Document ID: SEC-2015-0198-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2015-02-02T05:00Z

[Federal Register Volume 80, Number 21 (Monday, February 2, 2015)]
[Notices]
[Pages 5600-5602]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-01863]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74145; File No. SR-Phlx-2015-09]

 Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Regarding 
the Short Term Option Series Program

January 27, 2015.
    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 21, 2015, NASDAQ OMX PHLX LLC (``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 is filing with the Commission a proposal to amend Rule 
1012 (Series of Options Open for Trading) to introduce finer $.50 
strike price intervals in non-index Short Term Options with strike 
prices less than $100.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.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 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
    The purpose of this proposed rule change is to amend Rule 1012 
governing the Short Term Option (``STO'') \3\ Series Program to 
introduce finer strike price intervals for certain STOs. In particular, 
the Exchange proposes to amend Commentary .11(e) to Rule 1012 to extend 
$0.50 strike price intervals in non-index options to STOs with strike 
prices less than $100 instead of the current $75. This proposed change 
is intended to eliminate gapped strikes between $75 and $100 that 
result from conflicting strike price parameters under the STO Series 
Program and the $2.50 Strike Price Program, as described in more detail 
below.
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    \3\ STOs, also known as ``weekly options'' as well as ``Short 
Term Options'', are series in an options class that are approved for 
listing and trading on the Exchange in which the series are opened 
for trading on any Thursday or Friday that is a business day and 
that expire on the Friday of the next business week. If a Thursday 
or Friday is not a business day, the series may be opened (or shall 
expire) on the first business day immediately prior to that Thursday 
or Friday, respectively. STOs are listed and traded pursuant to the 
STO Series Program. For STO Series Program rules regarding non-index 
options, see Rule 1000(b)(44) and Commentary .11 to Rule 1012. For 
STO Series Program rules regarding index options, see Rule 
1000A(b)(16) and Rule 1101A(b)(vi).
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    This is a competitive filing that is based on a recent STO proposal 
of the International Securities Exchange, LLC (``ISE'').\4\
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    \4\ See Securities Exchange Act Release No. 73999 (January 6, 
2015), 80 FR 1559 (January 12, 2015) (SR-ISE-2014-52) (order 
approving).
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    Under the Exchange's rules, the Exchange may list STOs in up to 
fifty option classes in addition to option classes that are selected by 
other securities exchanges that employ a similar program under their 
respective rules.\5\ On any Thursday or Friday that is a business day, 
the Exchange may list STO series in designated option classes that 
expire at the close of business on each of the next five Fridays that 
are business days and are not Fridays in which monthly or quarterly 
options expire.\6\ These STO series trade in $0.50, $1, or $2.50 or 
greater strike price intervals depending on the strike price and 
whether the option trades in dollar increments in the related monthly 
expiration.\7\ Specifically, STOs in non-index option classes admitted 
to the STO Series Program currently trade in: (1) $0.50 or greater 
intervals for strike prices less than $75, or for option classes that 
trade in one dollar increments in the related monthly expiration 
option; (2) $1 or greater intervals for strike prices that are between 
$75 and $150; and (3) $2.50 or greater intervals for strike prices 
above $150.\8\
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    \5\ See Commentary .11(a) to Rule 1012.
    \6\ See Commentary .11 to Rule 1012.
    \7\ See Commentary .11(e) to Rule 1012.
    \8\ Id.
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    The Exchange also operates a $2.50 Strike Price Program that 
permits the Exchange to select up to sixty options classes on 
individual stocks to trade in $2.50 strike price intervals, in addition 
to option classes selected by other securities exchanges that employ a 
similar program under their respective rules.\9\ Monthly expiration 
options in classes admitted to the $2.50 Strike

[[Page 5601]]

Price Program trade in $2.50 intervals where the strike price is (1) 
greater than $25 but less than $50; or (2) between $50 and $100 if the 
strikes are no more than $10 from the closing price of the underlying 
stock in its primary market on the preceding day.\10\ These strike 
price parameters conflict with strike prices allowed for STOs as dollar 
strikes between $75 and $100 otherwise allowed under the STO Series 
Program may be within $0.50 of strikes listed pursuant to the $2.50 
Strike Price Program. In order to remedy this conflict, the Exchange 
proposes to extend the $0.50 strike price intervals currently allowed 
for STOs with strike prices less than $75 to STOs with strike prices 
less than $100.
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    \9\ See Commentary .05(b) to Rule 1012.
    \10\ Id. For a definition of ``primary market'', see Rule 
1000(b)31.
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    With this proposed change, STOs in non-index option classes will 
trade in: (1) $0.50 or greater intervals for strike prices less than 
$100, or for option classes that trade in one dollar increments in the 
related monthly expiration option; (2) $1 or greater intervals for 
strike prices that are between $100 and $150; and (3) $2.50 or greater 
intervals for strike prices above $150.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder, including the 
requirements of Section 6(b) of the Act.\11\ In particular, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ requirements that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and to perfect the mechanism for a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    During the month prior to expiration, the Exchange is permitted to 
list related monthly option contracts in the narrower strike price 
intervals available for STO series.\13\ After transitioning to short 
term strike price intervals, however, monthly options that trade in 
$2.50 intervals between $50 and $100 under the $2.50 Strike Price 
Program, trade with dollar strikes between $75 and $150. Due to the 
overlap of $1 and $2.50 intervals, the Exchange cannot list certain 
dollar strikes between $75 and $100 that conflict with the prior $2.50 
strikes. For example, if the Exchange initially listed monthly options 
on ABC with $75, $77.50, and $80 strikes, the Exchange could list the 
$76 and $79 strikes when these transition to short term intervals. The 
Exchange would not be permitted to list the $77 and $78 strikes, 
however, as these are $0.50 away from the $77.50 strike already listed 
on the Exchange. This creates gapped strikes between $75 and $100, 
where investors are not able to trade otherwise allowable dollar 
strikes on the Exchange. Similarly, these conflicting strike price 
parameters create issues for investors who want to roll their positions 
from monthly to weekly expirations. In the example above, for instance, 
an investor that purchased a monthly ABC option with a $77.50 strike 
price would not be able to roll that position into a later short term 
expiration with the same strike price as that strike is unavailable 
under current STO Series Program rules. Permitting $0.50 intervals for 
STOs up to $100 would remedy both of these issues as strikes allowed 
under the $2.50 Strike Price Program would not conflict with the finer 
$0.50 strike price interval.
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    \13\ See Commentary .05(a)(vii) to Rule 1012.
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    The STO Series Program has been well-received by market 
participants and the Exchange believes that introducing finer strike 
price intervals for STOs with strike prices between $75 and $100, and 
thereby eliminating the gapped strikes described above, will benefit 
these market participants by giving them more flexibility to closely 
tailor their investment and hedging decisions.
    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 (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with 
this proposed rule change. The Exchange believes that its members will 
not have a capacity issue as a result of this proposal. The Exchange 
also represents that it does not believe this expansion will cause 
fragmentation of liquidity.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
Exchange believes that the proposed rule change will result in 
additional investment options and opportunities to achieve the 
investment objectives of market participants seeking efficient trading 
and hedging vehicles, to the benefit of investors, market participants, 
and the marketplace in general.

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 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, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will ensure 
fair competition among exchanges by allowing the Exchange to open 
additional series of individual stocks and ETF options in $.50 strike 
price intervals up to $100 in the same manner as ISE. For this reason, 
the Commission believes that the proposed rule change presents no novel 
issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest; and will allow the 
Exchange to remain competitive with other exchanges. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing.\16\
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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

[[Page 5602]]

public interest, for the protection of investors, or otherwise in 
furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.

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 email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2015-09 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-Phlx-2015-09. This 
file number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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-Phlx-2015-09 and should be 
submitted on or before February 23, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01863 Filed 1-30-15; 8:45 am]
BILLING CODE 8011-01-P