Federal Register / Vol. 74, No. 157 / Monday, August 17, 2009 / Notices 41475 

6 Id. 

7The Commission notes that the current listing 

fee for Derivative Securities Products is $5,000, 

while the lowest listing fee for common stock is 

$100,000. See NYSE Arca Equities, Inc. Schedule of 

Fees and Charges for Exchange Services. 

8 15 U.S.C. 78f(b)(4). In approving the 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). 

9 15 U.S.C. 78s(b)(2). 

10 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78s(b)(1). 

5 17 CFR 240.19b–4. 

6The Exchange may not list long-term option 

series (‘‘LEAPS’’) at $1 strike price intervals for any 

class selected for the Program. 

7The Exchange recently amended Exchange Rule 

1010, Withdrawal of Approval of Underlying 

Securities or Options, to eliminate the $3 market 

price per share requirement for continued approval 

for an underlying security. The amendment 

eliminated the prohibition against listing additional 

series or options on an underlying security at any 

time when the price per share of such underlying 

security is less than $3. The Exchange explained in 

that proposed rule change that the market price for 

a large number of securities has fallen below $3 in 

the current volatile market environment. See 

Securities Exchange Act Release No. 59346 

(February 3, 2009), 74 FR 6681 (February 10, 2009). 

initial listing fee for issuers of 

traditional equity securities, e.g., 

common stock.6

Accordingly, the Commission believes 

that the Exchange’s proposed rule 

change provides for the equitable 

allocation of reasonable dues, fees, and 

other charges among issuers and further, 

does not unfairly discriminate between 

issuers given the additional time and 

resources dedicated to new Sponsors of 

Derivative Securities Products and given 

that the listing fees, including the onetime consulting fee, for Derivative 

Securities Products is substantially 

below the listing fee for traditional 

equity securities.7 Further, the 

Commission believes that the proposed 

one time consulting fee is equitable in 

that it applies uniformly to all new 

issuers of Derivative Securities 

Products. For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act.8

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,9 that the 

proposed rule change (SR–NYSEArca– 

2009–52) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–19623 Filed 8–14–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60466; File No. SR–Phlx– 

2009–65] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to 

Strike Price Intervals of $0.50 for 

Options on Stocks Trading at or Below 

$3.00 

August 10, 2009. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on July 31, 

2009, NASDAQ OMX PHLX, Inc. 

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

Securities and Exchange Commission 

(the ‘‘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, pursuant to Section 

19(b)(1) of the Act 4 and Rule 19b–4 

thereunder,5 proposes to amend Rule 

1012, Series of Options Open for 

Trading, Commentary .05, in order to 

establish strike price intervals of $0.50, 

beginning at $1, for certain options 

classes whose underlying security 

closed at or below $3 in its primary 

market on the previous trading day. 

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 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 those 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to expand the ability of 

investors to hedge risks associated with 

stocks trading at or under $3. Currently, 

Commentary .05(a)(ii) to Phlx Rule 1012 

provides that the interval of strike prices 

of series of options on individual stocks 

may be $2.50 or greater where the strike 

price is $25 or less. Additionally, 

Commentary .05(a)(i) to Phlx Rule 1012 

allows the Exchange to establish $1 

strike price intervals (the ‘‘$1 Strike 

Program’’) on options classes overlying 

no more than fifty-five individual stocks 

designated by the Exchange. In order to 

be eligible for selection into the $1 

Strike Program, the underlying stock 

must close below $50 in its primary 

market on the previous trading day. If 

selected for the $1 Strike Program, the 

Exchange may list strike prices at $1 

intervals from $1 to $50, but no $1 strike 

price may be listed that is greater than 

$5 from the underlying stock’s closing 

price in its primary market on the 

previous day. The Exchange may also 

list $1 strikes on any other option class 

designated by another securities 

exchange that employs a similar $1 

Strike Program its own rules.6 The 

Exchange is restricted from listing any 

series that would result in strike prices 

being within $0.50 of a strike price set 

pursuant to Commentary .05(a)(ii) to 

Phlx Rule 1012 at intervals of $2.50. 

The Exchange is now proposing to 

establish strike prices of $1, $1.50, $2, 

$2.50, $3 and $3.50 for certain stocks 

that trade at or under $3.00.7 The listing 

of these strike prices will be limited to 

options classes whose underlying 

security closed at or below $3 in its 

primary market on the previous trading 

day, and which have national average 

daily volume that equals or exceeds 

1000 contracts per day as determined by 

The Options Clearing Corporation 

during the preceding three calendar 

months. The listing of $0.50 strike 

prices would be limited to options 

classes overlying no more than 5 

individual stocks (the ‘‘$0.50 Strike 

Program’’) as specifically designated by 

the Exchange. The Exchange would also 

be able to list $0.50 strike prices on any 

other option classes if those classes 

were specifically designated by other 

securities exchanges that employed a 

similar $0.50 Strike Program under their 

respective rules. 

Currently, the Exchange may list 

options on stocks trading at $3 at strike 

prices of $1, $2, $3, $4, $5, $6, $7 and 

$8 if they are designated to participate 

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41476 Federal Register / Vol. 74, No. 157 / Monday, August 17, 2009 / Notices 

8Additionally, market participants may be able to 

trade $2.50 strikes on the same option at another 

exchange, if that exchange has elected not to select 

the stock for participation in its own similar $1 

Strike Program. 

9Again, market participants may also be able to 

trade the option at $1 strike price intervals on other 

exchanges, if those exchanges have selected the 

stock for participation in their own similar $1 Strike 

Program. 

10Current sections (ii), (iii) and (iv) would be 

renumbered as sections (iii), (iv) and (v) 

respectively. 

11The option on the qualifying stock could also 

have strike prices set at $5, $7.50 and so forth at 

$2.50 intervals (pursuant to Commentary .05(a)(ii) 

to Phlx Rule 1012) or, if it has been selected for the 

$1 Strike Program, at $4, $5, $6, $7 and $8. 

12As of July 31, 2009, stocks trading at or below 

$3 include E*Trade Financial Corporation, Ambac 

Financial Group, Inc., Alcael-Lucent, Federal Home 

Loan Mortgage Corporation (Freddie Mac) and 

Federal National Mortgage Association (Fannie 

Mae). A number of these stocks are widely held and 

actively traded equities, and the options overlying 

these stocks also trade actively on Phlx. 

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

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

in the $1 Strike Program.8 If these stocks 

have not been selected for the 

Exchange’s $1 Strike Program, the 

Exchange may list strike prices of $2.50, 

$5, $7.50 and so forth as provided in 

Commentary .05(a), but not strike prices 

of $1, $2, $3, $4, $6, $7 and $8.9

The Exchange is now proposing to 

amend Commentary .05 to Phlx Rule 

1012 by adding new section (ii) to list 

strike prices on options on a number of 

qualifying stocks that trade at or under 

$3.00, not simply those stocks also 

participating in the $1 Strike Program, 

in finer intervals of $0.50, beginning at 

$1 up to $3.50.10 Thus, a qualifying 

stock trading at $3 would have option 

strike prices established not just at 

$2.50, $5.00, $7.50 and so forth (for 

stocks not in the Exchange’s $1 Strike 

Program) or just at $1, $2, $3, $4, $5, $6, 

$7 and $8 (for stocks designated to 

participate in the $1 Strike Program), 

but rather at strike prices established at 

$1, $1.50, $2, $2.50, $3 and $3.50.11

The Exchange believes that current 

market conditions demonstrate the 

appropriateness of the new strike prices. 

Recently the number of securities 

trading below $3.00 has increased 

dramatically.12 Unless the underlying 

stock has been selected for the $1 Strike 

Program, there is only one possible inthe-money call (at $2.50) to be traded if 

an underlying stock trades at $3.00. 

Similarly, unless the underlying stock 

has been selected for the $1 Strike 

Program, only one out-of-the-money 

strike price choice within 100% of a 

stock price of $3 is available if an 

investor wants to purchase out-of-themoney calls. Stated otherwise, a 

purchaser would need over a 100% 

move in the underlying stock price in 

order to have a call option at any strike 

price other than the $5 strike price 

become in-the-money. If the stock is 

selected for the $1 Strike Program, the 

available strike price choices are 

somewhat broader, but are still greatly 

limited by the proximity of the $3 stock 

price to zero, and the very large percent 

gain or loss in the underlying stock 

price, relative to a higher priced stock, 

that would be required in order for 

strikes set at $1 or away from the stock 

price to become in-the-money and serve 

their intended hedging purpose. 

As a practical matter, a low-priced 

stock by its very nature requires narrow 

strike price intervals in order for 

investors to have any real ability to 

hedge the risks associated with such a 

security or execute other related options 

trading strategies. The current 

restriction on strike price intervals, 

which prohibits intervals of less than 

$2.50 (or $1 for stocks in the $1 Strike 

Program) for options on stocks trading at 

or below $3, could have a negative affect 

on investors. The Exchange believes that 

the proposed $0.50 strike price intervals 

would provide investors with greater 

flexibility in the trading of equity 

options that overlie lower priced stocks 

by allowing investors to establish equity 

option positions that are better tailored 

to meet their investment objectives. The 

proposed new strike prices would 

enable investors to more closely tailor 

their investment strategies and 

decisions to the movement of the 

underlying security. As the price of 

stocks decline below $3 or even $2, the 

availability of options with strike prices 

at intervals of $0.50 could provide 

investors with opportunities and 

strategies to minimize losses associated 

with owning a stock declining in price. 

With regard to the impact on system 

capacity, Phlx has analyzed its capacity 

and represents that it and the Options 

Price Reporting Authority have the 

necessary systems capacity to handle 

the additional traffic associated with the 

listing and trading of an expanded 

number of series as proposed by this 

filing. 

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, by 

expanding the ability of investors to 

hedge risks associated with stocks 

trading at or under $3. The proposal 

should create greater trading and 

hedging opportunities and flexibility, 

and provide customers with the ability 

to more closely tailor investment 

strategies to the price movement of the 

underlying stocks, trading in many of 

which is highly liquid. 

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 that is 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 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 Exchange consents, 

the Commission will: 

(A) By order approve the 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–2009–65 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. 

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Federal Register / Vol. 74, No. 157 / Monday, August 17, 2009 / Notices 41477 

15 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)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5See NYSE Arca Trader Update, July 20, 2009, 

available at http://www.nyse.com/pdfs/ 

Arca_Fee_Schedule_Update.pdf. 

6 15 U.S.C. 78f. 

7 15 U.S.C. 78f(b)(4). 

All submissions should refer to File 

Number SR–Phlx–2009–65. 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 inspection and copying 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–2009–65 and should 

be submitted on or before September 8, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–19573 Filed 8–14–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60464; File No. SR–BATS– 

2009–027] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to Fees for Use 

of BATS Exchange, Inc. 

August 10, 2009. 

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 July 29, 

2009, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) filed with the 

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 Exchange. BATS has designated 

the proposed rule change as one 

establishing or changing a member due, 

fee, or other charge imposed by the 

Exchange under Section 19(b)(3)(A)(ii) 

of the Act 3 and Rule 19b–4(f)(2) 

thereunder,4 which renders the 

proposed rule change 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 modify its 

fee schedule applicable to use of the 

Exchange. While changes to the fee 

schedule pursuant to this proposal will 

be effective upon filing, the changes will 

become operative on August 1, 2009. 

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 

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 proposes to modify its 

fee schedule applicable to use of the 

Exchange effective August 1, 2009, in 

order to change the fee charged by the 

Exchange for odd lot orders routed to 

NYSE Arca. Due to the pricing structure 

at NYSE Arca, the Exchange currently 

charges higher fees for odd lot orders to 

the extent such odd lot orders are routed 

to and executed at NYSE Arca. Effective 

August 1, 2009, NYSE Arca will begin 

applying its standard fees for round lot 

executions to odd lot executions.5

Accordingly, the Exchange proposes to 

delete the specific fees charged for odd 

lot orders routed to NYSE Arca, and 

instead, will charge the same fees that 

it charges for routed orders generally. 

For instance, an odd lot order routed 

through the Exchange’s CYCLE or 

RECYCLE routing strategy will be 

charged $0.0026 per share wherever 

such order is executed, including NYSE 

Arca. If such odd lot order is in a stock 

priced below $1.00, then the Exchange 

will charge 0.26% of the total dollar 

value of the trade to the extent the order 

was routed to and executed at any 

venue (including NYSE Arca) pursuant 

to the Exchange’s CYCLE or RECYCLE 

routing strategy. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change 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 of the Act.6

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,7 in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among members and other 

persons using any facility or system 

which the Exchange operates or 

controls. The Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily direct order flow to competing 

venues if they deem fee levels at a 

particular venue to be excessive. 

Finally, the Exchange believes that the 

proposed rates are equitable in that they 

apply uniformly to all Members. 

(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 

No written comments were solicited 

or received. 

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