2182 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

18 15 U.S.C. 78s(b)(2). 

19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 63339 

(November 18, 2010), 75 FR 71771 (‘‘Notice’’). 

4Commentary .05 also permits strike price 

intervals of $5 or greater where the strike price is 

greater than $25 but less than $200; and $2.50 or 

greater where the strike price is $25 or less. 

5 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

6 15 U.S.C. 78f(b)(5). 

modernizes the affiliation provision in 

recognition of the transition of the 

Exchange from a mutual to a 

demutualized organization. 

Furthermore, the Commission notes 

that the Exchange represented in its 

proposal, as described above, that the 

Exchange would continue to have 

access to information on an affiliation 

necessary to carry out its regulatory 

responsibility with respect to the 

member organizations and their 

affiliated persons. Further, an affiliation 

would not excuse a person from any of 

the Exchange’s By-Laws and rules 

governing membership. Notably, both 

the permit holder and the affiliated 

member organizations must comply 

with all applicable registration, 

qualification, examination, and other 

membership requirements, and the 

permit holder must continue to obtain 

and maintain all necessary 

qualifications (including examinations) 

and registrations. Further, the Series A– 

1 permit holder must disclose to the 

Exchange the individuals at each 

member organization (both the primary 

and secondary member organization) 

that are responsible for supervising the 

Series A–1 permit holder. The 

Commission believes that these 

provisions are designed to ensure 

compliance with applicable 

membership rules and should assure the 

Exchange’s oversight of any affiliation. 

In addition, the Commission believes 

that the Exchange’s proposed 

conforming changes to OFPA F–9, F–11, 

and Regulation 3 appropriately reflect 

the proposed deletion of Rule 793 and 

the new provision in Rule 908(b)(i). 

Separately, the Commission believes 

that the proposal to amend the language 

in Rule 908(h) should provide Exchange 

members with clarity as to the transfer 

of permits. 

Finally, the Commission believes that 

requiring applicants for Phlx 

membership to respond to requests for 

documentation or additional 

information within a 90 calendar day 

period, absent a showing of good cause, 

is reasonable and should provide the 

Exchange’s Membership Department upto-date information that it can utilize to 

make decisions concerning membership 

applications. The 90-day response 

period and subsequent lapse of an 

application for non-response should 

encourage prompt replies by applicants 

to Exchange requests for information 

and documentation and should assure 

that the Exchange has reliable and 

current information on which to base 

membership decisions. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,18 that the 

proposed rule change (SR–Phlx–2010– 

148) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–435 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63654; File No. SR–Phlx2010–158] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Order 

Granting Approval of Proposed Rule 

Change Establishing a $5 Strike Price 

Program 

January 6, 2011. 

I. Introduction 

On November 12, 2010, NASDAQ 

OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘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 allow the Exchange to list and 

trade option series with strike price 

intervals of $5 or greater where the 

strike price is more than $200 in up to 

five option classes on individual stocks. 

The proposed rule change, as amended, 

was published for comment in the 

Federal Register on November 24, 

2010.3 The Commission received no 

comment letters on the proposal. This 

order approves the proposed rule 

change. 

II. Description of the Proposal 

Phlx has proposed to modify 

Commentary .05 to Exchange Rule 1012 

to allow the Exchange to list and trade 

series in intervals of $5 or greater where 

the strike price is more than $200 in up 

to five option classes on individual 

stocks (‘‘$5 Strike Price Program’’). 

Currently, Exchange Rule 1012 at 

Commentary .05 permits strike price 

intervals of $10 or greater where the 

strike price is $200 or more.4 The 

proposal would allow the Exchange to 

list series in intervals of $5 or greater 

where the strike price is more than $200 

in up to five option classes on 

individual stocks. 

In support of its proposal, Phlx stated 

that it believes the proposed $5 Strike 

Price Program would provide investors 

increased opportunities to improve 

returns and manage risk in the trading 

of equity options that overlie high 

priced stocks. In addition, the Exchange 

believes the proposed $5 Strike Price 

Program would allow investors to 

establish equity options positions that 

are better tailored to meet their 

investment, trading, and risk 

management requirements. 

Phlx further stated that it has 

analyzed its capacity and represented 

that the Exchange and the Options Price 

Reporting Authority have the necessary 

systems capacity to handle the potential 

additional traffic associated with the 

listing and trading of new series 

associated with the $5 Strike Price 

Program. 

III. Discussion 

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.5 Specifically, the 

Commission finds that the proposal is 

consistent with Section 6(b)(5) of the 

Act,6 which requires, among other 

things, that the rules of a national 

securities exchange be designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, 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. 

As the Exchange notes, the proposal 

should provide investors with added 

flexibility in the trading of options on 

high-priced securities and allow 

investors to establish options positions 

that are more precisely tailored to meet 

their investment objectives. The 

Commission believes that the proposal 

strikes a reasonable balance between the 

Exchange’s desire to accommodate 

market participants by offering a wider 

array of investment opportunities and 

the need to avoid unnecessary 

proliferation of options series and the 

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Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 2183 

7 15 U.S.C. 78s(b)(2). 

8 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5See Securities Exchange Act Release No. 63558 

(December 16, 2010), 75 FR 80553 (December 22, 

2010) (Order approving SR–NYSEAmex-2010–100). 

6Stock/options orders may not trade at the same 

price as a Customer order in the option leg, unless 

satisfying the Customer order first, even though the 

Customer order cannot satisfy all the terms of the 

Stock/option order. 

corresponding increase in quotes and 

market fragmentation. The Commission 

expects the Exchange to monitor the 

trading volume associated with the 

additional options series listed as a 

result of this proposal and the effect of 

these additional series on market 

fragmentation and on the capacity of the 

Exchange’s, OPRA’s, and vendors’ 

automated systems. 

In addition, the Commission notes 

that Phlx has represented that it believes 

the Exchange and the Options Price 

Reporting Authority have the necessary 

systems capacity to handle the 

additional traffic associated with the 

newly permitted listings. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,7 that the 

proposed rule change (SR–Phlx–2010– 

158) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–441 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63660; File No. SR– 

NYSEArca–2010–124] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Amending NYSE Arca 

Options Rule 6.62(h) to Define Stock/ 

Complex Orders, Amending NYSE 

Arca Options Rule 6.75(g) to Update 

and Clarify the Priority of Complex 

Orders, and Amending NYSE Arca 

Options Rule 6.91 to Establish a 

Complex Order Auction 

January 6, 2011. 

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 December 

30, 2010, NYSE Arca, Inc. (‘‘Exchange’’ 

or ‘‘NYSE Arca’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by NYSE Arca. NYSE Arca has 

submitted the proposed rule change 

under Section 19(b)(3)(A) of the Act 3

and Rule 19b–4(f)(6) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

NYSE Arca Options Rule 6.62(h) to 

define Stock/Complex Orders, amend 

NYSE Arca Options Rule 6.75(g) to 

update and clarify the priority of 

Complex Orders, and amend NYSE Arca 

Options Rule 6.91 to establish a 

Complex Order Auction. 

A copy of this filing is available on 

the Exchange’s Internet Web site at 

http://www.nyse.com, on the 

Commission’s Internet Web site at 

http://www.sec.gov, at the Exchange’s 

principal office, 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 III below. The 

Exchange 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 this filing is to update 

and streamline the rules governing open 

outcry trading of Complex Orders, 

including the definition of a Stock/ 

Complex Order, and to adopt new rules 

to provide for a Complex Order Auction 

(‘‘COA’’) in the Electronic Complex 

Order rules, based on rules recently 

approved for NYSE Amex LLC 

(‘‘Amex’’).5 The filing also clarifies the 

minimum trading and quoting 

increment permissible for Complex 

Orders. 

Stock/Complex Orders 

NYSE Arca proposes to amend Rule 

6.62(h) to define Stock/Complex Orders 

as orders for the purchase or sale of a 

Complex Order coupled with an order 

to buy or sell a stated number of units 

of an underlying stock or a security 

convertible into the underlying stock 

(‘‘convertible security’’) representing 

either (A) the same number of units of 

the underlying stock or convertible 

security as are represented by the 

options leg of the Complex Order with 

the least number of contracts, or (B) the 

number of units of the underlying stock 

necessary to create a delta neutral 

position, but in no case in a ratio greater 

than 8 options contracts per unit of 

trading of the underlying stock or 

convertible security established for that 

series by the Clearing Corporation, as 

represented by the options leg of the 

Complex Order with the least number of 

options contracts. 

Revision to Complex Order Open 

Outcry Rules 

NYSE Arca proposes to amend Rule 

6.75 and Commentary .01 to Rule 6.75. 

The Exchange proposes to adopt a 

provision based on NYSE Amex LLC 

(‘‘Amex’’) Rule 963NY(d) to describe the 

priority of Complex Orders in open 

outcry. The new language does not 

change the process of executing a 

Complex Order or alter the priority of 

quotes and orders; rather, it streamlines 

and updates the rule text. 

Currently, when executing a Complex 

Order, contra sided complex trading 

interest in the Trading Crowd has 

priority over individual orders and 

quotes in the leg markets at the same net 

debit or credit price, except when 

individual Customer orders in the 

Consolidated Book are present in all of 

the leg markets. When there are 

Customer orders present in all legs at 

the same net debit or credit price, the 

Complex Order must first trade with the 

individual Customer orders, and may 

then trade against complex trading 

interest in the crowd. Complex Orders 

trading against contra side complex 

trading interest in the Trading Crowd 

must otherwise trade at least one leg at 

a price that is at least one minimum 

price variation better than individual 

Customer orders in the Consolidated 

Book.6

The proposed rule change will not 

alter these procedures or priorities. 

In addition, the Exchange is clarifying 

that Stock/Complex Orders (involving 

two or more options legs and a stock 

leg) may be executed at a net debit or 

credit price with another OTP Holder 

mstockstill on DSKH9S0YB1PROD with NOTICES