Document ID: SEC-2011-0439-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-04-05T04:00Z

[Federal Register Volume 76, Number 65 (Tuesday, April 5, 2011)]
[Notices]
[Pages 18817-18818]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8054]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64157; File No. SR-Phlx-2011-15]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order 
Granting Approval of Proposed Rule Change To Expand the $2.50 Strike 
Price Program

March 31, 2011.

I. Introduction

    On February 2, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
expand the $2.50 Strike Price Program. The proposed rule change was 
published for comment in the Federal Register on February 22, 2011.\3\ 
The Commission received no comment letters on the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 63914 (February 15, 
2011), 76 FR 9846 (``Notice'').
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II. Description of the Proposal

    Phlx has proposed to modify Exchange Rule 1012, Series of Options 
Open for Trading, to expand the range of option strike prices for which 
$2.50 strike price intervals may be listed under the $2.50 Strike Price 
Program

[[Page 18818]]

(``Program'') from between $50 and $75 to 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. The 
Exchange also proposed to increase the number of option classes on 
individual stocks, from 46 to 60, that it may select for the 
Program.\4\
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    \4\ In addition, the $2.50 Strike Price Program also permits the 
Exchange to list any option class with $2.50 strike intervals that 
is included in the $2.50 Strike Price Program of another exchange. 
See Phlx Rule 1012, Commentary .05(b).
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    In support of its proposal, Phlx stated that $2.50 strike intervals 
above $75 would afford investors the ability to more closely tailor 
investment strategies to the precise movement of the underlying 
security. The Exchange also stated that the number of option classes in 
the Program has not expanded since 1998, although increasingly more 
companies have completed initial public offerings since 1998 and 
significantly more options classes are trading now as compared to 1998. 
The Exchange stated that the increase would allow it to accommodate 
investor requests for $2.50 strikes in additional options classes.
    Finally, Phlx stated that it analyzed its capacity, and represented 
that the Exchange and the Options Price Reporting Authority have the 
necessary systems capacity to handle the potential additional traffic 
that would result from expanding the Program.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\5\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(5) of the Act,\6\ which requires, among other things, that 
the rules of a national securities exchange be designed to promote just 
and equitable principles of trade, to prevent fraudulent and 
manipulative acts, 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.
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    \5\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal strikes a reasonable 
balance between the Exchange's desire to offer a wider array of 
investment opportunities and the need to avoid unnecessary 
proliferation of options series and the corresponding increase in 
quotes and market fragmentation. The Commission expects the Exchange to 
monitor the trading volume associated with the additional options 
series listed as a result of this proposal and the effect of these 
additional series on market fragmentation and on the capacity of the 
Exchange's, OPRA's, and vendors' automated systems.
    In addition, the Commission notes that Phlx has represented that it 
believes the Exchange and the Options Price Reporting Authority have 
the necessary systems capacity to handle the additional traffic 
associated with the newly permitted listings.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-Phlx-2011-15) be, and it 
hereby is, approved.
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    \7\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8054 Filed 4-4-11; 8:45 am]
BILLING CODE 8011-01-P