Document ID: SEC-2011-0595-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2011-04-29T04:00Z

[Federal Register Volume 76, Number 83 (Friday, April 29, 2011)]
[Notices]
[Pages 24067-24069]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10361]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64326; File No. SR-NASDAQ-2011-057]

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ Stock Market, LLC 
Relating to the $2.50 Strike Price Program

April 22, 2011.
    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 April 18, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASDAQ Stock Market LLC proposes to amend Section 6, Series of 
Options Open for Trading, of Chapter IV, Securities Traded on NOM, to 
expand the $2.50 Strike Price Program, which applies to NASDAQ members 
using the NASDAQ Options Market (``NOM'').
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, 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. 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 this proposed rule change is to expand the 
Exchange's ability to select option classes on individual stocks for 
which the intervals of strike prices will be $2.50 to list for trading.
    The Exchange recently expanded its $2.50 Strike Price Program 
(``Program'') \3\ to permit the listing of options with $2.50 strike 
price intervals for options with strike prices between $50 and $100, 
provided the $2.50 strike price intervals are no more than $10 from the 
closing price of the underlying stock in the primary market.\4\ The 
Exchange currently list [sic] series at $2.50 strike price intervals in 
any multiply traded option once another exchange has selected that 
option to be a part of the program.
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    \3\ In 2007, NOM proposed to participate in the $2.50 Strike 
Price Program. See Securities Exchange Act Release Nos. 40662 
(November 12, 1998), 63 FR 64297 (November 19, 1998) (order 
approving File Nos. SR-Amex-98-21; SR-CBOE-98-29; SR-PCX-98-31; and 
SR-Phlx-98-26) (``1998 Order'') and 52893 (December 5, 2005), 70 FR 
73488 (December 12, 2005) (order approving File No. SR-Amex-2005-
067). NOM participates in the $2.50 Strike Price Program on the same 
terms and conditions as the other options exchanges. See Securities 
Exchange Act Release No. 57478 (March 12, 2008), 73 FR 14521 (March 
18, 2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-080). See also 
Securities Exchange Act Release No. 64157 (March 31, 2011), 76 FR 
18817 (April 5, 2011) (SR-Phlx-2011-15).
    \4\ The term ``primary market'' is defined in Exchange Rule 1000 
in respect of an underlying stock or exchange-traded fund share as 
the principal market in which the underlying stock or exchange-
traded fund share is traded.
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    The Exchange proposes to amend Chapter IV, Section 6 at Commentary 
.03 to specify that it may select up to sixty (60) option classes on 
individual stocks for which the intervals of strike prices will be 
$2.50 in addition to options selected by another exchange as part of 
the $2.50 Strike Price Program.
    NOM has participated in the industry wide $2.50 Strike Price 
Program since NOM's inception in 2007. Currently, other options 
exchanges select up to 60 option classes on individual stocks for which 
the intervals of strike prices will be $2.50.\5\ In addition, each 
options exchange is permitted to list options with $2.50 strike price 
intervals on any option class that another options exchange selects 
under its program. Also, significantly more options classes are trading 
in 2011 as compared to 2007. The Exchange proposes to specify that it 
may select up to 60 options classes to remain competitive with other 
exchanges and to offer investors additional investment choices.
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    \5\ The International Securities Exchange, LLC (``ISE''), NASDAQ 
OMX PHLX LLC (``Phlx''), and Chicago Board Options Exchange 
(``CBOE'') may select up to 60 option classes on individual stocks 
for which the intervals of strike prices will be $2.50. See 
Securities Exchange Act Release Nos. 64258 (April 8, 2011), 76 FR 
20764 (April 13, 2011) (SR-ISE-2011-23), 63914 (February 15, 2011) 
and 76 FR 9846 (February 22, 2011) (SR-Phlx-2011-15).
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    Furthermore, the Exchange does not believe that this proposal would 
have a negative impact on the marketplace. The Exchange would compare 
this proposal with the $1 Strike Price expansion, wherein NOM expanded 
its $1 Strike Price Program from 55 individual stocks to 150 individual 
stocks on which an option series may list at $1 strike price 
intervals.\6\ The Exchange believes that this proposed rule change that 
would, in part, result in an increase to overall options classes in the 
industry wide Program, is less than the $1 Strike Price

[[Page 24068]]

Program increase, which also occurred among several exchanges 
participating in the program. The Exchange believes that this proposal 
would have less impact than the $1 Strike Program increase, which did 
not have any negative impact on the market in terms of proliferation of 
quote volume or fragmentation.
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    \6\ See Securities Exchange Release Act No. 62451 (July 6, 
2010), 75 FR 40001 (July 13, 2010) (SR-NASDAQ-2010-083).
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    The Exchange believes that the effect of the proposed expansion on 
the marketplace would not result in a material proliferation of quote 
volume or concerns with fragmentation. With regard to the impact of 
this proposal on system capacity, the Exchange has analyzed its 
capacity and represents that it and the Options Price Reporting 
Authority have the necessary system capacity to handle the potential 
additional traffic associated with the listing and trading of classes 
on individual stocks in the $2.50 Strike Price Program.
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. 
The Exchange believes that the effect of the proposed expansion on the 
marketplace would not result in a material proliferation of quote 
volume or concerns with fragmentation. In addition, the Exchange 
believes that it has the necessary system capacity to handle the 
potential additional traffic associated with the listing and trading of 
classes.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the $2.50 Strike Price Program proposal would 
provide the investing public and other market participants increased 
opportunities to better manage their risk exposure. While expansion of 
the $2.50 Strike Price Program may generate additional quote traffic, 
the Exchange does not believe that this increased traffic will become 
unmanageable since the proposal is limited to a fixed number of 
classes. Further, the Exchange does not believe that the proposal will 
result in a material proliferation of additional series because it is 
limited to a fixed number of classes.

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 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\
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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 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.
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    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\
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    \11\ See Securities Exchange Act Release No. 64157 (March 31, 
2011), 76 FR 18817 (April 5, 2011) (SR-Phlx-2011-15) (order 
approving expansion of $2.50 Strike Price Program).
    \12\ For 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).
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    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 rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2011-057 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-NASDAQ-2011-057. 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-
NASDAQ-2011-057 and should be submitted on or before May 20, 2011.

[[Page 24069]]

    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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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10361 Filed 4-28-11; 8:45 am]
BILLING CODE 8011-01-P