Document ID: SEC-2009-0418-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-03-27T04:00Z

[Federal Register: March 27, 2009 (Volume 74, Number 58)]
[Notices]               
[Page 13498-13501]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27mr09-100]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59611; File No. SR-Phlx-2009-22]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by NASDAQ OMX PHLX, Inc. 
Relating to Administration of Certain Rules in Respect of Index Data 
Dissemination

March 20, 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 March 16, 2009, 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, II, and III, 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 reflect in the administration of its rules 
the expected discontinuation by the NASDAQ OMX Futures Exchange, Inc. 
(``NFX'') of index value distribution over NFX's Market Data 
Distribution Network (``MDDN''). Index values will continue to be 
distributed via another NASDAQ OMX data dissemination service, and the 
discontinuation of MDDN index value dissemination will not have any 
impact on the listing or trading of any instruments on the

[[Page 13499]]

Exchange, or on any facility of a national securities exchange within 
the meaning of the Act. The Exchange is not proposing to amend the text 
of any rules, but simply to change the administration of certain rules, 
as described below.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings.

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
    Currently, the values of the Exchange's various proprietary indexes 
are disseminated in parallel over two separate data services operated 
by The NASDAQ OMX Group, Inc. (``NASDAQ OMX'').\3\ These values are 
included both in NFX's MDDN \4\ and NASDAQ OMX's data dissemination 
service. The purpose of this filing is to reflect the pending 
discontinuation by NFX of its index data dissemination service over 
MDDN as redundant and unnecessary.\5\
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    \3\ NASDAQ OMX acquired the Exchange on July 24, 2008. NFX, 
which was previously known as the Philadelphia Board of Trade and 
became a subsidiary of NASDAQ OMX on the same date, is a Designated 
Contract Market within the meaning of the Commodities Exchange Act.
    \4\ MDDN is an Internet protocol multicast network, which was 
developed by NFX for the purpose of, among other things, 
transmitting current and closing index values.
    \5\ The Exchange's rule book and fee schedule do not reference 
MDDN. As explained herein, MDDN is not a service being provided by 
the Exchange (rather, it is a service of NFX, a designated contract 
market under the Commodities Exchange Act), and even if MDDN were an 
Exchange-supplied service, it would not constitute a facility of a 
national securities exchange, making its inclusion in the Exchange's 
rule book unnecessary. See, e.g., Securities Exchange Act Release 
No. 34-58897 (November 3, 2008), 73 FR 66952 (November 12, 2008) 
(SR-NASDAQ-2008-018) (NASDAQ's index dissemination service is not a 
facility of a national securities exchange, and its terms are not 
rules that must be filed with the Commission).
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    Exchange rules condition the listing and trading of index options 
on, among other things, the dissemination of underlying index values 
periodically during the trading day and closing index values after the 
close of the trading day. Rule 1009A(b)(10) provides that the current 
underlying index value for narrow-based indexes will be reported at 
least once every fifteen seconds during the time the index options are 
traded on the Exchange.\6\ Additionally, Rule 1100A(a) provides that 
the Exchange shall disseminate or shall assure that the closing index 
value is disseminated after the close of business and the current index 
value is disseminated from time-to-time on days on which transactions 
in index options are made on the Exchange.\7\
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    \6\ See also Rule 1009A(c)(1) (regarding reporting requirements 
for continued listing of narrow-based indexes underlying options); 
and Rules 1009A(d)(11) and 1109A(e)(1) (regarding reporting 
requirements for initial and continued listing of broad-based 
indexes underlying options).
    \7\ See also Securities Exchange Act Release No. 53790 (May 11, 
2006), 71 FR 28737 (May 17, 2006) (SR-Phlx-2006-04) (regarding, 
among other things, transmission over MDDN of current and closing 
index values underlying four index options that were approved by 
Commission order: XAU, OSX, SOX, and UTY).
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    The Exchange lists options on several proprietary indexes.\8\ Under 
this proposed rule change, discontinuation of the MDDN index value 
dissemination service will not affect the eligibility of such options 
to be listed and traded because dissemination of the underlying index 
data will not stop and will not be interrupted. All index values 
included in MDDN are currently also being disseminated over another 
NASDAQ OMX index dissemination service, making the MDDN index 
dissemination duplicative and no longer necessary.\9\ In the future, 
the Exchange will continue dissemination of its index data either 
through NASDAQ OMX's index dissemination service or through one or more 
other (NASDAQ OMX-owned or unrelated) major market data vendors.\10\
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    \8\ The proprietary indexes listed on the Exchange include: PHLX 
Chemicals Index (XCM); PHLX Defense Sector (DFX); PHLX Drug Sector 
(RXS); PHLX Europe Sector (XEX); PHLX Gold/Silver Sector (XAU); PHLX 
Housing Sector (HGX); PHLX Marine Shipping Index (SHX); PHLX Medical 
Device Index (MXZ); PHLX Oil Service Sector (OSX); PHLX 
Semiconductor Sector (SOX); PHLX Sports Index (SXP); and PHLX 
Utility Sector (UTY). DFX, RXS, HGX, OSX, and SOX are listed and 
options are traded pursuant to Rule 1009(A), which provides for 
trading of options on indexes pursuant to Rule 19b-4(e) of the Act. 
XAU and UTY, being two of the oldest indexes that pre-date Rule 19b-
4(e), are listed and options are traded pursuant to Commission 
orders. See Securities Exchange Act Release Nos. 20437 (December 2, 
1983), 48 FR 55229 (December 9, 1983) (XAU); and 24889 (September 9, 
1987), 52 FR 35021 (September 16, 1987) (UTY). XCM, XEX, SHX, MXZ, 
and SXP are no longer listed or traded and have no open options 
interest.
    \9\ It is expected that other MDDN data streams will continue to 
operate as a service of NFX to distribute NFX trading data.
    \10\ As is the case with the values of proprietary indexes, 
current and closing index values of certain non-proprietary indexes 
underlying options listed on the Exchange (Hapoalim American Israeli 
Index, SIG Coal Producers Index, SIG Energy MLP Index, and SIG Oil 
Production & Exploration Index) and data regarding foreign 
currencies underlying options listed on the Exchange (Australian 
dollars, British pounds, Canadian dollars, Euros, Japanese Yen and 
Swiss Francs) will likewise continue to be distributed over the 
NASDAQ OMX index dissemination service or one or more other (NASDAQ 
OMX-owned or unrelated) major market data vendors.
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    The Exchange believes that, just like NASDAQ's index dissemination 
service,\11\ NFX's MDDN index dissemination service is not a facility 
of any national securities exchange within the meaning of the Act and 
that the Exchange is not required under Section 19(b)(1) of the Act 
\12\ and Rule 19b-4 thereunder \13\ to file rule changes regarding 
administration of such service. If, at a later date, the Exchange 
proposed to modify the manner in which it disseminates index values, 
causing the relevant index dissemination service to fit within the 
definition of a facility of an exchange, or the Exchange proposed to 
tie the fees for receiving data from the index dissemination service to 
fees for usage of exchange services (to include, for example, listing 
and trading), the Exchange would file a proposed rule change with the 
Commission.\14\
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    \11\ See Securities Exchange Act Release No. 34-58897 (November 
3, 2008), 73 FR 66952 (November 12, 2008) (SR-NASDAQ-2008-018) 
(NASDAQ's index dissemination service is not a facility of a 
national securities exchange, and its terms are not rules that must 
be filed with the Commission).
    \12\ 15 U.S.C. 78s(b)(1).
    \13\ 17 CFR 240.19b-4.
    \14\ See Securities Exchange Act Release No. 58897 (November 3, 
2008), 73 FR 66952 (November 12, 2008) (SR-NASDAQ-2008-018).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \15\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \16\ 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 how underlying index data is to be disseminated.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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

[[Page 13500]]

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and paragraph (f)(1) of Rule 19b-4 thereunder. 
Pursuant to the Act, the proposed rule change has been designated by 
the Exchange as constituting a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule. Specifically, as described above, the 
Exchange has stated how it will administer the enumerated portions of 
Phlx Rules 1009A and 1100A in light of the discontinuation of index 
data dissemination over NFX's MDDN. 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.
    As discussed above, the Exchange believes that the MDDN index 
dissemination service is not a ``facility of a national securities 
exchange,'' and the terms and conditions of this service are therefore 
not included in the text of the Exchange's rules. Because of this, no 
changes are being made to the Exchange rule book or fee schedule, and 
this filing should be viewed as a statement of how the Exchange will 
administer its existing rules in light of the impending discontinuation 
of a non-exchange service (MDDN index dissemination) by a sister 
company (NFX).
    It must be noted in this regard that rule changes to discontinue 
important exchange services (as opposed to non-exchange services, as is 
the case here) have in the past been accepted by the Commission on 
immediately effective basis under paragraph (f)(1) of Rule 19-b(4).\17\ 
It stands to reason that discontinuation of a non-exchange service 
should receive the same treatment under paragraph (f)(1).
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    \17\ See, e.g. , Securities Exchange Act Release No. 58613 
(Sept. 22, 2008), 73 FR 57181 (Oct. 1, 2008) (SR-PHLX-2008-065) 
(immediately effective filing to change the administration of 
Exchange rules as a result of the shutdown of the entire XLE equity 
trading).
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    In its recent interpretive guidance regarding the self-regulatory 
organizations' rule filing process, the Commission stated that certain 
SRO proposals ``may be filed as an immediately effective rule so long 
as it is based on and similar to another SRO's rule'' and raises no new 
policy issues.\18\ Filings in this category are eligible to be 
submitted under paragraph (f)(6) of Rule 19b-4.\19\ As explained below, 
paragraph (f)(6) could serve as a separate basis for this filing's 
designation under Rule 19(b)(3), but the Exchange believes that 
designation under paragraph (f)(1) is more appropriate in this case.
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    \18\ Securities Exchange Act Release No. 58092 (July 3, 2008), 
73 FR 40144 (July 11, 2008).
    \19\ 17 CFR 240.19b-4(f)(6).
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    The Commission recently approved removal of index dissemination 
from the rule book of another exchange, NASDAQ,\20\ and in its impact, 
the present filing is similar to the NASDAQ filing. With the shut-down 
of MDDN index dissemination, both the PHLX and NASDAQ index values will 
continue to be distributed by the same index dissemination service, and 
since that service is not a facility of any national securities 
exchange (either NASDAQ or PHLX), its terms are not rules of an 
exchange within the meaning of the Act. This similarity to another 
SRO's rule makes the present filing eligible for immediate 
effectiveness under paragraph (f)(6) of Rule 19(b)(4).
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    \20\ Securities Exchange Act Release No. 58897 (November 3, 
2008), 73 FR 66952 (November 12, 2008) (SR-NASDAQ-2008-018) 
(NASDAQ's index dissemination service is not a facility of a 
national securities exchange, and its terms are not rules that must 
be filed with the Commission).
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    However, unlike the NASDAQ proposal, the present filing does not 
require any modifications to codified rule text and relates to a 
service that is being proposed for discontinuation. As explained above, 
even when the service to be discontinued is an important facility of a 
national securities exchange, its discontinuation has in the past been 
accepted as immediately effective under paragraph (f)(1) of Rule 19b-4. 
Based on prior Commission practice, while paragraph (f)(6) of Rule 19b-
4 would certainly apply to this filing, paragraph (f)(1) of this Rule 
is the appropriate basis for its immediate effectiveness.
    Based on the foregoing, the Exchange designates this filing as 
immediately effective under paragraph (f)(1) of Rule 19b-4. It is 
expected that notice of the impending discontinuation of MDDN index 
dissemination will be given as soon as practicable and the actual 
discontinuation will occur shortly thereafter, on a timetable that 
would minimize any possible inconvenience to its users.

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-2009-22 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-2009-22. 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 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-2009-22 and should be submitted on or before April 17, 2009.

[[Page 13501]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6826 Filed 3-26-09; 8:45 am]

BILLING CODE 8010-01-P