53008 Federal Register / Vol. 75, No. 167 / Monday, August 30, 2010 / Notices 

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

2 17 CFR 240.19b–4. 

3This proposal refers to ‘‘PHLX XL’’ as the 

Exchange’s automated options trading system. In 

May 2009 the Exchange enhanced the system and 

adopted corresponding rules referring to the system 

as ‘‘Phlx XL II.’’ See Securities Exchange Act Release 

No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 

2009) (SR–Phlx–2009–32). The Exchange intends to 

submit a separate technical proposed rule change 

that would change all references to the system from 

‘‘Phlx XL II’’ to ‘‘PHLX XL’’ for branding purposes. 

4Rule 1014(c)(i)(A)(1)(a) permits bid/ask 

differentials of no more than $.25 between the bid 

and the offer for each option contract for which the 

prevailing bid is less than $2; no more than $.40 

where the prevailing bid is $2 or more but less than 

$5; no more than $.50 where the prevailing bid is 

$5 or more but less than $10; no more than $.80 

where the prevailing bid is $10 or more but less 

than $20; and no more than $1 where the prevailing 

bid is $20 or more, provided that, in the case of 

equity options, the bid/ask differentials stated 

above shall not apply to in-the-money series where 

the market for the underlying security is wider than 

the differentials set forth above. For such series, the 

bid/ask differentials may be as wide as the 

quotation for the underlying security on the 

primary market, or its decimal equivalent rounded 

up to the nearest minimum increment. The 

Exchange may establish differences other than the 

above for one or more series or classes of options. 

5The PHLX XL system will consider only 

opening valid width quotes on the Exchange in its 

determination of the highest quote bid and lowest 

quote offer. 

6An ‘‘imbalance’’ occurs where there is 

unexecutable trading interest at a certain price. See 

Exchange Rule 1017(l)(ii)(A). 

Dated: August 24, 2010. 

Dan S. Jones, 

SBA Committee Management Officer. 

[FR Doc. 2010–21534 Filed 8–27–10; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62759; File No. SR–Phlx– 

2010–111] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to a 

Change to the Automated Opening 

System 

August 23, 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 August 

9, 2010, NASDAQ OMX PHLX, Inc. 

(‘‘Phlx’’ or 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 

Rule 1017, Openings in Options, to 

reflect a system change to (i) modify the 

manner in which the PHLX XL® 

automated options trading system 3

calculates the Opening Quote Range for 

an options series during the automated 

opening process, and (ii) terminate the 

opening process when away markets 

become crossed during the opening 

process. A new opening process for the 

affected series would commence at the 

time the Away Best Bid/Offer (‘‘ABBO’’) 

is uncrossed. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com, on the 

Commission’s Web site at http:// 

www.sec.gov, 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 

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 

The purpose of the proposed rule 

change is to change the manner in 

which the PHLX XL® automated options 

trading system calculates the Opening 

Quote Range (‘‘OQR’’) in an options 

series during the automated opening 

process. The OQR is a price range 

outside of which the Exchange will not 

open an option series. The proposal also 

reflects new system functionality to 

state that if, at any point during the 

opening process the ABBO becomes 

crossed (e.g., 1.05 bid, 1.00 offer), the 

opening process will be terminated and 

the Exchange will not open the affected 

series. A new opening process for the 

affected series will commence at the 

time the ABBO is uncrossed. 

OQR 

Currently, the PHLX XL system 

calculates the OQR for a particular 

series based upon the lowest quote bid 

on the Exchange and the highest quote 

offer on the Exchange among quotes that 

are compliant with the bid/ask 

differentials set forth in Rule 

1014(c)(i)(A)(1)(a) (‘‘valid width 

quotes’’.) 4 To determine the minimum 

value for the OQR, an amount, as 

defined in a table determined by the 

Exchange, is subtracted from the lowest 

quote bid. To determine the maximum 

value for the OQR, an amount, as 

defined in a table determined by the 

Exchange, is added to the highest quote 

offer. Quotes that are not valid width 

quotes and quotes that are outside of the 

OQR are not included in the Exchange’s 

automated opening process. 

The Exchange proposes to modify the 

PHLX XL system and Exchange Rule 

1017(l) to reflect the new manner in 

which the PHLX XL system calculates 

the OQR under certain circumstances. 

The manner in which the PHLX XL 

system calculates the OQR will depend 

upon whether there is a valid ABBO on 

markets other than the PHLX. 

As stated above, the PHLX XL system 

currently calculates a lowest bid and 

highest offer to use as a reference price 

on which to calculate the OQR. Under 

the proposal, Rule 1017(l)(ii) would be 

modified to state that a highest bid and 

lowest offer will be used when there are 

opening quotes 5 or orders on the 

Exchange that lock or cross each other 

and there is no imbalance 6 at the 

Exchange’s opening price. The purpose 

of this provision is to tighten the range 

of allowable opening prices and enable 

the system to open a series by using 

PHLX quotes when there are opening 

trades that will leave no imbalance. 

The PHLX XL system currently 

calculates the OQR without regard to 

away market(s) in the affected series. 

The Exchange proposes to modify this 

provision by enabling the PHLX XL 

system to consider the away market(s) 

in the affected series when calculating 

the OQR. Under the proposal, Rule 

1017(l)(iii) would be modified to 

address the situation where there is an 

imbalance at the price at which the 

maximum number of contracts can trade 

that is also at or within the highest 

quote bid and lowest quote offer, and 

one or more away markets have 

disseminated opening quotes in the 

affected series. In this situation, the 

PHLX XL system will calculate an OQR 

based upon valid width quotes received 

by the Exchange and quotes that are 

disseminated by the away market(s). 

In this situation, to determine the 

minimum value for the OQR, an 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 167 / Monday, August 30, 2010 / Notices 53009 

7The Exchange maintains the OQR table on its 

Web site. Changes to the OQR table are 

communicated to members by way of an Options 

Trader Alert (‘‘OTA’’) posted on the Web site. 

8This condition could be due to system issues, 

order imbalances, and other factors that would 

cause an away market not to disseminate an 

opening quote. This section of the proposed rule 

would also apply to issues that are singly listed on 

PHLX, in which case there is no other market that 

could quote in the affected series. 

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)(5). 

amount, as defined in a table to be 

determined by the Exchange,7 will be 

subtracted from the highest quote bid 

among valid width quotes on the 

Exchange and on the away market(s). 

Under the current method, the 

minimum value of the OQR is 

determined by subtracting the amount 

in the table from the lowest bid on the 

Exchange only. To determine the 

maximum value for the OQR, an 

amount, as defined in a table to be 

determined by the Exchange, will be 

added to the lowest quote offer among 

valid width quotes on the Exchange and 

on the away market(s). Under the 

current method, the maximum value of 

the OQR is determined by adding the 

amount in the table to the highest bid 

on the Exchange only. This new method 

of calculating the OQR is intended to 

narrow the OQR, and to consider betterpriced away markets’ quotations in 

determining the reference price from 

which to calculate the OQR. The 

Exchange believes that this should 

result in higher quality executions at the 

opening of trading. 

Proposed new Rule 1017(l)(iii)(A)(3) 

addresses the situation where there are 

away markets and the PHLX opening 

market is crossed or crosses away 

markets. If one or more away markets 

have disseminated opening quotes that 

are not crossed, and there are valid 

width quotes on the Exchange that cross 

each other or that cross away market 

quotes, the minimum value for the OQR 

will be the highest quote bid among 

quotes on away market(s). The 

maximum value for the OQR will be the 

lowest quote offer among quotes on 

away market(s). The purpose of this 

provision is to maintain market 

efficiency at the opening of trading 

when the PHLX market is crossed but 

there are away markets that the system 

can use as the OQR. The PHLX XL 

system will not add to the lowest away 

offer or subtract from the highest away 

bid in this situation in order to prevent 

an opening trade that would be through 

the ABBO. 

Proposed new Rule 1017(l)(iv) 

addresses the situation where there is an 

imbalance at the price at which the 

maximum number of contracts can trade 

that is also at or within the highest 

quote bid and lowest quote offer, and no 

away markets have disseminated 

opening quotes in the affected series.8 In 

this situation, to determine the 

minimum value for the OQR, an 

amount, as defined in a table to be 

determined by the Exchange, will be 

subtracted from the highest quote bid 

among valid width quotes on the 

Exchange only. To determine the 

maximum value for the OQR, an 

amount, as defined in a table to be 

determined by the Exchange, will be 

added to the lowest quote offer among 

valid width quotes on the Exchange 

only. 

Proposed new Rule 1017(l)(iv)(A)(3) 

addresses the situation where there is an 

imbalance and there are opening quotes 

on the Exchange that cross each other, 

and there is no away market in the 

affected series. In this situation, the 

minimum value for the OQR will be the 

lowest quote bid among valid width 

quotes on the Exchange, and the 

maximum value for the OQR will be the 

highest quote offer among valid width 

quotes on the Exchange. The purpose of 

this provision is to maintain market 

efficiency at the opening of trading 

when there is an imbalance, and when 

the PHLX market is crossed but there 

are no away markets that the system can 

consider as the OQR. The PHLX XL 

system will not add to the highest quote 

offer on the Exchange or subtract from 

the lowest quote bid on the Exchange in 

order to ensure that the OQR is as 

narrow as possible when there are 

opening quotes on the PHLX that cross 

each other. 

Crossed ABBO During the Opening 

Process 

Proposed new Rule 1017(l)(ix) 

provides that if, at any point during the 

opening process the ABBO becomes 

crossed, the opening process will be 

terminated and the Exchange will not 

open the affected series. A new opening 

process for the affected series will 

commence at the time the ABBO is 

uncrossed. The purpose of this 

provision is to ensure that the PHLX XL 

system does not route contracts that 

cannot be executed on the PHLX to 

away markets that may be disseminating 

incorrect prices that cross another 

market, thus protecting investors in 

general from entering into executions at 

incorrect prices. 

Technical Re-Numbering Amendment 

The Exchange proposes to re-number 

existing rules 1017(l)(iv)—(vii) to reflect 

the insertion of new proposed Rule 

1017(i)(iv). There are no proposed 

substantive amendments to these 

existing rules. 

Deployment 

Although the proposed rule change is 

effective upon filing, the Exchange 

anticipates that it will deploy the new 

PHLX XL functionality described herein 

on or around September 15, 2010. 

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. 

Specifically, the Exchange believes that 

the proposal benefits customers by 

improving prices and market efficiency 

at the opening of trading. 

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 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The proposed rule change effects a 

change in an existing order-entry or 

trading system of a self-regulatory 

organization that: (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) does not have the 

effect of limiting the access to or 

availability of the system. Therefore, the 

proposal is effective upon filing 

pursuant to Section 19(b)(3)(A) 11 of the 

Act and subparagraph (f)(5) of Rule 19b– 

4 thereunder.12

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 


jlentini on DSKJ8SOYB1PROD with NOTICES
53010 Federal Register / Vol. 75, No. 167 / Monday, August 30, 2010 / Notices 

13 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)(1). 

4 17 CFR 240.19b–4. 

5The proposal is not intended to limit the 

Exchange to these factors in determining whether 

exceptional circumstances exist. 

6Rule 1066(f) defines a hedge order is any spread 

type order (including a spread, straddle and 

combination order) for the same account or tied 

hedge order as defined below: 

(1) Spread Order. A spread order is an order to 

buy a stated number of option contracts and to sell 

a stated number of option contracts in a different 

series of the same option and may be bid for or 

offered on a total net debit or credit basis. 

(A) Inter-Currency Spread Order. In the case of 

foreign currency options, a spread order may 

consist of an order to buy a stated number of option 

contracts in one foreign currency and to sell the 

same number of option contracts in a different 

foreign currency option. 

(2) Straddle Order. A straddle order is an order 

to buy a number of call option contracts and the 

same number of put option contracts with respect 

to the same underlying security (in the case of 

options on a stock or Exchange-Traded Fund Share) 

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–Phlx–2010–111 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–Phlx–2010–111. 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 such 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– 

2010–111 and should be submitted on 

or before September 20, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–21473 Filed 8–27–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62760; File No. SR–Phlx– 

2010–112] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to 

Trade Reporting 

August 24, 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 August 

10, 2010, NASDAQ OMX PHLX, Inc. 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 the Substance 

of the Proposed Rule Change 

The Exchange, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 

thereunder,4 proposes to amend 

Exchange Options Floor Procedure 

Advice (‘‘OFPA’’) F–2 Allocation, Time 

Stamping, Matching and Access to 

Matched Trades, and Exchange Rule 

1051, General Comparison and 

Clearance Rule, to state that late reports 

of transactions in complex spread 

transactions executed in open outcry 

may be considered ‘‘exceptional 

circumstances’’ under the rule. 

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 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 the proposed rule 

change is to codify certain factors that 

the Exchange may consider to be 

‘‘exceptional circumstances’’ when 

determining whether an Exchange 

member has engaged in a pattern or 

practice of late trade reporting.5

Currently, OFPA F–2 and Rule 1051 

require a member or member 

organization initiating an options 

transaction, whether acting as principal 

or agent, to report or ensure that the 

transaction is reported within 90 

seconds of the execution to the tape. 

Each also states that a pattern or 

practice of late reporting without 

exceptional circumstances may be 

considered conduct inconsistent with 

just and equitable principles of trade. 

The Exchange proposes to modify 

OFPA F–2 and Rule 1051 to state that, 

in determining whether exceptional 

circumstances exist, the Exchange may 

consider late reports resulting from 

open outcry executions in: (i) A hedge 

order (as defined in Rule 1066(f)); 6 (ii) 


jlentini on DSKJ8SOYB1PROD with NOTICES