Document ID: SEC-2010-0186-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-02-04T05:00Z

[Federal Register: February 4, 2010 (Volume 75, Number 23)]
[Notices]               
[Page 5827-5829]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04fe10-85]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61438; File No. SR-Phlx-2010-13]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
To Amending Rule 1092, Obvious Errors and Catastrophic Errors

January 28, 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 January 26, 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.
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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 Exchange proposes to amend Exchange Rule 1092, Obvious Errors 
and Catastrophic Errors, to adopt the ability to review transactions on 
the Exchange's own motion.
    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

[[Page 5828]]

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 amend Rule 1092 
pertaining to the nullification and adjustment of options transactions. 
Specifically, the Exchange proposes to adopt a provision which provides 
that in the interest of maintaining a fair and orderly market and for 
the protection of investors, the President of the Exchange or his/her 
designee who is an officer (collectively ``Exchange officer''), may, on 
his or her own motion or upon request, determine to review any 
transaction occurring on the Exchange that is believed to be 
erroneous.\3\ A transaction reviewed pursuant to this provision may be 
nullified or adjusted only if it is determined by the Exchange officer 
that the transaction is an obvious error as provided in Rule 1092. A 
transaction would be adjusted or nullified in accordance with the 
provision under which it is deemed an erroneous transaction. The 
Exchange officer may be assisted by an Options Exchange Official in 
reviewing a transaction.
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    \3\ In the event a party to a transaction requests that the 
Exchange review a transaction, the Exchange officer nonetheless 
would need to determine, on his or her own motion, whether to review 
the transaction.
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    The Exchange officer shall act pursuant to this paragraph as soon 
as possible after receiving notification of the transaction, and 
ordinarily would be expected to act on the same day as the transaction 
occurred. However, because a transaction under review may have occurred 
near the close of trading or due to unusual circumstances, the rule 
provides that the Exchange officer shall act no later than 9:30 a.m. 
(ET) on the next trading day following the date of the transaction in 
question. A party affected by a determination to nullify or adjust a 
transaction pursuant to this provision may appeal such determination in 
accordance with Rule 1092; however, a determination by an Exchange 
officer not to review a transaction, or a determination not to nullify 
or adjust a transaction for which a review was requested or conducted, 
is not appealable. The Exchange believes it is appropriate to limit 
review on appeal to only those situations in which a transaction is 
actually nullified or adjusted.
    This provision is not intended to replace a party's obligation to 
request a review, within the required time periods under Rule 1092, of 
any transaction that it believes meets the criteria for an obvious 
error. And, if a transaction is reviewed and a determination has been 
rendered pursuant to Rule 1092, no additional relief may be granted 
under this new provision. Moreover, the Exchange does not anticipate 
exercising this new authority in every situation in which a party fails 
to make a timely request for review of this transaction pursuant to 
Rule 1092. The Exchange believes this provision should help to protect 
the integrity of its marketplace by vesting an Exchange officer with 
the authority to review a transaction that may be erroneous, in those 
situations where a party failed to make a timely request for a review.
    The Exchange believes that the provision would also be useful in 
situations where some parties, but not all, to trades around the same 
time have requested a review. Under the rule, reviews are currently 
request-based. Under the proposal, in this situation, the Exchange 
would be able to invoke this provision to review a series of trades, 
whether or not all parties requested it.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \4\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \5\ 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 notes that the Exchange officer can adjust or nullify a 
transaction under the authority granted by this provision only if the 
transaction meets the objective criteria for an obvious error under the 
Exchange rules.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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; or (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 Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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, 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 has requested that the Commission waive the 30-day 
operative delay so that the Exchange may promptly implement the 
proposed rule change. The Exchange believes that a recent trading 
situation that resulted in divergent outcomes on some other options 
markets could have been handled in a more clear and orderly way if the 
new provision had been in place. The Commission notes that the proposed 
rule change is substantively identical to a previously approved 
proposal from CBOE \8\ and thus presents no new regulatory issues. The 
Commission believes that, under the circumstances, it is appropriate 
and consistent with the protection of investors and the public interest 
to waive the 30-day operative delay. Therefore, the Commission hereby 
designates the proposed rule change operative upon filing.\9\
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    \8\ See Exchange Act Release No. 60978 (November 10, 2009), 74 
FR 59296 (November 17, 2009) (approving SR-CBOE-2009-68).
    \9\ 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 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,

[[Page 5829]]

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 No. SR-Phlx-2010-13 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 No. SR-Phlx-2010-13. 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 such filing also will be available for 
inspection and copying at the principal office of Phlx. 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 No. SR-Phlx-2010-13 and should be 
submitted on or before February 25, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-2335 Filed 2-3-10; 8:45 am]
BILLING CODE 8011-01-P