Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 12191 

68 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)(1). 

4 17 CFR 240.19b–4. 

5This proposal refers to ‘‘PHLX XL’’ as the 

Exchange’s automated options trading system. In 

May, 2009 the Exchange enhanced the system and 

adopted corresponding rules referring to the system 

as ‘‘Phlx XL II.’’ See Securities Exchange Act Release 

No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 

2009) (SR–Phlx–2009–32). The Exchange intends to 

submit a separate technical proposed rule change 

that would change all references to the system from 

‘‘Phlx XL II’’ to ‘‘PHLX XL’’ for branding purposes. 

6A ‘‘valid width quote’’ for options on equities 

and index options means bidding and/or offering so 

as to create differences of no more than $.25 

between the bid and the offer for each option 

contract for which the prevailing bid is less than $2; 

no more than $.40 where the prevailing bid is $2 

or more but less than $5; no more than $.50 where 

the prevailing bid is $5 or more but less than $10; 

no more than $.80 where the prevailing bid is $10 

or more but less than $20; and no more than $1 

where the prevailing bid is $20 or more, provided 

that, in the case of equity options, the bid/ask 

differentials stated above shall not apply to in-themoney series where the market for the underlying 

security is wider than the differentials set forth 

above. For such series, the bid/ask differentials may 

be as wide as the quotation for the underlying 

security on the primary market, or its decimal 

equivalent rounded up to the nearest minimum 

increment. The Exchange may establish differences 

other than the above for one or more series or 

classes of options. See Exchange Rule 

1014(c)(i)(A)(1)(a). 

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 Exchange consents, 

the Commission shall: (a) By order 

approve or disapprove 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, 

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 rulecomments@sec.gov. Please include File 

Number SR–Phlx–2011–13 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2011–13. 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 Web site viewing and 

printing 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 

Exchange. 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–2011–13 and should 

be submitted on or before March 25, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.68

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4898 Filed 3–3–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63979; File No. SR–Phlx– 

2011–21] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Quality Opening Markets 

February 25, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that, on February 

16, 2011, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. 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, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 

thereunder,4 proposes to amend Rule 

1017, Openings in Options, to reflect a 

system change under which the PHLX 

XL® automated options trading system 5

will initiate an opening ‘‘imbalance 

process’’ during the opening of trading 

in an option series when: (i) No other 

U.S. options exchange has opened the 

affected series for trading, and (ii) there 

is not a ‘‘quality opening market’’ (as 

defined below) present on the Exchange 

in such option series. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, 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 

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 

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 the proposed rule 

change is to improve the quality of 

executions that take place on the 

Exchange during the Opening Process 

when no other market center is open for 

trading in the affected series, by 

amending Exchange Rule 1017. 

Specifically, the Exchange’s PHLX XL 

system will initiate an imbalance 

process when marketable opening 

orders on the Exchange could be 

executed against valid width quotes 

(defined in Exchange Rule 1014) 6 but 

there is not a ‘‘quality opening market’’ 


jlentini on DSKJ8SOYB1PROD with NOTICES
12192 Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 

7 If there are other options markets open for 

trading in the affected series, the Exchange would 

route the order to better-priced away markets 

following a one-second ‘‘Route Timer.’’ See, e.g., 

Exchange Rule 1017(l)(iv)(B). 

8Such options are referred to as Long Term 

Equity AnticiPation Securities (‘‘LEAPS’’). 

9See Exchange Rule 1012, Commentary .03. 

10Although there is not a true ‘‘imbalance’’ in this 

situation, the Exchange believes that the imbalance 

process is the most efficient way to communicate 

to participants that it is seeking fresh quotations 

that would result in a quality opening market on the 

Exchange. 

11See current Exchange Rule 1017(l)(v). 

12The PHLX XL system may repeat the imbalance 

process up to three times (as established by the 

Exchange). See current Exchange Rule 

1017(l)(v)(C)(6). 

13 15 U.S.C. 78f(b). 

14 15 U.S.C. 78f(b)(5). 

(as set forth in a table posted on the 

Exchange’s Web site). 

Quality Opening Market 

A ‘‘quality opening market ’’ is a bid 

and offer on the Exchange comprised of 

the highest bid of all valid width 

opening quotes on the Exchange and the 

lowest offer of all valid width opening 

quotes on the Exchange, with a specific 

bid/ask differential that is narrower than 

the bid/ask differential of a valid width 

quote. 

A quality opening market is 

calculated by determining the bid/ask 

differential of the best available bid and 

the best available offer on the Exchange. 

If such bid/ask differential is equal to or 

less than a specific range as defined in 

a table published by the Exchange, the 

available top of book quotation is 

considered to be a ‘‘quality opening 

market’’. 

For example, currently for options 

priced under $2.00, a valid width quote 

is defined as a quote with a bid/ask 

differential that is not greater than 

$0.25. Assume at the opening on the 

Exchange, the Exchange’s market is 

$0.00 bid, $0.25 offer for 500 contracts 

in an option that is quoted and traded 

in increments of $0.01 (a ‘‘penny pilot 

option’’). Despite having a ‘‘valid width’’ 

quote on the Exchange, a market or 

marketable limit order to buy with equal 

or smaller size than the valid width 

quote size would be executed against 

the valid width quote offer of $0.25 if 

there were no other options markets 

open for trading in the affected series.7

An execution of $0.25 in a penny pilot 

option that is normally quoted with, for 

example, a $0.03 or $0.04 bid/ask 

differential, may be considered 

unacceptable. The Exchange has 

experienced situations where, following 

such an execution, additional PHLX 

market participants submit quotes in the 

affected series at a significantly better 

level than the opening price. This result 

is unacceptable to both the Exchange 

and its customers. The Exchange 

believes that the ‘‘quality opening 

market’’ requirement should reduce, the 

number of occurrences of, or preclude, 

this result, especially in the case of outof-the-money options series and 

relatively illiquid options. 

Another example of the result the 

proposed rule change addresses 

concerns options having up to thirtynine months from the time they are 

listed until expiration.8 Strike price 

interval, bid/ask differential and 

continuity rules do not apply to such 

options series until the time to 

expiration is less than nine months.9

Options series with expirations of nine 

months or more may be quoted with any 

bid/ask differential. Assume at the 

opening on the Exchange, the 

Exchange’s market in such an option 

series is $0.00 bid, $5.00 offer for 50 

contracts. A market or marketable limit 

order to buy with a size of 50 or fewer 

contracts would execute at $5.00, absent 

an imbalance process seeking a ‘‘quality 

opening market’’ on the Exchange. 

In order to ensure quality opening 

executions in this circumstance, 

proposed Rule 1017(l)(v)(B) would state 

that, if there is no imbalance, and (1) no 

other U.S. options exchange has opened 

the affected series for trading, and (2) 

there is no ‘‘quality opening market’’ (as 

defined in a table to be determined by 

the Exchange and published on the 

Exchange’s Web site), present on the 

Exchange in such option series, the 

PHLX XL system will begin the 

imbalance process 10 in order to seek 

additional valid width quotes that result 

in a ‘‘quality opening market’’ on the 

Exchange. During the imbalance 

process, the Exchange broadcasts 

‘‘Imbalance Notices’’ seeking fresh 

quotations from participants at up to 

3-second intervals.11

In this situation, the PHLX XL system 

will execute contra-side interest when 

either: (i) A ‘‘quality opening market ’’ is 

present on the Exchange, (ii) another 

options exchange opens for trading in 

the affected series, or (iii) the imbalance 

process is complete. Once a ‘‘quality 

opening market’’ is present on the 

Exchange, or another options exchange 

opens for trading in the affected series, 

the imbalance process will be 

terminated and the contra-side 

marketable order interest will be 

executed in accordance with Exchange 

Rule 1017. 

If no ‘‘quality opening market’’ is 

present during the imbalance process, 

and no other options exchange has 

opened for trading in the affected series 

during the imbalance process, contraside marketable order interest will be 

executed against valid width quotes 

present on the Exchange in accordance 

with Exchange Rule 1017 upon the 

termination of the imbalance process.12

The Exchange believes that, if no 

‘‘quality opening market’’ is present 

during the imbalance process (and no 

other options exchange has opened for 

trading in the affected series), the valid 

width quote is the best opening price 

and therefore it is appropriate to execute 

at the valid width quote price. 

The Exchange also proposes technical 

re-numbering changes to Rule 1017 to 

address proposed new Rule 1017(l)(v). 

The Exchange believes that this 

proposal to ‘‘force’’ an imbalance process 

when there are no other markets open 

for trading in the affected series, and 

there is no ‘‘quality opening market’’ 

present on the Exchange, will enhance 

the opening price discovery process and 

encourage participants to submit high 

quality quotes at the opening of trading. 

This in turn should enhance the quality 

of executions at the opening of trading 

on the Exchange, all to the benefit of the 

investing public. The Exchange further 

believes that the proposal will promote 

increased customer confidence in the 

PHLX opening process, and should 

attract more opening order flow to the 

Exchange. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 13 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 14

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. 

Specifically, the Exchange believes that 

the proposal benefits customers by 

improving prices and market efficiency 

at the opening of trading. 

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 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. 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 12193 

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

16 17 CFR 240.19b–4(f)(6). 

17See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– 

Phlx–2009–32). 18 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)(1). 

4 17 CFR 240.19b–4. 

5 17 CFR 242.200(g); 17 CFR 242.201. See 

Securities Exchange Act Release No. 61595 (Feb. 26, 

2010), 75 FR 11232 (Mar. 10, 2010) (amending 

Rules 201 and 200 of Regulation SHO to adopt a 

short sale price test restriction and ‘‘short exempt’’ 

marking requirement). See also Securities Exchange 

Act Release No. 63247 (Nov. 4, 2010), 75 FR 68702 

(Nov. 9, 2010) (extending the compliance date of 

the amendments to Rules 201 and 200 of Regulation 

SHO until February 28, 2011). 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Pursuant to Section 19(b)(3)(A) 15 of 

the Act and Rule 19b–4(f)(6) 16

thereunder, the Exchange has 

designated this proposal as one that 

effects a change that: (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) by its terms, does 

not become operative for 30 days after 

the date of the filing, or such shorter 

time as the Commission may designate 

if consistent with the protection of 

investors and the public interest. 

Rule 19b–4(f)(6) requires a selfregulatory organization to give the 

Commission written notice of its intent 

to file the proposed rule change at least 

five business days prior to the date of 

filing of the proposed rule change, or 

such shorter time as designated by the 

Commission. The Exchange has satisfied 

this requirement. 

The Exchange notes that the instant 

proposal to establish a ‘‘quality opening 

market’’ and to publish a table of 

acceptable opening bid/ask differentials 

on its Web site is substantially similar 

to its previously approved proposed 

rule change to establish an Opening 

Quote Range and an Acceptable Quote 

Range, and to publish those ranges in a 

table on its Web site.17 The Opening 

Quote Range and the Acceptable Quote 

Range substantially track the quality 

opening market standard. Furthermore, 

because the table that describes the bid/ 

ask differential required for a quality 

opening market is intended to be 

dynamic and subject to market 

conditions, the Exchange believes that it 

is appropriate to display the table on its 

Web site, just as it does with the 

Opening Quote Range and the 

Acceptable Quote Range. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

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 rulecomments@sec.gov. Please include File 

Number SR–Phlx–2011–21 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2011–21. 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 Web site viewing and 

printing 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 

Exchange. 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– 

2011–21 and should be submitted on or 

before March 25, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4897 Filed 3–3–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63978; File No. SR–Phlx– 

2011–25] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change To Adopt New 

Rule 3303 To Implement the 

Amendments to Regulation SHO 

February 25, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that on February 

18, 2011, The NASDAQ OMX PHLX 

LLC (‘‘PSX’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been substantially prepared by the 

Exchange. 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, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 4

thereunder, proposes to adopt new Rule 

3303 as a written policy or procedure to 

implement the amendments to Rules 

200(g) and 201 of Regulation SHO.5

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 


jlentini on DSKJ8SOYB1PROD with NOTICES