31828 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 

affiliates or trading units and the entity has 

designated in writing in advance the affiliates or 

trading units that are to be considered separate and 

distinct from each other. 21See proposed Rule 24.4.05(F). See also supra 

note 12. 

22See proposed Rule 24.4.05(G). 

23See proposed Rule 24.4.05(E)(2). 

24 In approving this rule, the Commission notes 

that it has considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

25 15 U.S.C. 78f(b)(5). 

26See Securities Exchange Act Release No. 40594 

(October 23, 1998), 63 FR 59362, 59380 (November 

3, 1998) (File No. S7–30–97) (adopting rules 

relating to OTC derivatives dealers), cited in 

Exemption Approval Order, supra note 7. 

27 15 U.S.C. 78s(b)(2). 

28 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)(iii). 4 17 CFR 240.19b–4(f)(6). 

options contract equivalent of the net 

delta of such positions for a each 

account that holds an index option 

position subject to the delta hedging 

exemption in excess of the levels 

specified in 24.4 (and Rule 24.4A, in the 

case of industry index options).21 Each 

member relying on the exemption 

would be required to retain, and 

undertake reasonable efforts to ensure 

that its non-member affiliates or 

customers relying on the exemption 

retain, a list of the options, securities, 

and other instruments underlying each 

option position net delta calculation 

reported to the Exchange; and to 

produce such information to the 

Exchange upon request.22 In addition, 

the options positions of a non-member 

relying on the exemption would be 

required to be carried by a member with 

which it is affiliated.23

The Exchange will announce the 

operative date of the proposed rule 

change in a regulatory circular to be 

published no later than 60 days after 

Commission approval. The operative 

date shall be no later than 30 days after 

publication of the regulatory circular. 

The Commission finds 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.24 In particular, the 

Commission believes that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,25 which requires, 

among other things, that CBOE rules be 

designed to prevent fraudulent and 

manipulative acts and practices, 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. 

In approving the Equity Exemption, 

the Commission noted its previous 

statement in support of recognizing 

options positions hedged on a delta 

neutral basis as properly exempted from 

position limits.26 The Commission 

believes that it is appropriate and 

consistent with the Act to expand the 

Equity Exemption to allow the use of 

correlated instruments in determining 

whether an ETF options position is 

delta neutral. The Commission further 

believes that it is appropriate and 

consistent with the Act to establish a 

delta based index options hedge 

exemption from position limits. Finally, 

the Commission believes that it is 

reasonable for CBOE to exempt 

Exchange Market-Makers and DPMs 

using the OCC Model from the reporting 

requirements of the Equity Exemption, 

and not to include them as subject to the 

reporting requirements of the Index 

Exemption, because the Exchange can 

access the information through the 

Exchange’s market surveillance systems. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (SR–CBOE–2010– 

021), as modified by Amendment No. 1, 

be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13439 Filed 6–3–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62192; File No. SR–CBOE– 

2010–052] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to Trades for 

Less Than $1 

May 28, 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 May 27, 

2010, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) 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 Exchange filed the 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

Section 19(b)(3)(A)(iii) of the Act 3 and 

Rule 19b–4(f)(6) thereunder.4 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 proposing to extend 

its program that allows transactions to 

take place at a price that is below $1 per 

option contract until June 1, 2011. The 

text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/Legal), at the 

Exchange’s Office of the Secretary, on 

the Commission’s Web site at http:// 

www.sec.gov, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

An ‘‘accommodation’’ or ‘‘cabinet’’ 

trade refers to trades in listed options on 

the Exchange that are worthless or not 

actively traded. Cabinet trading is 

generally conducted in accordance with 

the Exchange Rules, except as provided 

in Exchange Rule 6.54, Accommodation 

Liquidations (Cabinet Trades), which 

sets forth specific procedures for 

engaging in cabinet trades. Rule 6.54 

currently provides for cabinet 

transactions to occur via open outcry at 

a cabinet price of $1 per option contract 

in any options series open for trading in 

the Exchange, except that the Rule is not 

applicable to trading in option classes 

participating in the Penny Pilot 

Program. Under the procedures, bids 

and offers (whether opening or closing 

a position) at a price of $1 per option 

contract may be represented in the 

trading crowd by a Floor Broker or by 

a Market-Maker or provided in response 

to a request by a PAR Official/OBO, a 

Floor Broker or a Market-Maker, but 


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Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 31829 

5See Securities Exchange Act Release Nos. 59188 

(December 30, 2008), 74 FR 480 (January 6, 2009) 

(SR–CBOE–2008–133) (adopting the amended 

procedures on a temporary basis through January 

30, 2009), 59331 (January 30, 2009), 74 FR 6333 

(February 6, 2009) (extending the amended 

procedures on a temporary basis through May 29, 

2009), and 60020 (June 1, 2009), 74 FR 27220 (June 

8, 2009) (SR–CBOE–2009–034) (extending the 

amended procedures on a temporary basis through 

June 1, 2010). 

6Currently the $1 cabinet trading procedures are 

limited to options classes traded in $0.05 or $0.10 

standard increment. The $1 cabinet trading 

procedures are not available in Penny Pilot Program 

classes because in those classes an option series can 

trade in a standard increment as low as $0.01 per 

share (or $1.00 per option contract with a 100 share 

multiplier). Because the temporary procedures 

allow trading below $0.01 per share (or $1.00 per 

option contract with a 100 share multiplier), the 

procedures are available for all classes, including 

those classes participating in the Penny Pilot 

Program. 

7As with other accommodation liquidations 

under Rule 6.54, transactions that occur for less 

than $1 are not be disseminated to the public on 

the consolidated tape. In addition, as with other 

accommodation liquidations under Rule 6.54, the 

transactions are exempt from the Consolidated 

Options Audit Trail (‘‘COATS’’) requirements of 

Exchange Rule 6.24, Required Order Information. 

However, the Exchange maintains quotation, order 

and transaction information for the transactions in 

the same format as the COATS data is maintained. 

In this regard, all transactions for less than $1 must 

be reported to the Exchange following the close of 

each business day. The rule also provides that 

transactions for less than $1 will be reported for 

clearing utilizing forms, formats and procedures 

established by the Exchange from time to time. In 

this regard, the Exchange initially intends to have 

clearing firms directly report the transactions to The 

Options Clearing Corporation (‘‘OCC’’) using OCC’s 

position adjustment/transfer procedures. This 

manner of reporting transactions for clearing is 

similar to the procedure that CBOE currently 

employees for on-floor position transfer packages 

executed pursuant to Exchange Rule 6.49A, 

Transfer of Positions. 

8 15 U.S.C. 78s(b)(1). 

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

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

11 15 U.S.C. 78s(b)(3)(A). 

12 17 CFR 240.19b–4(f)(6). Rule 19b–4(f)(6)(iii) 

requires the self-regulatory organization to submit 

to the Commission written notice of its 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 Exchange 

has satisfied this requirement. 

13 Id. 

14For purposes only of waiving the operative date 

of this proposal, the Commission has considered 

the proposed rule’s impact on efficiency, 

competition, and capital formation. See 15 U.S.C. 

78c(f). See also 17 CFR 200.30–3(a)(59). 

must yield priority to all resting orders 

in the PAR Official/OBO cabinet book 

(which resting cabinet book orders may 

be closing only). So long as both the 

buyer and the seller yield to orders 

resting in the cabinet book, opening 

cabinet bids can trade with opening 

cabinet offers at $1 per option contract. 

The Exchange has temporarily 

amended the procedures through June 1, 

2010 to allow transactions to take place 

in open outcry at a price of at least $0 

but less than $1 per option contract.5

These lower priced transactions are 

traded pursuant to the same procedures 

applicable to $1 cabinet trades, except 

that (i) bids and offers for opening 

transactions are only permitted to 

accommodate closing transactions in 

order to limit use of the procedure to 

liquidations of existing positions, and 

(ii) the procedures are also available for 

trading in option classes participating in 

the Penny Pilot Program.6 The Exchange 

believes that allowing a price of at least 

$0 but less than $1 better accommodates 

the closing of options positions in series 

that are worthless or not actively traded, 

particularly due to recent market 

conditions which have resulted in a 

significant number of series being outof-the-money. For example, a market 

participant might have a long position 

in a call series with a strike price of 

$100 and the underlying stock might 

now be trading at $30. In such an 

instance, there might not otherwise be a 

market for that person to close-out the 

position even at the $1 cabinet price 

(e.g., the series might be quoted no 

bid).7

The purpose of the instant rule 

change is to extend the operation of 

these temporary procedures through 

June 1, 2011, so that the procedures can 

continue without interruption while 

CBOE considers whether to seek 

permanent approval of the temporary 

procedures. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 8

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.9

Specifically, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 10 requirements that 

the rules of an exchange be designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, to remove 

impediments to and to perfect the 

mechanism for a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The Exchange believes 

that allowing for liquidations at a price 

less than $1 per option contract better 

facilitates the closing of options 

positions that are worthless or not 

actively trading. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE 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 neither solicited nor 

received comments on the proposal. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

does not (i) significantly affect the 

protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest, 

provided that the self-regulatory 

organization has given the Commission 

written notice of its intent to file 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 proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 11 and 

Rule 19b–4(f)(6) thereunder.12

Under Rule 19b–4(f)(6) of the Act,13 a 

proposal does not become operative for 

30 days after the date of its filing, or 

such shorter time as the Commission 

may designate if consistent with the 

protection of investors and the public 

interest. The Exchange has requested 

that the Commission waive the 30-day 

operative date so that the pilot may 

continue without interruption while the 

Exchange considers whether to seek 

permanent approval of the temporary 

procedures. The Exchange believes that 

waiver of the operative delay will 

continue to allow for the orderly closing 

of option positions that are worthless or 

not actively traded. The Commission 

believes that waiving the 30-day 

operative delay is consistent with the 

protection of investors and the public 

interest, and thus designates the 

proposal as operative upon filing.14

At any time within 60 days of the 

filing of such 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, 


srobinson on DSKHWCL6B1PROD with NOTICES
31830 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 61878 

(April 8, 2010), 75 FR 20023 (April 16, 2010) 

(‘‘Notice’’). 

4See Letter from Lawrence Lempert, Bullock 

Trading, LP, Michael Waber, Fairview Trading 

Corp., Andy Yang, Cutler Group, LP, Theodore 

Raven, TSR Associates, LLC, and Tim Lobach, 

Keystone Trading Partners to Mary Schapiro, 

Chairman, Commission, dated May 3, 2010 

(‘‘Lempert Letter’’) and Letter from Robert Sullivan, 

Empire Options Corporation to Mary Schapiro, 

Chairman, Commission, received May 3, 2010 

(‘‘Sullivan Letter’’). See also Letter from Michael 

Waber, Fairview Trading, Inc., to Elizabeth M. 

Murphy, Secretary, Commission, dated May 23, 

2010 (‘‘Waber Letter’’) (responding to the Phlx 

Letter, infra note 5). 

5See Letter from Richard S. Rudolph, Assistant 

General Counsel, NASDAQ OMX PHLX, Inc. to 

Elizabeth M. Murphy, Secretary, Commission, dated 

May 13, 2010 (‘‘Phlx Letter’’). 

6See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– 

Phlx–2009–32). 

7See Securities Exchange Act Release No. 60459 

(August 7, 2009), 74 FR 41466 (August 17, 2009) 

(SR–Phlx–2009–54). The Exchange represents that 

the data contained in the TOPO data feed is 

identical to the data sent to the processor for the 

Options Price Regulatory Authority (‘‘OPRA’’), and 

the TOPO and OPRA data leave the Phlx XL II 

system at the same time. 

8See Securities Exchange Act Release No. 60877 

(October 26, 2009), 74 FR 56255 (October 30, 2009) 

(SR–Phlx–2009–92). 

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–CBOE–2010–052 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–CBOE–2010–052. 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–CBOE– 

2010–052 and should be submitted on 

or before June 25, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13438 Filed 6–3–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62194; File No. SR–Phlx– 

2010–48] 

Self-Regulatory Organizations; Order 

Approving Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to 

Market Data Fees 

May 28, 2010. 

I. Introduction 

On April 6, 2010, NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to establish fees for a data 

product, Top of Phlx Options Plus 

Orders (‘‘TOPO Plus Orders’’ or ‘‘TOPO 

Plus’’), which currently provides 

disseminated Exchange top-of-market 

data (including orders, quotes and 

trades), together with all information 

that is included in the Exchange’s 

Specialized Order Feed (‘‘SOF’’). The 

proposed rule change was published for 

comment in the Federal Register on 

April 16, 2010.3 The Commission 

received three comment letters on the 

proposed rule change.4 The Exchange 

submitted one letter in response to these 

comment letters.5

This order approves the proposed rule 

change. 

II. Description of the Proposed Rule 

Change 

In June 2009, the Exchange launched 

Phlx XL II, an electronic trading 

platform on which all options on the 

Exchange are currently traded.6 In 

conjunction with the launch and rollout 

of the Phlx XL II system, the Exchange 

developed the Top of Phlx Options 

direct data feed (‘‘TOPO’’),7 which 

provides to subscribers the Exchange’s 

best bid and offer position, with 

aggregate size, based on displayable 

order and quoting interest on the Phlx 

XL II system. 

In October 2009, the Exchange made 

the TOPO Plus Orders data feed 

available to all market participants for 

free.8 According to the Exchange, TOPO 

Plus Orders provides disseminated 

Exchange top-of-market data (including 

orders, quotes and trades) together with 

all information that is included in SOF, 

the Exchange’s real-time full limit order 

book data feed. When it established 

TOPO Plus Orders, the Exchange stated 

that it planned to submit a proposed 

rule change to the Commission in order 

to implement fees for the use of TOPO 

Plus Orders. 

SOF is currently available to any 

Exchange quoting participant (i.e., 

specialists, Streaming Quote Traders, 

and Remote Streaming Quote Traders 

(collectively, ‘‘users’’)) and is available 

to users on an issue-by-issue basis at the 

user’s request. A user does not have to 

be assigned in an issue for the Exchange 

to provide SOF to such user in that 

issue. The SOF provides real-time 

information to keep track of the single 

order book(s), single and complex 

orders, complex strategy and Live 

Auction for all symbols for which the 

user is configured. Users may be 

configured for one or more symbols. 

SOF provides real-time data for the 

entire book to its users. It is a 

compilation of limit order data resident 

in the Exchange’s limit order book for 

options traded on the Exchange that the 

Exchange provides through a real-time 

data feed. The Exchange updates SOF 

information upon receipt of each 

displayed limit order. For every limit 


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