Document ID: SEC-2009-0867-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-06-26T04:00Z

[Federal Register Volume 74, Number 122 (Friday, June 26, 2009)]
[Notices]
[Pages 30658-30660]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-15153]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60150; File No. SR-Phlx-2009-35]

Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify 
the Definition of ``Narrow-Based Index''

June 19, 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 16, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' 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. Phlx has designated the proposed 
rule change as constituting a non-controversial rule change under Rule 
19b-4(f)(6) under the Act,\3\ which renders the proposal effective upon 
filing with 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 file a proposed rule change to add a 
commentary to Rule 1000A(b)(12) to clarify that this rule, which 
defines the term ``narrow-based index'' to mean ``to be representative 
of a particular industry or a group of related industries'' to also 
accommodate an index the constituents of which are all headquartered 
within a single country to be listed as a narrow-based index pursuant 
to Exchange rules.
    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, 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
    Phlx is filing the proposed rule change to add a commentary to 
clarify that Phlx Rule 1000A(b)(12), which defines the term ``narrow-
based index'' (or ``industry index'') to mean ``to be representative of 
a particular industry or a group of related industries'' to also 
accommodate an index the constituents of which are all headquartered 
within a single country to be listed as a narrow-based index pursuant 
to Exchange rules. This would enable options based on an index, 
including companies all headquartered within a single country, to be 
rightfully considered as a generic narrow-based index for purposes of 
listing on the Exchange and trading.
    The listing and trading of index options on the Exchange is 
generally conditioned on the ability to meet the rule requirements for 
narrow-based and broad based indexes.\4\ More particularly regarding 
narrow-based indexes, Phlx Rule 1009A(b) states that the Exchange may 
trade options on an underlying index pursuant to Rule 19b-4(e) of the 
Act \5\ where all of the noted conditions noted are satisfied.\6\ 
Indeed, the Exchange has, and continues to, list and trade options on 
narrow-based indexes based on industries or a group of related 
industries that are located within various countries. These options are

[[Page 30659]]

traded pursuant to the Exchange's index option trading rules.\7\
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    \4\ Broad-based indexes (or market indexes), which are not at 
issue in this filing, are defined in Phlx Rule 1000A(b)(11).
    \5\ The Chicago Board Options Exchange and International 
Securities Exchange have the same ability pursuant to their own 
rules.
    \6\ These include the index is capitalization-weighted, price-
weighted, modified capitalization-weighted or equal dollar-weighted, 
and consists of ten or more component securities; each component 
security has a market capitalization of at least $75 million, except 
that for each of the lowest weighted component securities in the 
index that in the aggregate account for no more than 10% of the 
weight of the index; the market capitalization is at least $50 
million; and trading volume of each component security has been at 
least one million shares for each of the last six months, except 
that for each of the lowest weighted component securities in the 
index that in the aggregate account for no more than 10% of the 
weight of the index, trading volume has been at least 500,000 shares 
for each of the last six months. See Phlx Rule 1009A(b)(1)-(12) for 
all of the conditions.
    \7\ See Phlx Rules 1000A et seq. (index options trading rules). 
See also Phlx Rules 1000 et seq. (general options trading rules).
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    With the Exchange's interpretation of Phlx Rule 1000A(b)(12) as 
discussed herein, the Exchange intends to list and trade options, 
pursuant to Phlx Rule 1009A(b), on an index(es) that includes 
industries all headquartered within a single country. The Exchange 
represents that, in all other material aspects, these options will meet 
the requirements for generic listing and trading pursuant to Rule 
1009A(b). The proposed rule change simply seeks to clarify that the 
generic listing and trading standards would cover an index that 
otherwise qualifies as a ``narrow-based index,'' with the exception 
that the constituents of the index are all headquartered within a 
single country.
    For example, the proposed rule change would allow the Exchange to 
list and trade options on the NASDAQ China Index (the ``Index'') 
pursuant to generic listing standards. Options on the Index would not 
otherwise qualify for listing on the Exchange because the Index does 
not currently fit within the definition of a narrow-based index under 
Phlx Rule 1000A(b)(12). In all other respects the Index meets the 
applicable generic listing standards under Rule 1009A(b). The Exchange 
intends to list and trade options on the Index pursuant to Rule 
1009A(b) almost immediately upon operation of the changes in the 
proposed commentary to Phlx Rule 1000A(b)(12).
    Moreover, like the presently traded narrow-based index options, 
these narrow-based options will be traded pursuant to the Exchange's 
trading rules.\8\ The Exchange represents that its existing 
surveillance procedures applicable to trading in options will be 
adequate to properly monitor the trading in options on these narrow-
based indexes.
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    \8\ Id. The trading rules include, among other things, position 
limits, exercise limits, and terms of options contracts (Phlx Rules 
1001A, 1002A, and 1101A, respectively). See also Securities and 
Exchange Release No. 42132 (November 12, 1999), 64 FR 63837 
(November 22, 1999) (SR-Phlx-98-99) (order approving narrow-based 
options position limit increase to 18,000, 24,000, and 31,500 
contracts).
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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 clarifying the term ``narrow-based index'' also 
accommodates an index the constituents of which are all headquartered 
within a single country.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \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. 
Phlx has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \14\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that its proposal become operative immediately so that Phlx may list 
and trade options on the NASDAQ China Index immediately pursuant to its 
generic listing standards for narrow-based indexes. The Commission 
believes that waiving the 30-day operative delay to make the product 
available without delay is consistent with the protection of investors 
and the public interest. Therefore, the Commission designates the 
proposal operative upon filing.\15\
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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 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, 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-Phlx-2009-35 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-2009-35. 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

[[Page 30660]]

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 publicly available. All submissions 
should refer to File Number SR-Phlx-2009-35 and should be submitted on 
or before July 17, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-15153 Filed 6-25-09; 8:45 am]
BILLING CODE 8010-01-P