5628 Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 

stocks, provided the $1 intervals are not within 

$0.50 of an existing series with a $2.50 strike price. 

See Rule 6.4 Commentary .04(c). This provision 

would not change under the current proposal. 

7Rule 6.4A codifies the limitation on strike price 

ranges outlined in the OLPP, which, except in 

limited circumstances, prohibits options series with 

an exercise price more than 100% above or below 

the price of the underlying security if that price is 

$20 or less. If the price of the underlying security 

is greater than $20, an exchange may not list new 

options series with an exercise price more than 

50% above or below the price of the underlying 

security. 

8 In approving this 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. 78f(b)(5). 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

However, as the Exchange noted in its 

proposal, due to the prohibition on $1 

strike price intervals within $0.50 of an 

existing strike price, the existence of 

series with $2.50 interval strikes for 

classes selected for the $1 Strike Price 

Program could lead to discontinuities in 

strike prices and a lack of parallel 

strikes in different expiration months of 

the same issue. For example, if a $12.50 

strike series was open in a class selected 

for the $1 Strike Price Program, the 

Exchange would not be able to list series 

with a $12 or $13 strike, potentially 

resulting in sequence of strike prices at 

irregular intervals (i.e., $10, $11, $12.50, 

$14, and $15). 

To replace these now-forbidden $2.50 

interval strikes, the Exchange proposes 

to allow the listing of one additional 

series within each natural $5 interval, as 

follows. The Exchange proposed to 

permit the listing of a series with a 

strike $2 above the $5-interval strike for 

each such $5-interval strike above the 

price of the underlying security at the 

time of listing. Conversely, the 

Exchange’s proposal would permit the 

listing of a series with a strike $2 below 

the $5-interval strike for each such $5- 

interval strike below the price of the 

underlying security at the time of 

listing. For example, if the underlying 

security was trading at $19, the 

Exchange could list a $27 strike between 

the $25 and the $30 strikes, and a $32 

strike between the $30 and $35 strikes; 

as well as a $13 strike between the $10 

and $15 strikes, and an $8 strike 

between the $10 and $15 strikes. The 

Exchange also notes that each such 

additional series may be listed only if 

such listing is consistent with the 

Options Listing Procedures Plan 

(‘‘OLPP’’) Provisions in Rule 6.4A.7 The 

foregoing provisions would apply to all 

classes selected for the $1 Strike Price 

Program, both with respect to standard 

and long-term options. In addition, 

since series with $1-interval strikes are 

not permitted for most long-term 

options, the proposal would allow the 

Exchange to list the long-term strike that 

is $2 above the $5-interval just below 

the underlying price at the time of 

listing. For example, if the underlying 

security is trading at $21.25, this 

provision would allow the Exchange to 

add a $22 strike ($2 above the $20 

strike) for the long-term option series. 

In support of its proposal, the 

Exchange stated that the proposed rule 

change seeks to reduce investor 

confusion resulting from discontinuous 

strike prices that has arisen in the 

operation of the $1 Strike Price Program, 

by providing a consistent application of 

strike price intervals for issues in the $1 

Strike Price Program. 

The Exchange further represented that 

it has the necessary systems capacity to 

support the potential increase in new 

options series that will result from the 

proposed changes to the $1 Strike Price 

Program. 

III. Discussion 

The Commission finds that the 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange.8 Specifically, the 

Commission finds that the proposal is 

consistent with Section 6(b)(5) of the 

Act,9 which requires, among other 

things, that the rules of a national 

securities exchange be designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts and practices, 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. 

As the Exchange notes, the proposal 

is intended to reduce investor confusion 

resulting from the operation of the $1 

Strike Price Program by reducing the 

occurrences of discontinuities in strike 

prices and non-parallel strikes in 

different expiration months of the same 

issue. The Commission believes that the 

proposal strikes a reasonable balance 

between the Exchange’s desire to 

accommodate market participants and 

the need to avoid unnecessary 

proliferation of options series and the 

corresponding increase in quotes and 

market fragmentation. The Commission 

expects the Exchange to monitor the 

trading and quotation volume associated 

with the additional options series listed 

as a result of this proposal and the effect 

of these additional series on market 

fragmentation and on the capacity of the 

Exchange’s, OPRA’s, and vendors’ 

automated systems. 

In approving this proposal, the 

Commission notes that Exchange has 

represented that it has the necessary 

systems capacity to support the 

potential increase in new options series 

that will result from the proposed 

changes to the $1 Strike Price Program. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–NYSEArca– 

2010–106) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2115 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63774; File No. SR–BX– 

2011–006] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change Regarding the 

Listing of $1 Strike Prices on the 

Boston Options Exchange Facility 

January 25, 2011. 

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 

21, 2011, NASDAQ OMX BX, Inc. (the 

‘‘Exchange’’) 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 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 the 

Rules of the Boston Options Exchange 

Group, LLC (‘‘BOX’’) regarding the 

listing of $1 strike prices. The text of the 

proposed rule change is available from 

the principal office of the Exchange, on 

the Commission’s Web site at http:// 

www.sec.gov, at the Commission’s 

Public Reference Room, and also on the 

Exchange’s Internet Web site at http:// 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 5629 

3Chapter IV, Section 6(b) of the BOX Rules 

codifies the limitation on strike price ranges 

outlined in the OLPP, which, except in limited 

circumstances, prohibits options series with an 

exercise price more than 100% above or below the 

price of the underlying security if that price is $20 

or less. If the price of the underlying security is 

greater than $20, BOX shall not list new options 

series with an exercise price more than 50% above 

or below the price of the underlying security. 

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

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

nasdaqomxbx.cchwallstreet.com/ 

NASDAQOMXBX/Filings/. 

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 self-regulatory organization 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 Exchange proposes to amend 

Supplementary Material .02 to Chapter 

IV, Section 6 (Series of Options 

Contracts Open for Trading) of the BOX 

Trading Rules to improve the operation 

of the $1 Strike Price Program. 

Currently, the $1 Strike Price Program 

only allows the listing of new $1 strikes 

within $5 of the previous day’s closing 

price. In certain circumstances this has 

led to situations where there are no atthe-money $1 strikes for a day, despite 

significant demand. For instance, on 

November 15, 2010, the underlying 

shares of Isilon Systems Inc. opened at 

$33.83. It had closed the previous 

trading day at $26.29. Options were 

available in $1 intervals up to $31, but 

because of the restriction to only listing 

within $5 of the previous close, BOX 

was not able to add $32, $33, $34, $36, 

$37 or $38 strikes during the day. 

The Exchange proposes that $1 

interval strike prices be allowed to be 

added immediately within $5 of the 

official opening price in the primary 

listing market. Thus, on any day, $1 

Strike Program strikes may be added 

within $5 of either the opening price or 

the previous day’s closing price. 

On occasion, the price movement in 

the underlying security has been so 

great that listing within $5 of either the 

previous day’s closing price or the day’s 

opening price will leave a gap in the 

continuity of strike prices. For instance, 

if an issue closes at $14 one day, and the 

next day opens above $27, the $21 and 

$22 strikes will be more than $5 from 

either benchmark. The Exchange 

proposes that any such discontinuity be 

avoided by allowing the listing of all $1 

Strike Program strikes between the 

closing price and the opening price. 

Additionally, issues that are in the $1 

Strike Price Program may currently have 

$2.50 interval strike prices added that 

are more than $5 from the underlying 

price or are more than a nine months to 

expiration (long-term options series). In 

such cases, the listing of a $2.50 interval 

strike may lead to discontinuities in 

strike prices and also a lack of parallel 

strikes in different expiration months of 

the same issue. For instance, under the 

current rules, BOX may list a $12.50 

strike in a $1 Strike Program issue 

where the underlying price is $24. This 

allowance was provided to avoid too 

large of an interval between the 

standard strike prices of $10 and $15. 

The unintended consequence, however, 

is that if the underlying price should 

decline to $16, BOX would not be able 

to list a $12 or $13 strike. If the 

underlying stayed near this level at 

expiration, a new expiration month 

would have the $12 and $13 strike but 

not the $12.50, leading to a disparity in 

strike intervals in different months of 

the same option class. This has also led 

to investor confusion, as they regularly 

request the addition of inappropriate 

strikes so as to roll a position from one 

month to another at the same strike 

level. 

To avoid this problem, the Exchange 

proposes to prohibit $2.50 interval 

strikes below $50 in all $1 Strike Price 

Program issues, including long term 

option series. At each standard $5 

increment strike more than $5 from the 

price of the underlying security, BOX 

proposes to list the strike $2 above the 

standard strike for each interval above 

the price of the underlying security, and 

$2 below the standard strike, for each 

interval below the price of the 

underlying security, provided it meets 

the Options Listing Procedures Plan 

(‘‘OLPP’’) Provisions in Chapter IV, 

Section 6(b) of the BOX Rules.3 For 

instance, if the underlying security was 

trading at $19, BOX could list, for each 

month, the following strikes: $3, $5, $8, 

$10, $13, $14, $15, $16, $17, $18, $19, 

$20, $21, $22, $23, $24, $25, $27, $30, 

$32, $35, and $37. 

Instead of $2.50 strikes for long-term 

options, the Exchange proposes to list 

one long-term $1 Strike option series 

strike in the interval between each 

standard $5 strike, with the $1 Strike 

being $2 above the standard strike price 

for each interval above the price of the 

underlying security, and $2 below the 

standard strike price, for each interval 

below the price of the underlying 

security. In addition, BOX may list the 

long-term $1 strike which is $2 above 

the standard strike just below the 

underlying price at the time of listing, 

and may add additional long-term 

options series strikes as the price of the 

underlying security moves, consistent 

with the OLPP. For instance, if the 

underlying is trading at $21.25, longterm strikes could be listed at $15, $18, 

$20, $22, $25, $27, and $30. If the 

underlying subsequently moved to $22, 

the $32 strike could be added. If the 

underlying moved to $19.75, the $13, 

$10, $8, and $5 strikes could be added. 

The Exchange also proposes that 

additional long-term option strikes may 

not be listed within $1 of an existing 

strike until less than nine months to 

expiration. 

Finally, the Exchange represents that 

it has the necessary systems capacity to 

support the small increase in new 

options series that will result from these 

changes to the $1 Strike Price Program. 

2. Statutory Basis 

The Exchange believes that this 

proposed rule change is consistent with 

Section 6(b) of the Securities Exchange 

Act of 1934 (‘‘Act’’),4 in general, furthers 

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

Act 5 in particular, in that it is designed 

to prevent fraudulent and manipulative 

acts and practices, 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, to protect investors and the 

public interest. In particular, the 

proposed rule change seeks to reduce 

investor confusion and address issues 

that have arisen in the operation of the 

$1 Strike Price Program by providing a 

consistent application of strike price 

intervals for issues in the $1 Strike Price 

Program. Moreover, the Exchange 

believes the proposed rule change 

would benefit investors by giving them 

more flexibility to closely tailor their 

investment decisions. While amending 

the $1 Strike Program to allow 

additional strike prices will generate 

additional quote traffic, BOX does not 

believe that this increased traffic will 

result in a material proliferation of 

additional series because it will affect a 

limited number of classes and BOX does 


srobinson on DSKHWCL6B1PROD with NOTICES
5630 Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Commission 

has waived the five-day prefiling requirement in 

this case. 

8See Securities Exchange Act Release No. 63773 

(January 25, 2011) (SR–NYSEAmex–2010–109). See 

also Securities Exchange Act Release No. 63770 

(January 25, 2011) (SR–NYSEArca–2010–106). 

9For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 revises Phlx Rule 1080, 

Commentary .08(a)(i), to indicate that member 

organizations submitting Complex Orders with a 

stock/ETF component represent that such orders 

comply with the qualified contingent trade 

exemption from Rule 611(a) of Regulation NMS 

under the Exchange Act. 

4See Securities Exchange Act Release No. 63509 

(December 9, 2010), 75 FR 78320 (‘‘Notice’’). 

not believe that the additional price 

points will result in fractured liquidity. 

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 

The Exchange has neither solicited 

nor received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not significantly affect the 

protection of investors or the public 

interest, does not impose any significant 

burden on competition, and, by its 

terms, does not become operative for 30 

days from the date on which it was 

filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 6 and Rule 19b– 

4(f)(6) thereunder.7

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal is substantially 

similar to that of another exchange that 

has been approved by the Commission.8

Therefore, the Commission designates 

the proposal operative upon filing.9

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

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–BX–2011–006 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–BX–2011–006. 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–BX– 

2011–006 and should be submitted on 

or before February 22, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2123 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63777; File No. SR–Phlx2010–157] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Order 

Approving a Proposed Rule Change, 

as Modified by Amendment Nos. 1 and 

2, Relating to Complex Orders 

January 26, 2011. 

I. Introduction 

On November 29, 2010, NASDAQ 

OMX PHLX LLC (‘‘Phlx’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (the ‘‘Act’’),1 and Rule 19b– 

thereunder,2 a proposed rule change to 

amend the rules governing the trading of 

Complex Orders on the Phlx’s electronic 

options trading platform, Phlx XL II, to, 

among other things: (i) Permit Complex 

Orders with up to six components, 

including the underlying stock or 

Exchange Traded Fund Share (‘‘ETF’’); 

(ii) establish a Do Not Auction (‘‘DNA’’) 

designation for Complex Orders; (iii) 

add a definition of conforming ratio; (iv) 

provide priority rules for Complex 

Orders traded on Phlx XL II; and (v) 

provide for the communication of the 

stock or ETF component of a Complex 

Order by the Exchange to Nasdaq 

Options Services LLC (‘‘NOS’’), the 

Phlx’s affiliated broker-dealer, for 

execution. The Exchange filed 

Amendment No. 1 to the proposal on 

December 6, 2010.3 The proposed rule 

change, as modified by Amendment No. 

1, was published for comment in the 

Federal Register on December 15, 

2010.4 The Exchange filed Amendment 

No. 2 to the proposal on January 11, 


srobinson on DSKHWCL6B1PROD with NOTICES