Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 67799 

6 15 U.S.C. 78f(b). 

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

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

9 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 Nos. 60814 

(October 13, 2009), 74 FR 53535 (October 19, 2009) 

(SR–BX–2009–63); and 61811 (March 31, 2010), 75 

FR 17802 (April 7, 2010) (SR–BX–2010–25) (notice 

of filing and immediate effectiveness permitting 

concurrent listing of $3.50 and $4 strikes for classes 

in the $0.50 Strike and $1 Strike Programs). 

Customer and Professional orders 

routed from the Phlx XL II system. As 

with all fees, the Exchange may adjust 

these Routing Fees in response to 

competitive conditions by filing a new 

proposed rule change. 

While fee changes pursuant to this 

proposal are effective upon filing, the 

Exchange has designated these changes 

to be operative upon the effectiveness of 

SR–C2–2010–006. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 6

in general, and furthers the objectives of 

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

in that it is an equitable allocation of 

reasonable fees and other charges among 

Exchange members. The Exchange 

believes that these fees are reasonable 

because they seek to recoup costs that 

are incurred by the Exchange when 

routing Customer and Professional 

orders to C2 on behalf of its members. 

The Exchange also believes that the 

proposed fees to both Customers and 

Professionals are equitable because it 

will be uniformly applied to all 

Customers and Professionals. 

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 foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.8 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. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or 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–2010–151 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–2010–151. 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 website (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 website viewing and 

printing in the Commission’s Public 

Reference Room. 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– 

2010–151 and should be submitted on 

or before November 24, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27689 Filed 11–2–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63206; File No. SR–BX– 

2010–073] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change To Expand the 

$0.50 Strike Program 

October 28, 2010. 

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 October 

27, 2010, 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 

Chapter IV, Section 6 (Series of Options 

Contracts Open for Trading) of the Rules 

of the Boston Options Exchange Group, 

LLC (‘‘BOX’’), specifically BOX’s $0.50 

Strike Price Program (the ‘‘$0.50 Strike 

Program’’ or ‘‘Program’’) 3 to: (i) Expand 

the $0.50 Strike Program for strike 

prices below $1.00; (ii) extend the $0.50 

Strike Program to strike prices that are 

$5.50 or less; (iii) extend the prices of 

the underlying security to at or below 

$5.00; and (iv) extend the number of 

options classes to those overlying 20 

individual stocks. 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 


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67800 Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 

4See Chapter IV, Section 6, Supplementary 

Material .02(b) referring to the $1 Strike Program. 

5Using a Black Scholes pricing model. 

Exchange’s Internet Web site at http:// 

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 purpose of this proposed rule 

change is to modify Chapter IV, Section 

6, Supplementary Material .06 of the 

BOX Rules to expand the $0.50 Strike 

Program in order to provide investors 

with opportunities and strategies to 

minimize losses associated with owning 

a stock declining in price. 

The Exchange is proposing to 

establish strike price intervals of $0.50, 

beginning at $0.50 for certain options 

classes where the strike price is $5.50 or 

less and whose underlying security 

closed at or below $5.00 in its primary 

market on the previous trading day and 

which have national average daily 

volume that equals or exceeds 1,000 

contracts per day as determined by The 

Options Clearing Corporation (‘‘OCC’’) 

during the preceding three calendar 

months. The Exchange also proposes to 

limit the listing of $0.50 strike prices to 

options classes overlying no more than 

20 individual stocks as specifically 

designated by BOX. 

Currently, Chapter IV, Section 6, 

Supplementary Material .06 of the BOX 

Rules permits strike price intervals of 

$0.50 or greater beginning at $1.00 

where the strike price for the class is 

$3.50 or less, but only for options 

classes whose underlying security 

closed at or below $3.00 in its primary 

market on the previous trading day and 

which have national average daily 

volume that equals or exceeds 1,000 

contracts per day as determined by OCC 

during the preceding three calendar 

months. Further, the listing of $0.50 

strike prices is limited to options classes 

overlying no more than 5 individual 

stocks as specifically designated by 

BOX. BOX is currently restricted from 

listing series with $1 intervals within 

$0.50 of an existing strike price in the 

same series, except that strike prices of 

$2, $3, and $4 shall be permitted within 

$0.50 of an existing strike price for 

classes also selected to participate in the 

$0.50 Strike Program.4

The number of $0.50 strike options 

traded on BOX has continued to 

increase since the inception of the 

Program. There are now approximately 

25 options classes in the $0.50 Strike 

Program and they are listed, and traded, 

across all options exchanges including 

BOX; two of which are classes chosen 

by BOX for the $0.50 Strike Program. 

This proposed rule change would 

expand $0.50 strike offerings to market 

participants, such as traders and retail 

investors, and thereby enhance their 

ability to tailor investing and hedging 

strategies and opportunities in a volatile 

market place. 

By way of example, suppose an 

investor wanted to invest in 5,000 

shares of Sirius Satellite (‘‘SIRI’’) on July 

13, 2010. The closing price for SIRI on 

that day was $ 0.9678. If the investor 

wanted to buy a call option as an 

alternative to purchasing the shares 

outright for about $4,800, the lowest 

strike price available was the $1 strike, 

an out-of-the-money option. However, if 

a $0.50 strike series had been available, 

the investor would have been able to 

control 5,000 shares by purchasing 50 

exercisable in-the-money $0.50 strike 

call options. BOX notes that a 3-month 

SIRI call option with an implied 

volatility of 50 has a theoretical value of 

$0.47,5 or $47 per contract. Thus, by 

investing in options with a $0.50 strike 

price, the investor could have benefited 

from the same upside potential as the 

stock purchase, but at a cost of only 

$2,350 (50 contracts at $47 per contract). 

Similarly, if an investor wanted to 

hedge a position in SIRI stock with put 

options, the lowest available strike price 

at the time was $1, an in-the-money 

option. If a $0.50 strike series had been 

available, the investor could have used 

50 out-of-the-money puts for a fraction 

of the cost of buying 50 put options with 

a $1 strike price. BOX believes that 

investors deserve the opportunity to 

hedge downside risk in stocks trading 

less than $1.00 in the same manner as 

investors have with stocks trading 

greater than $1.00. 

Increasing the threshold for the price 

of the underlying security from $3.00 to 

$5.00 and expanding the number of 

$0.50 strikes available for stocks priced 

under $5.00 further aids investors by 

offering opportunities to manage risk 

and execute a variety of option 

strategies to improve returns. For 

example, today an investor can enhance 

their yield by selling an out-of-themoney call. Using an example of an 

investor who wants to hedge Citigroup 

(‘‘C’’) which is trading at $4.24, that 

investor would be able to choose the 

$4.50 strike which is 6% out-of-themoney or the $5.00 strike which is 

17.92% out-of-the- money, under this 

proposal. Today, this investor only has 

the latter choice. Beyond that, this 

investor today may choose the $6.00 

strike which is 41% out-of-the-money 

and offers significantly less premium. 

Pursuant to this proposal, if this 

investor had a choice to hedge the 

position with a $5.50 strike option, the 

investor would have the opportunity to 

sell the option at only 29% out-of-themoney, as compared to 41%, and would 

improve her return by gaining more 

premium, while also benefiting from 

29% of upside return in the underlying 

equity. 

By increasing the number of securities 

underlying options classes in the 

Program from 5 individual stocks to 20 

individual stocks would allow BOX to 

offer investors additional opportunities 

to use the $0.50 Strike Program. BOX 

notes that $0.50 strikes have had no 

material impact on capacity. Further, 

BOX has observed the popularity of 

$0.50 strikes. Expanding the $0.50 

Strike Program will allow investors to 

better enhance returns and manage risk 

because they are provided significantly 

greater flexibility in trading options that 

overlie lower priced stocks. Expanding 

the Program will also allow investors to 

establish equity options positions that 

are better tailored to meet their 

investment, trading and risk needs. 

The Exchange also proposes making a 

corresponding amendment to Chapter 

IV, Section 6, Supplementary Material 

.02(b) of the BOX Rules to add $5 and 

$6 to $1 Strike Program language that 

addresses listing series with $1 intervals 

within $0.50 of an existing strike price 

in the same series. Currently, and to 

account for the overlap with the $0.50 

Strike Program, the following series are 

excluded from this prohibition: strike 

prices of $2, $3, and $4. BOX proposes 

to add $5 and $6 to that list to account 

for the proposal to expand the $0.50 

Strike Program to strike prices of up to 

$5.50. 

Finally, the Exchange proposes to 

remove the following sentence: 

Additionally, for an option class 

selected for the $1 Strike Price Program, 

BOX may not list $1 Strike Prices on 

any series having greater than nine (9) 


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Federal Register / Vol. 75, No. 212 / Wednesday, November 3, 2010 / Notices 67801 

6See Securities Exchange Act Release No. 61041 

(November 20, 2009), 74 FR 53535 (November 30, 

2009) (SR–BX–2009–73). 

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

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 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. 

11See Securities Exchange Act Release No. 63132 

(October 19, 2010), 75 FR 65541 (October 25, 2010) 

(SR–Phlx–2010–118) (order approving expansion of 

$0.50 Strike Price Program). 

12For 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). 13 17 CFR 200.30–3(a)(12). 

months until expiration. This sentence 

should have been removed when the 

Exchange expanded the $1 Strike Price 

Program in a limited fashion to allow 

BOX to list new series in $1 intervals up 

to $5 in long-term option series in up to 

200 option classes on individual 

stocks.6

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the Act,7

in general, and Section 6(b)(5) of the 

Act,8 in particular, in that it is designed 

to promote just and equitable principles 

of trade, to prevent fraudulent and 

manipulative acts, to remove 

impediments to and perfect the 

mechanism for a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. In particular, the 

Exchange believes that amending the 

current $0.50 Strike Program will result 

in a continuing benefit to investors by 

giving them more flexibility to closely 

tailor their investment decisions in a 

greater number of securities. Investors 

would be provided with an opportunity, 

which does not exist today, to minimize 

losses associated with declining stock 

prices. With the increase in actively 

traded, low-priced securities, BOX 

believes that amending the $0.50 Strike 

Program to allow a $0.50 strike interval 

below $1 for strike prices of $5.50 or 

less is necessary to provide investors 

additional opportunity to minimize and 

manage risk. 

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 9 and Rule 19b– 

4(f)(6) thereunder.10

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.11 Therefore, the 

Commission designates the proposal 

operative upon filing.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 

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–2010–073 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–2010–073. 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– 

2010–073 and should be submitted on 

or before November 24, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27701 Filed 11–2–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63199; File No. SR– 

NASDAQ–2010–139] 

Self-Regulatory Organizations; 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Routing Fees 

October 27, 2010. 

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

Securities Exchange Act of 1934 


jlentini on DSKJ8SOYB1PROD with NOTICES