Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71771 

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

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(3). 9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

Act,6 in particular, in that the proposal 

is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, 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, and, in 

general, to protect investors and the 

public interest. The proposed rule 

change makes a minor clerical change to 

an existing Nasdaq rule. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

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

Act 7 and Rule 19b–4(f)(3) thereunder,8

Nasdaq has designated this proposal as 

one that is concerned solely with the 

administration of the self-regulatory 

organization. Accordingly, Nasdaq 

believes that its proposal should become 

immediately effective. 

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: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) 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–NASDAQ–2010–146 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–NASDAQ–2010–146. 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– 

NASDAQ–2010–146 and should be 

submitted on or before December 15, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29612 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63339; File No. SR–Phlx– 

2010–158] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to a 

$5 Strike Price Program 

November 18, 2010. 

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 November 

12, 2010, 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, II, 

and III, 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 proposes to amend 

Commentary .05 to Exchange Rule 1012, 

Series of Options Open for Trading, 

specifically Commentary .05(c) 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 (5) option classes on individual 

stocks. 

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, on the 

Commission’s Web site at http:// 

www.sec.gov, 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. 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

71772 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

3Commentary .05 also permits strike price 

intervals of $5.00 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. 

4 Initially adopted in 1995 as a pilot program, the 

pilot $2.50 Strike Price Program allowed options 

exchanges to list options with $2.50 strike price 

intervals for options trading at strike prices greater 

than $25 but less than $50 on a total of up to 100 

option classes. See Securities Exchange Act Release 

No. 35993 (July 19, 1995), 60 FR 38073 (July 25, 

1995) (SR–Phlx–95–08). In 1998, the pilot program 

was permanently approved and expanded to allow 

the options exchanges to select up to 200 option 

classes for the $2.50 Strike Price Program. See 

Securities Exchange Act Release No. 40662 

(November 12, 1998), 63 FR 64297 (November 19, 

1998) (SR–Phlx–98–26). Of the 200 options classes 

eligible for the $2.50 Strike Price Program, 46 have 

been allocated to Phlx. With the expansion of the 

$2.50 Strike Price Program to options with strike 

prices below $75, for example, if an option class has 

been selected as part of the $2.50 Strike Price 

Program, and the underlying stock closed at $48.50 

in its primary market, the Exchange may list 

options with strike prices of $52.50 and $57.50 on 

the next business day; and if an underlying security 

closed at $54, the Exchange may list options with 

strike prices of $52.50, $57.50, and $62.50 on the 

next business day. Moreover, an option class 

remains in the $2.50 Strike Price Program until the 

Exchange otherwise designates and sends a 

decertification notice to the Options Clearing 

Corporation. See Securities Exchange Act Release 

No. 55338 (February 23, 2007), 72 FR 9371 (March 

1, 2007) (SR–Phlx–2007–04). 

5The prices listed in this example are 

assumptions and not based on actual prices. The 

assumptions are made for illustrative purposes only 

using the stock price as a hypothetical. 

6 Id. 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this proposed rule 

change is 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 (5) option classes on individual 

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

provide investors and traders additional 

opportunities and strategies to hedge 

high priced securities. 

Currently, Exchange Rule 1012 at 

Commentary .05 permits strike price 

intervals of $10 or greater where the 

strike price is $200 or more,3 except the 

Exchange may select up to 46 options 

classes on individual stocks for which 

the interval of strike prices will be $2.50 

where the strike price is greater than 

$25 but less than $50 (the ‘‘$2.50 Strike 

Price Program’’). In addition to those 

options selected by the Exchange, the 

strike price interval may be $2.50 in any 

multiply-traded option once another 

exchange trading that option selects 

such option.4

The Exchange is proposing to add the 

proposed $5 Strike Price Program as an 

exception to the $10 or greater program 

in addition to the $2.50 Strike Price 

Program. 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 (5) option classes 

on individual stocks. 

The Exchange believes the $5 Strike 

Price Program would offer investors a 

greater selection of strike prices at a 

lower cost. For example, if an investor 

wanted to purchase an option with an 

expiration of approximately one month, 

a $5 strike interval could offer a wider 

choice of strike prices, which may result 

in reduced outlays in order to purchase 

the option. By way of illustration, using 

Google, Inc. (‘‘GOOG’’) as an example, if 

GOOG would trade at $610 5 with 

approximately one month remaining 

until expiration, the front month (one 

month remaining) at-the-money call 

option (the 610 strike) would trade at 

approximately $17.50 and the next 

highest available strike (the 620 strike) 

would trade at approximately $13.00. 

By offering a 615 strike an investor 

would be able to trade a GOOG front 

month call option at approximately 

$15.25, thus providing an additional 

choice at a different price point. 

Similarly, if an investor wanted to 

hedge exposure to an underlying stock 

position by selling call options, the 

investor may chose an option term with 

two months remaining until expiration. 

An additional $5 strike interval could 

offer additional and varying yields to 

the investor. For example if Apple, Inc. 

(‘‘AAPL’’) would trade at $310 6 with 

approximately two months remaining 

until expiration, the second month (two 

months remaining) at-the-money call 

option (the 310 strike) would trade at 

approximately $14.50 and the next 

highest available strike (the 320) strike 

would trade at $9.90. The 310 strike 

would yield a return of 4.67% and the 

320 strike would yield a return of 

3.20%. If the 315 strike were available, 

that series would be priced at 

approximately $12.20 (a yield of 3.93%) 

and would minimize the risk of having 

the underlying stock called away at 

expiration. 

With regard to the impact of this 

proposal on system capacity, the 

Exchange has analyzed its capacity and 

represents that it and the Options Price 

Reporting Authority have the necessary 

systems capacity to handle the potential 

additional traffic associated with the 

listing and trading of classes on 

individual stocks $5 Strike Price 

Program. 

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 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. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

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. The 

Exchange believes the $5 Strike Price 

Program proposal would provide the 

investing public and other market 

participants increased opportunities 

because a $5 series in high priced stocks 

would provide market participants 

additional opportunities to hedge high 

priced securities. This would allow 

investors to better manage their risk 

exposure. Moreover, the Exchange 

believes the proposed $5 Strike Price 

Program would benefit investors by 

giving them more flexibility to closely 

tailor their investment decisions in a 

greater number of securities. 

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. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 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 Exchange consents, 

the Commission shall: (a) By order 

approve or disapprove such proposed 

rule change, or (b) institute proceedings 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES

Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71773 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 57358 

(February 20, 2008), 73 FR 11173 (February 29, 

2008) (SR–NYSEArca–2008–17). 

4The term ‘‘delta neutral’’ is defined in Rule 6.8, 

Commentary .07(iii)(a) as referring to an equity 

option position that is hedged, in accordance with 

a permitted pricing model, by a position in the 

underlying security or one or more instruments 

relating to the underlying security, for the purpose 

of offsetting the risk that the value of the option 

position will change with incremental changes in 

the price of the security underlying the option 

position. 

5Permitted pricing model is defined in Rule 6.8, 

Commentary .07(iii)(c). 

6The amendments proposed herein are similar to 

changes approved for the Chicago Board Options 

Exchange (‘‘CBOE’’). See Securities Exchange Act 

Release No. 62190 (May 27, 2010), 75 FR 31826 

(June 4, 2010) (SR–CBOE–2010–021). See also 

Securities Exchange Act Release No. 56970 

(December 14, 2007), 72 FR 72428 (December 20, 

2007) (SR–CBOE–2007–099). The exemption was 

extended to certain customers whose accounts are 

carried by a member. See Securities Exchange Act 

Release No. 60555 (August 21, 2009), 74 FR 43741 

(August 27, 2009) (SR–CBOE–2009–039). This 

proposed rule filing is being done pursuant to an 

industry-wide initiative, under the auspices of the 

Intermarket Surveillance Group (‘‘ISG’’), to establish 

comparable delta-hedge exemption rules among 

exchanges. 

7The term ‘‘options contract equivalent of the net 

delta’’ is defined in Rule 6.8, Commentary .07(iii)(b) 

as the net delta divided by the number of shares 

underlying the option contract. The term ‘‘net delta’’ 

is defined in the same rule to mean, at any time, 

the number of shares (either long or short) required 

Continued 

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–2010–158 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-2010–158. 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– 

2010–158 and should be submitted on 

or before December 15, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29594 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63338; File No. SR– 

NYSEArca–2010–99] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Expanding the Delta 

Hedging Exemption Available for 

Equity Options Position Limits and 

Adopting a Delta Hedging Exemption 

From Certain Index Options Position 

Limits 

November 18, 2010. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on November 

5, 2010, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. 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 (i) expand 

the delta hedging exemption available 

for equity options position limits and 

(ii) adopt a delta hedging exemption 

from certain index options position 

limits. The text of the proposed rule 

change is available at the Exchange, the 

Commission’s Public Reference Room, 

on the Commission’s Web site at 

http://www.sec.gov, and http:// 

www.nyse.com. 

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 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Expansion of Delta-Based Equity Hedge 

Exemption 

On February 5, 2008,3 the Exchange 

submitted a proposed rule change with 

the Commission establishing an 

exemption from equity options position 

and exercise limits for positions held by 

Exchange OTP Holders, OTP Firms, and 

certain of their affiliates, that are ‘‘delta 

neutral’’ 4 under a ‘‘permitted pricing 

model,’’ 5 subject to certain conditions 

(‘‘Exemption’’). The Exchange is 

proposing to amend certain of its rules 

to expand its exemption from equity 

options position and exercise limits and 

adopt a delta hedging exemption from 

certain index options position limits.6

The ‘‘options contract equivalent of 

the net delta’’ of a hedged equity option 

position is subject to the position limits 

under Rule 6.8, subject to the 

availability of other exemptions.7

WReier-Aviles on DSKGBLS3C1PROD with NOTICES