full value of the Index as expressed in U.S. dollars. The Exchange
also may provide for the listing of long-term index option series
(``LEAPS'') and for FLEX options on the Index. The Exchange will list
expiration months for Index options and Index LEAPS in accordance with
PCX Rule 7.8. Strike prices will be set to bracket the Index in 5 point
increments. The minimum tick size for series trading below $3 will be
\1/16\th and the minimum tick size for all other series will be \1/
8\th.\11\
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\11\ See PCX Rule 6.72.
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E. Position Limits
The Exchange is proposing to establish position limits for Index
options equal to 37,500 contracts on the same side of the market, with
no more than 22,500 contracts in the series with the nearest expiration
date. These limits are roughly equivalent, in dollar terms, to the
limits applicable to options on other indices.\12\ Furthermore, the
hedge exemption rule applicable to broad-based index options,
Commentary .02 to PCX Rule 7.6, will apply to Index options. With
regard to FLEX Index options, the Exchange is proposing to establish
position limits of 200,000 contracts on the same side of the market
pursuant to PCX Rule 8.107(a). The PCX also represents that it has the
necessary systems capacity to support new series that would result from
the introduction of the Index options.\13\
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\12\ For example, on June 18, 1997, a position of 37,500
contracts would have a dollar value of $1,168,800,000 (37,500 times
the Index value of 311.68 times the Index multiplier of 100). For a
comparison of position limits on similar indices, see Securities
Exchange Act Release No. 32554 (June 29, 1993) 58 FR 36492 (July 7,
1993) (order approving increase in position and exercise limits on
the Wilshire Small Cap Index to 37,500 contracts on the same side of
the market with no more than 22,500 of such contracts in the series
with the nearest expiration date) and Securities Exchange Act
Release No. 36504 (November 22, 1995) 60 FR 61275 (November 29,
1995) (order approving increase in position and exercise limits on
the PSE Technology Index to 37,500 contracts on the same side of the
market with no more than 22,500 on such contracts in the series with
the nearest expiration date).
\13\ In addition, the Options Price Reporting Authority
(``OPRA'') has represented that it has the necessary systems
capacity to support those new series of index options that would
result from the introduction of Index options and long-term Index
options. See letter from Joe Corrigan, Executive Director, OPRA, to
Kim Koppien, Vice President-Operations, Options Division, PCX, dated
August 18, 1997.
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F. Exercise and Settlement
The proposed options on the Index will expire on the Saturday
following the third Friday of the expiration month and trading in the
expiring contract month on the PCX will normally cease at 1:15 p.m.
(Pacific Time) on the business day preceding the last day of trading in
the component securities of the Index (ordinarily the Thursday before
expiration Saturday, unless there is an intervening holiday). The
exercise settlement value of Index options at expiration will be
determined from opening prices established at the open of the regular
Friday trading sessions at the appropriate exchange or market system.
If a stock does not trade during
[[Page 50424]]
this interval or if it fails to open for trading, the last available
price of the stock will be used in the calculation of the Index.\14\
When the last trading day is moved in accordance with Exchange holidays
(such as when the PCX is closed on the Friday before expiration), the
last trading day for expiring options will be Wednesday and the
exercise settlement value of Index options at expiration will be
determined at the open of the regular Thursday trading sessions.
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\14\ If a stock does not trade during the opening of the regular
Friday trading session at the appropriate exchange or market system,
or if it fails to open for trading, then pursuant to PCX Rule
7.8(e), the last reported sale price of stock will be used in the
calculation of the Index, unless the exercise settlement amount is
fixed in accordance with the Rules and By-Laws of The Options
Clearing Corporation.
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G. Surveillance
The Exchange will apply its existing index option surveillance
procedures to Index options. These procedures include complete access
to trading activity in the underlying securities. Further, the
Intermarket Surveillance Group (``ISG'') Agreement, dated July 14,
1983, as amended on January 29, 1990, will be applicable to the trading
of options on the Index.\15\
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\15\ ISG was formed on July 14, 1983 to, among other things,
coordinate more effectively surveillance and investigative
information sharing arrangements in the stock and options markets.
See Intermarket Surveillance Group Agreement, July 14, 1983. The
most recent amendment to the ISG Agreement, which incorporates the
original agreement and all amendments made thereafter, was signed by
ISG members on January 29, 1990. See Second Amendment to the
Intermarket Surveillance Group Agreement, January 29, 1990. The
members of the ISG are: the Amex; the Boston Stock Exchange, Inc.;
the Chicago Board Options Exchange, Inc. (``CBOE''); the Chicago
Stock Exchange, Inc.; the NASD; the NYSE; the PCX; and the
Philadelphia Stock Exchange, Inc. Because of potential opportunities
for trading abuses involving stock index futures, stock options, and
the underlying stock, and the need for greater sharing of
surveillance information for these potential intermarket trading
abuses, the major stock index futures exchanges (e.g., the Chicago
Mercantile Exchange and the Chicago Board of Trade) joined the ISG
as affiliate members in 1990.
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H. Other Exchange Matters
Finally, the Exchange proposes to amend PCX Rule 7.13 regarding
limitation of liability in order to be consistent with the limitation
of liability rules of other self-regulatory organizations
(``SROs'').\16\
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\16\ See Amendment No. 1, supra note 3. The Commission notes
that the text of new Rule 7.13 is substantially similar to the
limitation of liability provisions of other SROs. See CBOE Rule
24.14.
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III. Commission Findings and Conclusions
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange, and, in
particular, the requirements of Section 6(b)(5).\17\ Further, the
trading of options on the Index will allow investors holding positions
in some or all of the securities underlying the Index to hedge the risk
associated with their portfolios. Specifically, the Commission finds
that the listing and trading of options on the Index, including LEAPS
and FLEX Index options, will serve to promote the public interest and
help to remove impediments to a free and open securities market by
providing investors with a means to hedge exposure to market risk
associated with the emerging growth equity market \18\ and promote
efficiency, competition, and capital formation.\19\
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\17\ 15 U.S.C. 78f(b)(5).
\18\ Pursuant to Section 6(b)(5) of the Act, the Commission must
predicate approval of any new securities product upon a finding that
the introduction of such product is in the public interest. Such a
finding would be difficult with respect to a product that served no
hedging or other economic function, because any benefits that might
be derived by market participants likely would be outweighed by the
potential for manipulation, diminished public confidence in the
integrity of the markets, and other valid regulatory concerns. In
this regard, the trading of listed options on the Index will provide
investors with a hedging vehicle that should reflect the overall
movement of the stocks representing companies in the emerging growth
sector in the U.S. stock markets.
\19\ 15 U.S.C. 78c(f).
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Nevertheless, the trading of options on the Index raises several
concerns related to the design and maintenance of the Index, customer
protection, surveillance and market impact. The Commission believes,
however, for the reasons discussed below, that the PCX has adequately
addressed these concerns.
A. Design and Maintenance of the Index
The Commission finds that it is appropriate and consistent with the
Act for the PCX to designate the Index as broad-based for purposes of
index options trading. First, the Index is composed of 50 companies
from 26 industry groups including: computer software; semiconductors;
consumer goods; energy; capital equipment; basic materials;
agriculture/food and financial services.\20\ Second, no particular
stock or group of stocks dominates the Index. Specifically, as of June
18, 1997, the largest stock accounted for 5.20% of the Index weight,
while the smallest accounted for 0.56%. The top five stocks in the
Index by weight accounted for 24.05%. Accordingly, the Commission
believes that it is appropriate for the PCX to apply its rules
governing broad-based index options to trading in the proposed Index
options. The Commission notes that with respect to the maintenance of
the Index, Morgan Stanley has implemented several safeguards in
connection with the listing and trading of the Index options that will
serve to ensure that the Index components are highly capitalized,
diversified and actively-traded. In this regard, Morgan Stanley will
maintain the Index so that: (a) the number of component stocks in the
Index will be no less than 42 and no greater than 58; (b) the top
weighted component stock will not account for more than 25% of the
weight of the Index; (c) the top five weighted component stocks will
not account for more than 50% of the weight of the Index; (d) no
component stock will have a market capitalization of below $75 million;
(e) no component issue will have an average trading volume of less than
20,000 shares per day; (f) no component issue will have an average
trading value of less than $100,000 per day; (g) no component will have
a price per share of less than $3; (h) at least 80% of the issues
comprising the Index and 90% of the Index weight will meet the initial
listing requirements for options trading pursuant to PCX Rule 3.6; and
(i) the minimum market capitalization for all of the issues included in
the Index, collectively, will be $60 billion.
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\20\ Although technology issues comprise 61% of the market
capitalization of the Index, these companies are included in nine
different industries ranging from computer software to
semiconductors to computer services. in addition, the Commission
previously has approved the listing and trading of options on a
broad-based index designed to measure the performance of high
capitalization technology stocks. See e.g., Securities Exchange Act
Release No. 37693 (September 17, 1996) 61 FR 50362 (September 25,
1996) (order approving the listing and trading of options on the
Goldman Sachs Technology Composite Index).
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In addition, the Commission notes that Morgan Stanley has adopted
appropriate procedures to be followed by those responsible for
maintaining the Index in order to help to prevent and to deter the
misuse of any informational advantages with respect to changes in the
composition of the Index.\21\ Such procedures include, for example,
informational barriers.
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\21\ See Letter from Carol Shahmoon, Counsel, Morgan Stanley, to
Sharon Lawson, Senior Special Counsel, Division of Market
Regulations, Commission, dated August 7, 1997.
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B. Customer Protection
The Commission believes that a regulatory system designed to
protect public customers must be in place before the trading of
sophisticated financial instruments, such as Index
[[Page 50425]]
options, can commence on a national securities exchange. The Commission
notes that the trading of standardized exchange-traded options occurs
in an environment that is designed to ensure, among other things, that
(1) the special risks of options are disclosed to public customers; (2)
only investors capable of evaluating and bearing the risks of options
trading are engaged in such trading; and (3) special compliance
procedures are applicable to options accounts. Accordingly, because the
Index options will be subject to the same regulatory regime as the
other standardized options currently traded on the PCX, the Commission
believes that adequate safeguards are in place to ensure the protection
of investors in Index options. In addition, the PCX plans to distribute
a circular to its membership calling attention to specific risks
associated with options on the Index.
C. Surveillance
In evaluating new derivative instruments, the Commission,
consistent with the protection of investors, considers the degree to
which the derivative instrument is susceptible to manipulation. The
ability to obtain information necessary to detect and deter market
manipulation and other trading abuses is a critical factor in the
Commission's evaluation. It is for this reason that the Commission
requires that there be a comprehensive surveillance sharing agreement
(``CSSA'') in place between an exchange listing or trading a derivative
product and the exchanges trading the stocks underlying the derivative
contract that specifically enables officials to surveil trading in the
derivative product and its underlying stocks.\22\ Such agreements
provide a necessary deterrent to manipulation because they facilitate
the availability of information needed to fully investigate a potential
manipulation if it were to occur. For foreign stock index derivative
products, these agreements are especially important to facilitate the
collection of necessary regulatory, surveillance and other information
from foreign jurisdictions.\23\
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\22\ The Commission believes that a CSSA should provide the
parties thereto with the ability to obtain information necessary to
detect and deter market manipulation and other trading abuses.
Consequently, the Commission generally requires that a CSSA require
that the parties to the agreement provide each other, upon request,
information about market trading activity, clearing activity, and
the identity of the ultimate purchasers and sellers of securities.
See Securities Exchange Act Release No. 31529 (November 27, 1992).
\23\ As noted above, presently there are no stocks of foreign
issuers in the Index.
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In order to address the above noted concerns, the Exchange will
apply its existing index option surveillance procedures to Index
options. In addition, as previously discussed, the markets on which all
component stocks trade are members of the ISG which provides for the
exchange of all necessary surveillance information.\24\
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\24\ See supra note 14.
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D. Market Impact
The Commission believes that the listing and trading of Index
options on the PCX should not adversely impact the securities markets
in the United States.\25\ First, the existing index option surveillance
procedures of the PCX will apply to options based on the Index. Second,
the Commission notes that the Index is broadbased and diversified and
includes highly capitalized securities that are actively traded. Third,
the position limit of 37,500 contracts on the same side of the market,
provided no more than 22,500 of such contracts are in series in the
nearest expiration month, will serve to minimize potential manipulation
and market impact concerns. Fourth, the risk to investors of contra-
party non-performance will be minimized because Index and regular and
long-term options will be issued and guaranteed by the Options Clearing
Corporation just like any other standardized option traded into the
United States. Accordingly, the Commission does not believe that the
introduction of Index options on the PCX will have a significant effect
on the underlying securities markets.
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\25\ The Commission notes that both the Exchange and OPRA have
represented that they have the necessary systems capacity to support
those new series of index options that would result from the
introduction of options on the Index. See supra note 13 and
accompanying text.
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E. Other Exchange Matters
The Commission finds that the proposed limitation of liability
language will provide the PCX with protection that is substantively
similar to protection already afforded other SROs.\26\ The Commission
believes that by amending the Exchange's limitation of liability rule,
entities will not be discouraged from creating new products or
calculating and disseminating settlement values.\27\ Therefore,
derivative products, that provide hedging or other economic functions,
should remain available to investors.
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\26\ See e.g., CBOE Rule 24.14, supra note 15. In order to
conform its limitation of liability provisions to those of other
SROs, the PSE will not rely on this rule to limit its liability for
intentional misconduct or for any violation of the federal
securities laws.
\27\ See e.g., Securities Exchange Act Release No. 34125 (May
27, 1994) 59 FR 29307 (June 6, 1994).
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For the reasons described above, the Commission finds good cause to
approve Amendment No. 2 prior to the thirtieth day after the date of
publication of notice of filing thereof in the Federal Register.
Specifically, Amendment No. 2 provides, 90% of the Index weight will
meet the initial listing requirements for options trading pursuant to
PCX Rule 3.6.
Accordingly, the Commission believes that it is consistent with
Sections 6(b)(5) and 19(b)(2) \28\ of the Act, to find that good cause
exists to approve Amendment No. 2 on an accelerated basis.
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\28\ 15 U.S.C. 78s(b)(2).
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IV. Solicitation of Comments and Conclusion
Interested persons are invited to submit written data, views and
arguments concerning Amendments No. 2. Persons making written
submissions should file six copies thereof with the Secretary,
Securities and Exchange Commission, 450 Fifth Street, N.W., 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 in the Commission's Public Reference Room in Washington, D.C.
Copies of such filing will also be available for inspection and copying
at the principal office of the PCX. All submissions should refer to the
File No. SR-PCX-97-29 and should be submitted by October 16, 1997.
For the foregoing reasons, the Commission finds that the PCX's
proposal to list and trade options based on the Morgan Stanley Emerging
Growth Index is consistent with the requirements of the Act and the
rules and regulations thereunder.
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-PCX-97-29), as amended, is approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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[[Page 50426]]
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-25376 Filed 9-24-97; 8:45 am]
BILLING CODE 8010-01-M