Document ID: SEC-2010-0875-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-06-17T04:00Z

[Federal Register: June 17, 2010 (Volume 75, Number 116)]
[Notices]               
[Page 34491-34493]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jn10-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62269; File No. SR-Phlx-2010-82]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to Trading Halts in Options During a Trading Pause in the Underlying 
Security

June 10, 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 June 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 Exchange has 
designated the proposed rule change as constituting a ``non-
controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under 
the Act,\3\ which renders the proposal effective upon receipt of this 
filing by the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Exchange Rule 1047, Trading 
Rotations, Halts and Suspensions, to state that Trading on the Exchange 
in any option contract shall be halted whenever trading in the 
underlying security has been paused by the primary listing market. 
Trading in such options contracts may be resumed upon a determination 
by the Exchange that the conditions that led to the pause are no

[[Page 34492]]

longer present and that the interests of a fair and orderly market are 
best served by a resumption of trading, which in no circumstances will 
be before the Exchange has received notification that the underlying 
security has resumed trading on at least one exchange.
    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 ensure that the 
Exchange maintains fair and orderly markets in options upon the 
imposition of a single stock pause (``trading pause'') \4\ by the 
listing market for the underlying security. Accordingly, as proposed, 
if such a trading pause is imposed, it will be considered a halt on the 
primary market for the underlying security and a trading halt in the 
overlying option will be imposed.
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    \4\ The term ``trading pause'' is not defined in PHLX's Rules, 
but for example, see Securities Exchange Act Release No. 62129 (May 
19, 2010), 75 FR 28839 (May 24, 2010) (SR-NASDAQ-2010-061); and 
Securities Exchange Act Release No. 62124 (May 19, 2010), 75 FR 
28828 (May 24, 2010) (SR-BX-2010-037).
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    Transactions that occur between the time the pause is imposed on 
the listing market and the halt is processed on PHLX will be nullified 
pursuant to PHLX Rule 1092(c)(iv)(B).\5\
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    \5\ PHLX Rule 1092(c)(iv)(B) states that, respecting equity 
options (including
    options overlying ETFs), trades on the Exchange will be 
nullified when the trade occurred during a trading halt on the 
primary market for the underlying security.
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    Trading in the affected option will resume upon a determination by 
the Exchange that the conditions that led to the pause are no longer 
present and that the interests of a fair and orderly market are best 
served by a resumption of trading, which in no circumstances will be 
before the Exchange has received notification that the underlying 
security has resumed trading on at least one exchange.
    Orders in the affected option that are received during the halt on 
PHLX will be treated as pre-opening orders and will be included in the 
re-opening process upon the resumption of trading on the listing market 
for the underlying security pursuant to PHLX Rule 1017(h).\6\
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    \6\ PHLX Rule 1017(h) states that the procedure described in the 
Rule (Openings in
    Options) may be used to reopen an option after a trading halt.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ 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 halting trading in options during times of uncertainty 
regarding the price of the underlying security due to a trading pause 
in such underlying security.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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

    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 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, it 
has become effective pursuant to Section 19(b)(3)(A) of the Act \9\ and 
Rule 19b-4(f)(6) thereunder.\10\
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    \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 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.
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    The Exchange requested that the Commission waive the 30-day 
operative delay. The Exchange notes that such a waiver will permit it 
to immediately implement the proposed rule change in order to benefit 
customers by halting trading in options during times of uncertainty 
regarding the price of the underlying security due to a trading pause 
in such underlying security. The Commission approved filings from the 
exchanges and the Financial Industry Regulatory Authority to institute 
a single stock trading pause for equity securities that experience a 
10% change in price during a five minute period.\11\ The Commission 
hereby grants the Exchange's request and believes such waiver is 
consistent with the protection of investors and the public 
interest.\12\ Accordingly, the Commission designates the proposed rule 
change operative upon filing with the Commission.
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    \11\ See Securities Exchange Act Release Nos. 62251 and 62252 
(June 10, 2010).
    \12\ For purposes only of waiving the 30-day operative delay 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).
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    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 rule-comments@sec.gov. Please include 
File

[[Page 34493]]

Number SR-Phlx-2010-82 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-2010-82. 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 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-2010-82 and should be submitted on or before July 8, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14603 Filed 6-16-10; 8:45 am]
BILLING CODE 8010-01-P