5952 Federal Register / Vol. 74, No. 21 / Tuesday, February 3, 2009 / Notices 

8 15 U.S.C. 78s(b)(3)(A)(ii). 

9 17 CFR 240.19b–4(f)(6) [sic]. 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Amendment 1 makes a technical correction to 

conform Commentary .03 to the proposed new rule 

language. 

4Changes are marked to the rule text that appears 

in the electronic NASDAQ Manual found at http:// 

wallstreet.cch.com/nasdaq/. 

(C) Self-Regulatory Organization’s 

Statement on Comments Regarding the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change 

has been designated as a fee change 

pursuant to Section 19(b)(3)(A)(ii) of the 

Act 8 and Rule 19b–4(f)(2) thereunder,9

because it establishes or changes a due, 

fee or other charge imposed on members 

by the Exchange. Accordingly, the 

proposal is effective upon filing with 

the Commission. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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. 

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–2009–005 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–2009–005. 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 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 such filing also will be 

available for inspection and copying at 

the principal office of BATS. 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–2009–005 and should be 

submitted on or before February 24, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2231 Filed 2–2–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59310; File No. SR– 

NASDAQ–2009–005] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change as 

Modified by Amendment No. 1 Thereto 

To Reduce The Order Exposure Period 

on the NASDAQ Options Market 

January 28, 2009. 

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 January 

23, 2009, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) proposed rule change 

as described in Items I and II below, 

which Items have been prepared by the 

Exchange. Amendment 1 was filed on 

January 27, 2009. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change, 

as amended, from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Specifically, NASDAQ is proposing to 

amend Chapter VII, Section 12 of the 

NASDAQ rule manual governing the 

NASDAQ Options Market to provide 

that: (i) Options Participants may not 

execute as principal against orders on 

the limit order book they represent as 

agent unless such agency orders are first 

exposed on the limit order book for at 

least one (1) second, or the Options 

Participant has been bidding or offering 

on the Exchange for at least one (1) 

second prior to receiving an agency 

order that is executable against such 

order, and (ii) Options Participants must 

expose orders they represent as agent for 

at least one (1) second before such 

orders may be automatically executed, 

in whole or in part, against orders 

solicited from members and nonmember broker-dealers to transact with 

such orders.3

The text of the proposed rule change 

is below. Proposed new language is in 

italics; proposed deletions are in 

brackets.4

* * * * * 

Chapter VII, Market Participants: 

Sec. 12 Order Exposure Requirements: 

With respect to orders routed to NOM, 

Options Participants may not execute as 

principal orders they represent as agent 

unless (i) agency orders are first exposed 

on NOM for at least one (1) second 

[three (3) seconds] or (ii) the Options 

Participant has been bidding or offering 

on NOM for at least one (1) second 

[three (3) seconds] prior to receiving an 

agency order that is executable against 

such bid or offer. 

Commentary: 

.01 and .02 No change. 

.03 With respect to non-displayed 

trading interest, including the reserve 

portion, the exposure requirement of 

subsection (i) is satisfied if the 

displayable portion of the order is 

displayed at its displayable price for one 

[three] seconds. 

.04 No change. 

* * * * * 

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, 


yshivers on PROD1PC62 with NOTICES
Federal Register / Vol. 74, No. 21 / Tuesday, February 3, 2009 / Notices 5953 

5Pursuant to Chapter I, Section 1(a)(40) of the 

NOM Rules, the term ‘‘Options Participant’’ means 

a firm, or organization that is registered with the 

Exchange for purposes of participating in options 

trading on NOM as a ‘‘Nasdaq Options Order Entry 

Firm’’ or ‘‘Nasdaq Options Market Maker’’. 

6Securities Exchange Act Release No. 57478 

(March 12, 2008), 73 FR 14521 (March 18, 2008) 

(SR–NASDAQ–2007–004). 

7See Securities Exchange Act Release Nos. 57849 

(May 22, 2008), 73 FR 31167 (May 30, 2008) (SR– 

CBOE–2008–16); and 58224 (July 25, 2008), 73 FR 

44303 (July 30, 2008) (SR–ISE–2007–94). 

8The Exchange believes that the proposed 

timeframe would give market participants sufficient 

time to respond, compete, and provide price 

improvement for orders. The Exchange also notes 

that electronic systems are readily available to, if 

not already in place for, Exchange members that 

allow them to respond in a meaningful way within 

the proposed timeframe. 

9 15 U.S.C. 78f(b). 

10 15 U.S.C. 78f(b)(5). 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to reduce the exposure time 

during which Options Participants may 

not execute as principal against orders 

they represent as agent while continuing 

to afford the opportunity for other 

market participants to execute at or 

better than the limit order price during 

such exposure period. 

Chapter VII, Section 12 currently 

provide that an Options Participant 5

may not execute as principal against 

orders on the limit order book they 

represent as agent unless: (a) Agency 

orders are first exposed on the limit 

order book for at least three seconds, or 

(b) the Options Participant has been 

bidding or offering on the Exchange for 

at least three (3) seconds prior to 

receiving an agency order that is 

executable against such order. 

In addition, Options Participants must 

expose orders they represent as agent for 

at least three (3) seconds before such 

orders may be automatically executed, 

in whole or in part, against orders 

solicited from members and nonmember broker-dealers to transact with 

such orders. Under the proposal, these 

exposure periods would be reduced to 

one second. 

The Exchange adopted the 3-second 

exposure period upon its initial 

creation, based upon similar 

requirements and functionality already 

in existence on other options 

exchanges.6 The three-second order 

handling and exposure period assumes 

that three seconds is not long enough to 

permit human interaction with the 

orders. Rather, market participants had 

become sufficiently automated that they 

could react to these orders 

electronically. In this context, the 

Exchange believes it would be in all 

market participants’ best interest to 

minimize the exposure period to a time 

frame that continues to allow adequate 

time for market participants to respond 

electronically, as both the order being 

exposed and the participants 

responding are subject to market risk 

during the exposure period. In this 

respect, the Exchange states that its 

experience with the three-second 

exposure time period indicates that one 

second would provide an adequate 

response time. The Exchange does not 

believe it is necessary or beneficial to 

the orders being exposed to continue to 

subject them to market risk for a full 

three seconds. 

The Exchange has numerous market 

participants that have the capability and 

do opt to respond within a one-second 

exposure period on the Exchange’s fully 

automated trading platform for options. 

Recently, the Exchange distributed a 

survey to all NOM Options Participants. 

To substantiate that its members could 

receive, process, and communicate a 

response back to the Exchange within 

one second, the survey asked members 

to identify how many milliseconds it 

took for (i) a broadcast from the 

Exchange to reach their systems; (ii) 

their systems to generate responses; and 

(iii) their responses to reach the 

Exchange. The survey results indicate 

that the time it takes a message to travel 

between the Exchange and its members 

is not more than 100 milliseconds each 

way. The survey also indicated that it 

typically takes not more than 50 

milliseconds for member systems to 

process the information and generate a 

response. Thus, the survey indicated 

that it typically takes not more than 250 

milliseconds for members to receive, 

process, and respond to broadcast 

messages related to the various 

Mechanisms. Additionally, all 8 

members that responded to the survey 

indicated that reducing the exposure 

period to one second would not impair 

their ability to participate in orders 

affected by the proposal. The Exchange 

believes that this information provides 

additional support for its assertion that 

reducing the exposure periods from 

three seconds to one second will 

continue to provide members with 

sufficient time to ensure effective 

interaction with orders. 

The Exchange is submitting the 

instant proposal in order to remain 

competitive with other exchanges that 

have reduced the exposure period from 

3 seconds to 1 second.7 The Exchange 

believes that reducing its order handling 

and exposure periods from three 

seconds to one second will benefit 

market participants. The Exchange 

further believes that reducing the time 

periods to one second will allow it to 

provide investors and other market 

participants with more timely 

executions, thereby reducing market 

risk.8

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 9 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 10

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 

providing investors with more timely 

execution of their options orders, while 

ensuring that there is adequate exposure 

of limit orders in the Exchange’s 

marketplace. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ 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. To the contrary, 

NASDAQ is adopting this proposed rule 

change in response to the competitive 

advantage enjoyed by options exchanges 

that have already reduced the order 

exposure requirement from three 

seconds to one second. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

None. 

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 


yshivers on PROD1PC62 with NOTICES
5954 Federal Register / Vol. 74, No. 21 / Tuesday, February 3, 2009 / Notices 

11 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. 

4Flex Equity Options includes options on 

specified equity securities or Exchange Traded 

Fund Shares. 

5Pursuant to NYSE Arca Rule 5.32 (d)(1), upon 

assessment by the FLEX Post Official that sufficient 

liquidity exists, such request will be granted. 

(ii) as to which the Phlx consents, the 

Commission will: 

(A) By order approve such proposed 

rule change, or 

(B) Institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

The Exchange has requested 

accelerated approval of this proposed 

rule change prior to the 30th day after 

the date of publication of the notice in 

the Federal Register. The Commission 

is considering granting accelerated 

approval of the proposed rule change at 

the end of a 15-day comment period. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the proposal, 

including whether it 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–2009–005 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–2009–005. 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 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 

offices 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–2009–005 and 

should be submitted on or before 

February 18, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–2226 Filed 2–2–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Release No. 34–59305; File No. SR– 

NYSEArca–2009–04] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Arca, Inc. Amending Rules Governing 

Flexible Exchange Options to Increase 

Maximum Term 

January 27, 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 January 

9, 2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ 

or the ‘‘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 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 amend 

Exchange rules governing Flexible 

Exchange Options. A copy of this filing 

is available on the Exchange’s Web site 

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

Exchange’s principal office 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 

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 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 increase the maximum term 

for FLEX Options. Currently, the 

maximum term for a FLEX Equity 

Options 4 is three (3) years, provided an 

OTP Holder may request a longer term 

to a maximum of five (5) years,5 and for 

FLEX Index Options the maximum term 

is five (5) years. 

NYSE Arca is proposing to increase 

the maximum term for all FLEX Options 

to fifteen years and to eliminate the 

requirement that a FLEX Post Official 

make a liquidity assessment. The 

changes are being proposed to simplify 

the process and in response to investor 

interest in expanding the maximum 

term, in order to accommodate their 

desire to bring trades that are otherwise 

conducted in the over-the-counter 

(‘‘OTC’’) market to an exchange 

environment. 

The Exchange believes that expanding 

the eligible term for FLEX Options as 

proposed is important and necessary to 

the Exchange’s efforts to create a 

product and market that provides OTP 

Holders, and other qualified investors 

interested in FLEX-type options, with 

an improved but comparable alternative 

to the OTC market in customized 

options, which can take on contract 

characteristics similar to FLEX Options 

but are not subject to the same 

maximum term restriction. By 

expanding the eligible term for FLEX 

Options, market participants will now 

have greater flexibility in determining 

whether to execute their customized 

options in an exchange environment or 

in the OTC market. NYSE Arca believes 

market participants benefit from being 

able to trade these customized options 

in an exchange environment in several 

ways, including, but not limited to the 

following: (1) Enhanced efficiency in 

initiating and closing out positions; (2) 


yshivers on PROD1PC62 with NOTICES