33504 Federal Register / Vol. 74, No. 132 / Monday, July 13, 2009 / Notices 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58209 

(July 22, 2008), 73 FR 43966 (July 29, 2008) (SR– 

NASDAQ–2008–064) (notice of filing and 

immediate effectiveness establishing QOS Program 

as pilot through July 10, 2009). 

4Proposed Chapter XIV, Section 11(g), which is 

similar to NASDAQ OMX PHLX, Inc. (‘‘Phlx’’) Rule 

1101A(a)(v), extends the Exchange’s QOS Program 

to Index Options (the ‘‘Index QOS Program’’). The 

Exchange is also proposing changes in its Chapter 

IV, Section 6, Supplementary Material .04 regarding 

P.M. settlement and eligibility of Index Options for 

the QOS Program, to conform the Exchange’s QOS 

Program rules to those of other exchanges, such as, 

for example, Commentary .08 to Phlx Rule 1012 and 

CBOE Rules 5.5(e) and 24.9(a). 

5See Securities Exchange Act Release No. 58209 

(July 22, 2008), 73 FR 43966 (July 29, 2008) (SR– 

NASDAQ–2008–064). 

6 Id. 

4Proposed Chapter XIV, Section 11(g), which is 

similar to NASDAQ OMX PHLX, Inc. (‘‘Phlx’’) Rule 

1101A(a)(v), extends the Exchange’s QOS Program 

to Index Options (the ‘‘Index QOS Program’’). The 

Exchange is also proposing changes in its Chapter 

IV, Section 6, Supplementary Material .04 regarding 

P.M. settlement and eligibility of Index Options for 

the QOS Program, to conform the Exchange’s QOS 

Program rules to those of other exchanges, such as, 

for example, Commentary .08 to Phlx Rule 1012 and 

CBOE Rules 5.5(e) and 24.9(a). 

5See Securities Exchange Act Release No. 58209 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60248; File No. SR– 

NASDAQ–2009–063] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by The 

NASDAQ Stock Market LLC Relating to 

Permanent Approval of the Exchange’s 

Quarterly Option Series Pilot Program 

July 6, 2009. 

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 June 26, 

2009, The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’) 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 Nasdaq. 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 

Nasdaq proposes for NOM to modify 

Chapter IV, Section 6 (Series of Options 

Contracts Open for Trading) and 

Chapter XIV Sec. 11 (Terms of Index 

Options Contracts), to make permanent 

the Exchange’s Quarterly Option Series 

Pilot Program (‘‘QOS Program’’), and 

expand and conform the QOS Program 

to similar programs of other exchange. 

The text of the proposed rule change 

is available from Nasdaq’s Web site at 

http://nasdaq.cchwallstreet.com, at 

Nasdaq’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, 

Nasdaq 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. Nasdaq 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 make the QOS Program 

permanent, and expand and conform 

the QOS Program to make it similar to 

programs of other exchanges. 

On July 22, 2008, NASDAQ filed SR– 

NASDAQ–2009–064 with the 

Commission to establish the QOS 

Program.3 The QOS Program allows the 

Exchange to list and trade options that 

expire at the close of business on the 

last business day or a calendar quarter 

(‘‘Quarterly Option Series’’ or ‘‘QOS’’). 

Under the QOS Program, the Exchange 

may select up to five (5) currently listed 

options classes that are exchange traded 

fund (‘‘ETF’’) options on which 

Quarterly Option Series may be opened. 

In addition, the Exchange may also list 

Quarterly Option Series on any options 

classes that are selected by other 

securities exchanges that employ a 

similar program under their respective 

rules.4

The Exchange may list series that 

expire at the end of the next consecutive 

four (4) calendar quarters, as well as the 

fourth quarter of the next calendar year. 

All Quarterly Option Series are P.M. 

settled. 

If an option is selected for 

participation in the QOS Program, the 

strike price of each Quarterly Option 

Series is fixed at a price per share, with 

at least two strike prices above and two 

strike prices below the approximate 

value of the underlying security at about 

the time the Quarterly Options Series is 

opened for trading on the Exchange. The 

Exchange will list strikes prices for a 

Quarterly Option series that are within 

$5 from the closing price of the 

underlying on the preceding day. 

The Exchange may open for trading 

additional Quarterly Options Series of 

the same class when the Exchange 

deems it necessary to maintain an 

orderly market, to meet customer 

demand or when the market price of the 

underlying security moves substantially 

from the initial exercise price or prices. 

To the extent that any additional strike 

prices are listed by the Exchange, such 

additional strike prices shall be within 

thirty percent (30%) above or below the 

closing price of the underlying ETF on 

the preceding day. The Exchange may 

also open additional strike prices of 

Quarterly Option Series in ETF options 

that are more than 30% above or below 

the current price of the underlying ETF 

provided that demonstrated customer 

interest exists for such series, as 

expressed by institutional, corporate or 

individual customers or their brokers. 

Market-Makers trading for their own 

account shall not be considered when 

determining customer interest under 

this provision. The opening of the new 

Quarterly Options Series shall not affect 

the series of options of the same class 

previously opened. In addition to the 

initial listed series, the Exchange may 

list up to sixty (60) additional series per 

expiration month for each Quarterly 

Options Series in ETF options.5

The interval between strike prices on 

Quarterly Options Series shall be the 

same as the interval for strike prices for 

series in that same options class that 

expire in accordance with the normal 

monthly expiration cycle. By definition, 

Quarterly Option Series on an option 

class can never expire in the same week 

in which monthly option series on the 

same class expires. And, the Exchange 

will not list a Short Term Option Series 

on an options class the expiration of 

which coincides with that of a Quarterly 

Options Series on the same options 

class. 

The Exchange has adopted a delisting 

policy with respect to QOS in ETF 

options.6 On a monthly basis, the 

Exchange reviews series that are outside 

a range of five (5) strikes above and five 

(5) strikes below the current price of the 

underlying ETF, and delists series with 

no open interest in both the put and the 

call series having a: (i) Strike higher 

than the highest strike price with open 

interest in the put and/or call series for 

a given expiration month; and (ii) strike 

lower than the lowest strike price with 

open interest in the put and/or call 

series for a given expiration month. 

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Federal Register / Vol. 74, No. 132 / Monday, July 13, 2009 / Notices 33505 

7The Index QOS Program found in Chapter XIV, 

Section 11(g) is similar to the QOS Program in 

Chapter IV, Section 6, Supplementary Material .04, 

but has several differences. Principal among them 

are, first, that the strike price of each QOS will be 

fixed with at least two, but not more than five, 

strike prices above and two, but not more than five, 

strike prices below the value of the underlying 

security at about the time that a QOS is opened for 

trading on the Exchange. Second, that the exercise 

price of each QOS opened for trading on the 

Exchange shall be reasonably related to the current 

index value of the underlying index to which such 

series relates at or about the time such series of 

options is first opened for trading on the Exchange 

(the term ‘‘reasonably related to the current index 

value of the underlying index’’ means that the 

exercise price is within thirty percent (30%) of the 

current index value). Third, that the Exchange may 

open additional strike prices of QOS that are below 

the value of the underlying index provided that the 

total number of strike prices below the value of the 

underlying index is no more than five. And fourth, 

there is no delisting policy in the Index QOS 

Program. 

8The requirements for the Report were recently 

set forth in Securities Exchange Act Release No. 

58209 (July 22, 2008), 73 FR 43966 (July 29, 2008) 

(SR–NASDAQ–2008–064). 

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). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

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. Nasdaq has satisfied this requirement. 

13See Securities Exchange Act Release No. 60164 

(June 23, 2009), 74 FR 31333 (June 30, 2009) (SR– 

CBOE–2009–029) (approving the quarterly options 

series program on a permanent basis). 

14For 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). 

Notwithstanding the delisting policy, 

customer requests to add strikes and/or 

maintain strikes in QOS in ETF options 

in series eligible for delisting shall be 

granted. 

Further, in connection with the 

delisting policy, if the Exchange 

identifies series for delisting, the 

Exchange shall notify other options 

exchanges with similar delisting 

policies regarding eligible series for 

listing, and shall work with such other 

exchanges to develop a uniform list of 

series to be delisted, so as to ensure 

uniform series delisting of multiply 

listed options classes. 

The Exchange has selected the 

following five ETF option classes to 

participate in the QOS Program: 

DIAMONDS Trust (DIA) options, 

Standard and Poor’s Depositary 

Receipts/SPDRs (SPY) options, iShares 

Russell 2000 Index Fund (IWM) options, 

PowerShares QQQ Trust (QQQQ) 

options and Energy Select SPDR (XLE) 

options. The Exchange believes the QOS 

Program has been successful and well 

received by its members and the 

investing public for the approximately 

twelve months that it has been in 

operation as a pilot.7

In support of approving the QOS 

Program on a permanent basis, the 

Exchange has submitted to the 

Commission a Quarterly Option 

Program Report (‘‘Report’’) detailing the 

Exchange’s experience with the QOS 

Program.8 Specifically, the Report 

contains data and written analysis 

regarding the five (5) ETF option classes 

included in the QOS Program. The 

Report was submitted under separate 

cover and seeks confidential treatment 

under the Freedom of Information Act. 

The Exchange believes there is 

sufficient investor interest and demand 

in the QOS Program to warrant its 

permanent approval. The Exchange 

believes that, for the approximately 

twelve months that the QOS Program 

has been in operation, it has provided 

investors with additional means of 

managing their risk exposures and 

carrying out their investment objectives. 

Furthermore, the Exchange has not 

experienced any capacity-related 

problems with respect to Quarterly 

Option Series. The Exchange also 

represents that it has the necessary 

system capacity to continue to support 

the option series listed under the QOS 

Program. 

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 

making permanent the Exchange’s 

Quarterly Option Series Pilot Program. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in any 

burden on competition that is 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 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change 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 after the date of 

the filing, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act 11 and Rule 19b–4(f)(6) 

thereunder.12

The Exchange has asked the 

Commission to waive the operative 

delay to permit the proposed rule 

change to become operative prior to the 

30th day after filing so that the 

Exchange may immediately implement 

and permanently establish a Quarterly 

Options Series Program that is 

consistent with those of other options 

exchanges.13 The Commission has 

determined that waiving the 30-day 

operative delay of the Exchange’s 

proposal is consistent with the 

protection of investors and the public 

interest because such waiver will enable 

the Exchange to expand and conform 

the QOS Program to make it similar to 

programs of other exchanges and 

continue the current QOS program 

without disruption.14 Therefore, the 

Commission designates the proposal 

operative upon filing. 

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 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–NASDAQ–2009–063 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

mstockstill on DSKH9S0YB1PROD with NOTICES

33506 Federal Register / Vol. 74, No. 132 / Monday, July 13, 2009 / 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. 55301 

(February 15, 2007), 72 FR 8238 (February 23, 2007) 

(SR–Phlx-2007–08) (notice of filing and immediate 

effectiveness). The QOS Program has since been 

extended and is currently scheduled to expire on 

July 10, 2009. See Securities Exchange Act Release 

No. 58039 (June 26, 2008), 73 FR 38284 (July 3, 

2008) (SR–Phlx–2009–44) (notice of filing and 

immediate effectiveness). 

4Rule 1101A(b)(v) extends the QOS Program to 

Index Options (the ‘‘Index QOS Program’’). 

5The Exchange is making minor changes to 

Commentary .08 to Phlx Rule 1012 and Rule 

1101A(b)(v) to conform the Exchange’s rules to 

those of other exchanges such as, for example, 

CBOE Rules 5.5(e)(2) and 24.9(a)(2), regarding P.M. 

settlement and listing series in the fourth quarter of 

the next calendar year. 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2009–063. 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, 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–NASDAQ–2009–063 and 

should be submitted on or before 

August 3, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–16451 Filed 7–10–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60249; File No. SR–Phlx– 

2009–50] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to 

Permanent Approval of the Exchange’s 

Quarterly Option Series Pilot Program 

July 6, 2009. 

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 June 26, 

2009, 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 Phlx. 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 

Phlx rules to amend its Rules 1012 

(Series of Options Open for Trading) 

and 1101A (Terms of Option Contracts), 

to make permanent the Exchange’s 

Quarterly Option Series Pilot Program 

(‘‘QOS Program’’). 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, 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, 

Phlx 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. Phlx 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 make the QOS Program 

permanent. 

On July 9, 2007, the Exchange filed 

SR–Phlx-2007–08 with the Commission 

to establish the QOS Program.3 The 

QOS Program allows Phlx to list and 

trade options that expire at the close of 

business on the last business day of a 

calendar quarter (‘‘Quarterly Option 

Series’’ or ‘‘QOS’’). Under the QOS 

Program, Phlx may select up to five (5) 

currently listed option classes that are 

either Index Options and exchange 

traded fund (‘‘ETF’’) options on which 

Quarterly Option Series may be opened. 

In addition, Phlx may also list Quarterly 

Option Series on any options classes 

that are selected by other securities 

exchanges that employ a similar 

program under their respective rules.4

The Exchange may list series that 

expire at the end of the next consecutive 

four (4) calendar quarters, as well as the 

fourth quarter of the next calendar year. 

All Quarterly Option Series are P.M. 

settled.5

If an option is selected for 

participation in the QOS Program, the 

strike price of each Quarterly Option 

Series is fixed at a price per share, with 

at least two strike prices above and two 

strike prices below the approximate 

value of the underlying security at about 

the time the Quarterly Options Series is 

opened for trading on the Exchange. 

Phlx will list strikes prices for a 

Quarterly Option series that are within 

$5 from the closing price of the 

underlying on the preceding day. 

The Exchange may open for trading 

additional Quarterly Options Series of 

the same class when the Exchange 

deems it necessary to maintain an 

orderly market, to meet customer 

demand or when the market price of the 

underlying security moves substantially 

from the initial exercise price or prices. 

To the extent that any additional strike 

prices are listed by the Exchange, such 

additional strike prices shall be within 

thirty percent (30%) above or below the 

closing price of the underlying ETF on 

the preceding day. The Exchange may 

also open additional strike prices of 

Quarterly Option Series in ETF options 

that are more than 30% above or below 

the current price of the underlying ETF 

provided that demonstrated customer 

interest exists for such series, as 

expressed by institutional, corporate or 

individual customers or their brokers. 

Market-Makers trading for their own 

account shall not be considered when 

determining customer interest under 

this provision. The opening of the new 

mstockstill on DSKH9S0YB1PROD with NOTICES