Document ID: SEC-2011-2030-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-12-28T05:00Z

[Federal Register Volume 76, Number 249 (Wednesday, December 28, 2011)]
[Notices]
[Page 81553]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-33219]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66023; File No. SR-Phlx-2011-118]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order 
Approving Proposed Rule Change Relating to Transfer of Positions Off 
the Floor

December 21, 2011.

I. Introduction

    On October 20, 2011, NASDAQ OMX PHLX LLC (``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 codify current 
Exchange policy with respect to the transfer of option positions 
between accounts, individuals, or entities off the floor. The proposed 
rule change was published in the Federal Register on November 8, 
2011.\3\ The Commission received no comments 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\ See Securities Exchange Act Release No. 65666 (November 2, 
2011), 76 FR 69314.
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II. Description of Proposal

    The Exchange proposes to adopt new Exchange Rule 1058, Transfer of 
Positions. The proposed rule would govern the process when an Exchange 
member or member organization transfers positions off the floor in any 
class of options listed on its books. The proposed rule would allow 
transfers in one or more of the following events: (1) The dissolution 
of a joint account in which the remaining member or member organization 
assumes the positions of the joint account; (2) the dissolution of a 
corporation or partnership in which a former nominee of that 
corporation or partnership assumes the positions; (3) positions 
transferred as part of a member or member organization's capital 
contribution to a new joint account, partnership, or corporation; (4) 
the donation of positions to a not-for-profit corporation; (5) the 
transfer of positions to a minor under the Uniform Gifts to Minors Act; 
(6) a merger or acquisition resulting in a continuity of ownership or 
management; or (7) consolidation of accounts within a member or member 
organization.
    The proposed rule would further require members and member 
organizations to notify the Exchange in writing prior to effecting an 
off the floor transfer. This written notification must indicate the 
positions to be transferred and the reason for the transfer. Finally, 
the proposed rule would require all positions to be transferred at the 
same prices that appear on the books of the transferring member or 
member organization, so that the positions would retain the same cost 
basis. The transfer must indicate the original trading date, cannot net 
the transferred position against another position (for example, a long 
position that would net against an existing offsetting short position 
could not be transferred), and each member or member organization that 
is a party to the transfer must make and retain records related to the 
nature of the transaction, the name of the counter-party, and any other 
information required by the Exchange.

III. Commission Findings and Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act,\4\ 
and the rules and regulations thereunder applicable to a national 
securities exchange. In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\5\ 
which requires, among other things, that the rules of the exchange be 
designed to prevent fraudulent and manipulative acts and practices, 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.\6\
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
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    The Exchange's proposal would govern when and how an Exchange 
member or member organization could transfer option positions off the 
floor. The Commission believes that the proposal would clarify to an 
Exchange member or member organization the process required to transfer 
these positions, and the specific instances in which such a transfer is 
permitted. The Commission also notes that the proposed rule is 
substantially similar to the rules of other options exchanges.\7\ 
Accordingly, the Commission finds that the proposal would promote just 
and equitable principles of trade and remove impediments to and perfect 
the mechanism of a free and open market, and is consistent with the 
requirements of the Act.\8\
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    \7\ See, e.g., Chicago Board Options Exchange, Incorporated Rule 
6.49A and NYSE Arca, Inc. Rule 6.78.
    \8\ The Commission notes, however, that this order does not 
approve any prior transfer of option positions off the floor that 
may have been inconsistent with the approved rules of the Exchange 
then in effect.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-Phlx-2011-118) be, and it 
hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-33219 Filed 12-27-11; 8:45 am]
BILLING CODE 8011-01-P