Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Notices 76059 

4 17 CFR 242.608(b)(3)(iii). 

5 17 CFR 242.608(b)(2). 6 17 CFR 200.30–3(a)(29). 

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

2 17 CFR 240.19b–4. 

‘‘X’’ to indicate that the offer side of a 

quote is not firm while the bid side is 

firm, and ‘‘Y’’ to indicate that the bid 

side of a quote is not firm while the 

offer side is firm. The use of ‘‘X’’ and ‘‘Y’’ 

in these circumstances is similar to the 

use of ‘‘E’’ and ‘‘F’’ by the CQS network 

in respect of stock quotations (the letter 

‘‘F’’ is already used by OPRA and thus 

is unavailable for this purpose), so the 

concept should be familiar to most 

OPRA subscribers. 

Consistent with the addition of these 

two new codes to Sections 4.04 and 

4.15, Appendix D of the OPRA Spec, 

which describes how options Best Bids 

and Offers (BBOs) are determined, is 

proposed to be revised to provide that 

when one side of a quote is indicated as 

not firm, that side will not be 

considered for the purpose of 

determining what is the BBO in the 

subject option, but the firm side of the 

quote will be so considered. 

The text of the proposed amendment 

to the OPRA Plan is available at OPRA, 

the Commission’s Public Reference 

Room, http://opradata.com, and on the 

Commission’s Web site at http:// 

www.sec.gov. 

II. Implementation of the OPRA Plan 

Amendment 

OPRA designated this amendment as 

qualified to be put into effect upon 

filing with the Commission in 

accordance with clause (iii) of 

paragraph (b)(3) of Rule 608 under the 

Act 4 since the proposed changes to the 

Data Recipient Interface Specification 

and Participant Interface Specification 

are solely technical or ministerial in 

nature. OPRA intends to implement the 

revised OPRA Spec in late January or 

early February, 2011, when the 

necessary systems work is expected to 

be completed by OPRA’s Processor. As 

required by OPRA’s Vendor and 

Subscriber Agreements, OPRA will 

provide its Vendors and Subscribers 

with not less than sixty days notice of 

this change. 

The Commission may summarily 

abrogate the amendment within sixty 

days of its filing and require refiling and 

approval of the amendment by 

Commission order pursuant to Rule 

608(b)(2) under the Act 5 if it appears to 

the Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or the maintenance of fair and orderly 

markets, to remove impediments to, and 

perfect the mechanisms of, a national 

market system, or otherwise in 

furtherance of the purposes of the Act. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed OPRA 

Plan amendment 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 

No. SR–OPRA–2010–04 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–OPRA–2010–04. 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 plan 

amendment that are filed with the 

Commission, and all written 

communications relating to the 

proposed plan amendment 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 such filing 

also will be available for inspection and 

copying at the principal office of OPRA. 

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–OPRA–2010–04 and should 

be submitted on or before December 28, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–30575 Filed 12–6–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63403; File No. SR–BATS– 

2010–034] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing of a 

Proposed Rule Change To Create a 

Directed Order Program 

December 1, 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 

19, 2010, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 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 is filing with the 

Commission a proposal for the BATS 

Exchange Options Market (‘‘BATS 

Options’’) to create new BATS Rule 

21.1(d)(13), entitled ‘‘Market Maker 

Price Improving Orders,’’ create new 

BATS Rule 21.1(d)(14), entitled 

‘‘Directed Orders,’’ and amend existing 

BATS Rule 21.1(d)(2), entitled ‘‘Price 

Improving Orders.’’ 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.com, 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 


emcdonald on DSK2BSOYB1PROD with NOTICES
76060 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Notices 

3As described in proposed Rule 11.9(c)(13)(B), all 

other interest on the BATS Book at prices equal to 

or better than the non-displayed price of the Market 

Maker Price Improving Order has priority over the 

Market Maker Price Improving Order and, hence, 

will execute first against the Directed Order. 

4Emphasis added. 

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 

The Exchange is proposing certain 

modifications and additions to its rules 

related to the trading of options. First, 

the Exchange is proposing the 

establishment of new Rule 21.1(d)(13), 

entitled Market Maker Price Improving 

Orders. Second, the Exchange is 

proposing the establishment of new 

Rule 21.1(d)(14), entitled Directed 

Orders. Third, the Exchange is 

proposing to modify Rule 21.1(d)(6), 

entitled Price Improving Orders. 

The Exchange is proposing the rule 

changes described below to establish a 

directed order program through which 

Options Members can direct an order to 

a particular BATS Options Market 

Maker for potential execution at a price 

improved over the existing National 

Best Bid (‘‘NBB’’) or National Best Offer 

(‘‘NBO’’). As part of this program, BATS 

is proposing to define two new order 

types. The first would be new Rule 

21.1(d)(13), entitled Market Maker Price 

Improving Orders, which are orders 

from a BATS Options Market Maker to 

buy or sell an option that has a 

displayed price and size and a nondisplayed price at which the BATS 

Options Market Maker is willing to 

trade with a Directed Order. As 

proposed, a Market Maker Price 

Improving Order would be ranked on 

the BATS Options Book at its displayed 

price. The non-displayed price of the 

Market Maker Price Improving Order 

would not be entered into the BATS 

Options Book, but would be, along with 

its displayed size, converted to a buy or 

sell order at its non-displayed price in 

response to a Directed Order directed to 

the BATS Options Market Maker. 

The second new order type proposed 

would be new Rule 21.1(d)(14), entitled 

Directed Orders, which are orders from 

a BATS Options Member that are 

directed for execution to a particular 

BATS Options Market Maker. For a 

BATS Options Market Maker to 

participate in an execution against a 

Directed Order, (1) the Directed Order 

must be from a BATS Options Member 

that is on a list of eligible Options 

Members provided to the Exchange by 

the BATS Options Market Maker, in a 

manner prescribed by the Exchange, (2) 

the BATS Options Market Maker must 

be publicly quoting on BATS at the NBB 

(for sell Directed Orders) or NBO (for 

buy Directed Orders) with a Market 

Maker Price Improving Order that 

contains a non-displayed amount of 

price improvement over the NBB or 

NBO at the time the Directed Order 

arrives to the Exchange, and (3) the 

Directed Order must be marketable 

against the non-displayed price of the 

Market Maker Price Improving Order. 

If the above conditions are met, and 

if there are no other non-displayed 

orders at prices equal to or better than 

the non-displayed price of the Market 

Maker Price Improving Order, the 

Directed Order will trade with the 

Market Maker Price Improving Order up 

to the full size of the Market Maker 

Price Improving Order. Any remaining 

contracts from the Directed Order will 

be handled, consistent with the 

instructions on the Directed Order, in 

accordance with the order display and 

book processing requirements of Rule 

21.8 and, if applicable, processed in 

accordance with the order routing 

requirements of Rule 21.9. 

If there are non-displayed orders on 

the BATS Options Book at prices equal 

to or better than the non-displayed price 

of the Market Maker Price Improving 

Order, those other non-displayed orders 

will in all cases have priority over the 

non-displayed price of the Market 

Maker Price Improving Order. In such 

circumstances, the Market Maker Price 

Improving Order may still execute at its 

non-displayed price against the Directed 

Order consistent with the price/time 

priority provisions of Rule 21.8 to the 

extent of any remaining contracts of the 

Directed Order. Any contracts 

remaining of the Directed Order will 

continue to be processed in a manner 

consistent with the order display and 

book processing provisions of Rule 21.8, 

and if applicable, the order routing 

provisions of Rule 21.9. 

As proposed, an Options Market 

Maker Price Improving Order would be 

required to have a non-displayed price 

better than the displayed limit price that 

could be entered in an increment as 

small as (1) one cent or may be 

designated at the midpoint of the 

National Best Bid and Offer (‘‘NBBO’’). 

In addition, BATS is proposing to 

amend existing Rule 21.1(6), entitled 

Price Improving Orders, to provide all 

BATS Options Members with the ability 

to enter Price Improving Orders in an 

increment designated at the midpoint of 

the NBBO. Price Improving Orders will 

in all cases include a displayed price 

and a better, non-displayed price. Price 

Improving Orders with a non-displayed 

price designated at the midpoint of the 

NBBO will receive a new timestamp 

each time the non-displayed midpoint 

price automatically adjusts in response 

to changes in the NBBO and will be 

displayed at the NBBO at the time of 

entry. The displayed price will not 

subsequently adjust to changes in the 

NBBO. Price Improving Orders with a 

non-midpoint price will be displayed at 

the minimum price variation in that 

security and will be rounded up for sell 

orders and rounded down for buy 

orders. 

Market Maker Price Improving Orders 

with a non-displayed price designated 

at the midpoint of the NBBO will not 

receive a new timestamp in response to 

changes in the NBBO. Unlike Price 

Improving Orders, the non-displayed 

price of a Market Maker Price Improving 

Order is not entered into the BATS 

Options Book, and is only eligible to 

trade with a Directed Order to the extent 

that certain conditions precedent are 

satisfied, including (1) that the 

displayed price of the Market Maker 

Price Improving Order is equal to the 

NBB (for sell directed orders) or the 

NBO (for buy directed orders) at the 

time the Directed Order arrives to the 

Exchange, and (2) that there are no other 

orders on the BATS Options Book at 

prices equal to or better than the nondisplayed prices of the Market Maker 

Price Improving Order.3

The Exchange is also proposing to 

delete certain language from its existing 

Price Improving Order rule text. In 

particular, as currently written, Rule 

21.1(d)(6) states that ‘‘Price Improving 

Orders that are available for display 

* * *.’’ 4 The Exchange is proposing to 

delete the clause ‘‘that are available to 

display,’’ which although intended to 

simply distinguish an order executed 

upon arrival to the Exchange from an 

order posting to the BATS Options 

Book, has the potential to cause 

confusion to the extent it may suggest 

that Price Improving Orders can be 

posted on the BATS Options Book 

without a displayed price. That is not 

the case today, would not be the case 

under the proposed changes to the rule, 

and BATS is proposing to delete this 

clause to eliminate any confusion on 

this point. 

The elements of the Exchange’s 

proposal to create a directed order 

program are specifically designed to 

enhance opportunities available in the 

market for Options Members to obtain 

price improvement for customer orders 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Notices 76061 

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

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

7See, e.g., BATS Options Rule 21.1(d)(6) ‘‘Price 

Improving Orders’’; Nasdaq Options Market Rule 

Chapter VI, Section 1(e)(6) ‘‘Price Improving 

Orders’’. 

8See, e.g., BATS Rule 11.9(c)(9) ‘‘Mid-Point Peg 

Order’’. 

9See, e.g., Securities Exchange Act Release No. 

51759 (May 27, 2005), 70 FR 32860 (June 6, 2005) 

(SR–Phlx–2004–91) (order approving the 

establishment of a directed order process with 

certain specialist participation guarantees). 

10See Securities Exchange Act Release No. 52827 

(November 23, 2005), 70 FR 72193 (December 1, 

2005) (SR–PCX–2005–56) (order approving certain 

modifications to the PCX Equities, Inc.’s Directed 

Order Process on the Archipelago Exchange). 

11See, e.g., BOX Rule Section 18 ‘‘The Price 

Improvement Period’’ and ISE Rule 723 ‘‘Price 

Improvement Mechanism for Crossing 

Transactions’’ (both of which providing a 

mechanism for options members that want to 

internalize customer orders the ability to do so on 

the exchanges subject to a requirement that such 

orders first be exposed to all other options members 

through a brief price improvement auction). 

in the context of BATS’ price/time 

priority, continuous auction market. By 

requiring BATS Options Market Makers 

to be quoting at the NBB or NBO to 

participate in an execution against a 

Directed Order directed to it, BATS’ 

proposal incentivizes market makers to 

competitively quote and thereby 

furthers the public price discovery 

process. By further requiring BATS 

Options Market Makers to include a 

non-displayed price better than the 

displayed limit price at an increment as 

small as (1) one cent or the midpoint of 

the NBBO, the proposal increases the 

opportunities for customer orders to 

receive price improvement over the 

NBBO. Moreover, by permitting all 

Options Members to enter orders in the 

same increments as Market Maker Price 

Improving Orders, including as 

proposed at the midpoint of the NBBO, 

and according those orders in all cases 

priority at their non-displayed prices 

over Market Maker Price Improving 

Orders, the proposal avoids creating 

participation guarantees in place at 

other markets and instead promotes 

market-wide competition for executions 

at prices between the NBBO. 

Pursuant to the proposed directed 

order program, a BATS Options Member 

who notifies a BATS Options Market 

Maker of its intention to submit a 

Directed Order to BATS Options so that 

the BATS Options Market Maker could 

change its quotation to match the NBB 

or NBO immediately prior to 

submission of the Directed Order would 

be engaging in conduct inconsistent 

with just and equitable principles of 

trade in violation of Rule 3.1 and Rule 

18.4(f). In addition, a BATS Options 

Market Maker who becomes aware of a 

customer order from an affiliated 

broker-dealer or desk within the same 

broker-dealer and acts on such 

information to change its quotations to 

match the NBB or NBO immediately 

prior to submission of a Directed Order 

would be in violation of the Exchange’s 

Rule 22.10, ‘‘Limitations on Dealings’’. 

BATS will proactively conduct 

surveillance for such conduct and 

enforce against such violations. 

2. Statutory Basis 

Approval of the rule changes 

proposed in this submission is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder that are applicable to a 

national securities exchange, and, in 

particular, with the requirements of 

Section 6(b) of the Act.5 In particular, 

the proposed change is consistent with 

Section 6(b)(5) of the Act,6 because it 

would promote just and equitable 

principles of trade, remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest. 

The Exchange believes that the 

proposed rule meets these requirements 

in that it promotes competition for 

customer orders and furthers the public 

price discovery process by both 

incentivizing BATS Options Market 

Makers to publicly display aggressive 

quotes at the NBBO, as well as 

incentivizing BATS Options Market 

Makers and all other BATS Options 

Members to post non-displayed prices 

better than the NBBO. BATS notes that 

the Commission has previously found 

consistent with the Act non-displayed 

order types designed to provide price 

improvement at prices smaller than the 

minimum price variation in listed 

options.7 While those order types have 

to date been limited to permitting 

increments as small as (1) one cent, 

BATS notes that the Commission has 

previously found midpoint order types 

consistent with the Act in the equity 

markets,8 and as the options market 

structure has converged with the equity 

market structure in recent years through 

expansion of the penny pilot as well as 

the implementation of Regulation NMSlike protections, BATS believes 

customers in the options markets would 

similarly benefit from the potential 

price improvement afforded by 

midpoint executions. 

Moreover, the Commission has 

previously approved rules that provide 

specialist or market maker guarantees 

up to a certain percentage so long as the 

specialist or market maker is quoting at 

the NBBO and such guarantees do not 

rise to a level that could have a material 

adverse impact on quote competition 

with a particular exchange.9 While 

BATS’ directed order program requires 

BATS Options Market Makers to be 

quoting at the NBB or NBO to be eligible 

to trade with an incoming Directed 

Order directed to it, in contrast to prior 

rules approved by the Commission, 

BATS’ proposed directed order program 

provides no participation guarantees 

that could negatively impact quote 

competition. By not providing such 

guarantees, BATS’s proposed directed 

order program provides incentives to 

BATS Options Market Makers as well as 

all other BATS Options Members to 

aggressively quote, both at the NBBO 

and at non-displayed prices better than 

the NBBO. 

In addition, the Commission has 

previously approved rules that permit a 

specialist or market maker to determine 

the firms from which it will accept 

directed or preferenced orders. The 

Commission has explicitly approved a 

process similar to that proposed by 

BATS in the equity markets in which 

only those members who have been 

permissioned by a market maker are 

eligible to submit directed orders to the 

market maker.10 And, the Commission 

has implicitly approved such processes 

in the options markets by allowing 

certain price improvement auctions to 

exist pursuant to pilot programs, which 

auctions provide the ability of an 

options member to submit a customer 

order along with a contra-side principal 

order from the options member into a 

brief price improvement auction in 

which all members have the ability to 

compete for the execution.11 BATS’ 

proposed rule changes are similar in 

nature to these price improvement 

auctions, except that under BATS’ 

proposal, competition for the execution 

with a Directed Order occurs in the 

context of BATS’ continuous, price/time 

priority auction, and as previously 

mentioned, BATS Options Market 

Makers would have no participation 

guarantees. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has neither solicited 

nor received written comments on the 

proposed rule change. 


emcdonald on DSK2BSOYB1PROD with NOTICES
76062 Federal Register / Vol. 75, No. 234 / Tuesday, December 7, 2010 / Notices 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Penny Pilot was established in January 2007 

and in October 2009 was expanded and extended 

through December 31, 2010. See Securities 

Exchange Act Release Nos. 55153 (January 23, 

2007), 72 FR 4553 (January 31, 2007)(SR–Phlx– 

2006–74)(notice of filing and approval order 

establishing Penny Pilot); 60873 (October 23, 2009), 

74 FR 56675 (November 2, 2009)(SR–Phlx–2009– 

91)(notice of filing and immediate effectiveness 

expanding and extending Penny Pilot); 60966 

(November 9, 2009), 74 FR 59331 (November 17, 

2009)(SR–Phlx–2009–94)(notice of filing and 

immediate effectiveness adding seventy-five classes 

to Penny Pilot); 61454 (February 1, 2010), 75 FR 

6233 (February 8, 2010)(SR–Phlx–2010–12)(notice 

of filing and immediate effectiveness adding 

seventy-five classes to Penny Pilot); 62028 (May 4, 

2010), 75 FR 25890 (May 10, 2010)(SR–Phlx–2010– 

65)(notice of filing and immediate effectiveness 

adding seventy-five classes to Penny Pilot); and 

62616 (July 30, 2010), 75 FR 47664 (August 6, 

2010)(SR–Phlx–2010–103)(notice of filing and 

immediate effectiveness adding seventy-five classes 

to Penny Pilot). 

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 

up to 90 days (i) as the Commission may 

designate 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 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 proposal 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 

No. SR–BATS–2010–034 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 

No. SR–BATS–2010–034. 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 changes 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 website 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 such filing 

will also 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 No. SR–BATS– 

2010–034 and should be submitted on 

or before December 28, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–30577 Filed 12–6–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63395; File No. SR–Phlx2010–167] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Extension of the Exchange’s Penny 

Pilot Program and Replacement, on a 

Semi-Annual Basis, of Penny Pilot 

Issues that Have Been Delisted 

November 30, 2010. 

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 November 

22, 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 the Substance 

of the Proposed Rule Change 

The Exchange is filing with the 

Commission a proposal to amend Phlx 

Rule 1034 (Minimum Increments) to: 

Extend through December 31, 2011, the 

Penny Pilot Program in options classes 

in certain issues (‘‘Penny Pilot’’ or 

‘‘Pilot’’); and replace, on a semi-annual 

basis, any Penny Pilot issues that have 

been delisted.3

The text of the proposed rule change 

is available on the Exchange’s Website 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, 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 this filing is to amend 

Phlx Rule 1034 to: (1) Extend through 

December 31, 2011, the Penny Pilot; and 

(2) replace, on a semi-annual basis, any 

Penny Pilot issues that have been 

delisted. 

For a pilot period scheduled to expire 

on December 31, 2010, the Penny Pilot 

allows certain options to be quoted and 

traded on the Exchange in minimum 

increments of $0.01 for all series in such 

options with a price of less than $3.00; 

and in minimum increments of $0.05 for 

all series in such options with a price 

of $3.00 or higher. Options overlying the 

PowerShares QQQ Trust (‘‘QQQQ’’),® 

SPDR S&P 500 Exchange Traded Funds 

(‘‘SPY’’), and iShares Russell 2000 Index 

Funds (‘‘IWM’’), however, are quoted 


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