Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. (``Phlx''), Relating to the Listing and Trading of Quarterly Index Expiration Options on All Stock Indexes for Which Index Options are Listed for Trading by the Phlx

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33810; File No. SR-Phlx-93-45]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule

Change by the Philadelphia Stock Exchange, Inc. (``Phlx''), Relating to

the Listing and Trading of Quarterly Index Expiration Options on All

Stock Indexes for Which Index Options are Listed for Trading by the

Phlx

March 24, 1994.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on November

24, 1993, the Philadelphia Stock Exchange, Inc. (``Phlx'' or

``Exchange'') filed with Securities and Exchange Commission

(``Commission'') the proposed rule change as described in Items I, II,

and III below, which Items have been prepared by the Phlx.\1\ The

Commission is publishing this notice to solicit comments on the

proposed rule change from interested persons.

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\1\On March 21, 1994, the Exchange filed Amendment No. 1 to the

proposed rule change. Amendment No. 1 amends (1) certain Phlx rules

to add references to quarterly index expiration (``QIX'') options,

and (2) Rule 1001A(d) to state that positions in QIX options will be

aggregated with full-value, reduced-value, and long-term index

options based on the same index. The Phlx also represents that at

the present time, it will not list QIX options with more than 12

months to expiration. See Letter from Catherine Humphrey, Law Clerk,

Phlx, to Sharon Lawson, Office of Derivatives and Equity Oversight,

Division of Market Regulation, Commission, dated March 18, 1994

(``Amendment No. 1'').

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I. Self-Regulatory Organization's Statement of the Terms of

Substance of the Proposed Rule Change

The Phlx, pursuant to Rule 19b-4 of the Act, proposes a rule change

to provide for the listing and trading of quarterly index expiration

(``QIX'') options on the Gold and Silver (``XAU'') Index, the Utility

(``UTY'') Index, the National Over-the-Counter (``XOC'') Index, the

Value Line (``VLE'') Index, and the Bank (``BKX'') Index. The text of

the proposed rule change is available at the Office of the Secretary,

the Phlx, and at the Commission.

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 Exchange 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 the

Statutory Basis for, the Proposed Rule Change

The Phlx proposes a rule change to list QIX options on the XAU,

VLE, UTY, XOC, and BKX Indexes. The proposed QIX options would expire

on the first business day of the calendar quarter for p.m.-settled

index options and on the second business day of the calendar quarter

for a.m.-settled index options. Accordingly, the XAU, UTY, VLE, and XOC

index options, whose settlement values are currently determined using

closing values of the component securities, would have their QIX

settlement values determined on the close of the last business day of

the calendar quarter and would expire on the first business day of the

next quarter. The BKX index options, whose settlement value is

currently determined using the opening values of the component

securities, would have its QIX settlement value determined on the

opening of the first business day of the next calendar quarter and

would expire on the second business day of that quarter.

The Exchange's proposal would allow for the listing of up to eight

quarterly expirations at any given time, however, at the present time,

the Exchange will not list or trade QIX options with more than 12

months to expiration.\2\ For example, if Phlx began listing QIX options

in April 1994, there could be QIX options series listed with

expirations in July 1994, October 1994, January 1994, and April 1995.

Finally, in reference to position and exercise limits, Phlx proposes to

aggregate QIX options based on a particular index with existing options

contracts based on the same index.\3\ With respect to all other

contract features, the proposed QIX options will be subject to the same

rules that presently govern the trading of existing options contracts

including: Contract terms; sales practice rules; margin requirements;

and floor trading procedures.

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\2\Id. The Commission notes that any proposal to list or trade

QIX options with more than twelve months to expiration must be filed

with the Commission for review under Section 19(b)(2) of the Act.

\3\Id.

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According to the Exchange, portfolio managers and institutional

investors frequently engage in ``quarterly hedging strategies'' as

their performance is often judged on a quarterly basis. The Phlx

believes the proposed rule change will provide investment managers and

other institutional investors with a strategic tool to accommodate

their hedging and investment needs.

The Phlx also notes that other options exchanges already list and

trade QIX options on various stock indexes\4\ and in this respect, the

Phlx represents that the Options Clearing Corporation (``OCC'') will

accommodate the proposed Phlx QIX options.

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\4\See, e.g., Securities Exchange Act Release No. 32693 (July

29, 1993), 58 FR 41817 (August 5, 1993) (QIX options on the Russell

2000 Index listed and traded on the Chicago Board Options Exchange).

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The Exchange believes that the proposed rule change is consistent

with Section 6 of the Act in general, and with Section 6(b)(5), in

particular, in that it is designed to facilitate transactions in

securities, to perfect the mechanism of a free and open market, and to

protect investors and the public interest. Specifically, the Exchange

believes that consistent with Section 6(b)(5) of the Act, the proposal

would extend the benefits of a valuable new product to the investing

public and provide competition to other similar products already

available in the securities markets.

(B) Self-Regulatory Organization's Statement on Burden on Competition

The Phlx does not believe that the proposed rule change will impose

any 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 with respect to the

proposed rule change.

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 the self-regulatory organization 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. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW., Washington, DC 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 Section, 450 Fifth Street, NW.,

Washington, DC. Copies of such filing will also be available for

inspection and copying at the principal office of the Phlx. All

submissions should refer to File No. SR-Phlx-93-45 and should be

submitted April 21, 1994.

For the Commission, by the Division of Market Regulation,

pursuant to delegated authority.\5\

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\5\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-7605 Filed 3-30-94; 8:45 am]

BILLING CODE 8010-01-M