Document ID: SEC-2012-1785-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2012-11-06T05:00Z

[Federal Register Volume 77, Number 215 (Tuesday, November 6, 2012)]
[Notices]
[Pages 66660-66662]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27033]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68124; File No. SR-NASDAQ-2012-121]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Apply the Position Limit Exemption Rules of NASDAQ OMX PHLX LLC For 
Certain Index Options

 October 31, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 18, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' 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 NASDAQ Stock Market [sic] to amend NASDAQ Options Market LLC 
(``NOM'') \3\ Rules at Chapter XIV, Sections 5 (Position Limits for 
Broad-Based Index Options) and 7 (Position Limits for Industry and 
Micro-Narrow Based Index Options) to apply the position limit exemption 
rules of NASDAQ OMX PHLX LLC (``Phlx'') for certain broad-based index 
options and industry and micro-narrow based index options.
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    \3\ NOM is NASDAQ's facility for executing and routing 
standardized equity and
    index options.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

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. 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 Exchange is proposing to amend Chapter XIV, Sections 5 
(Position Limits for Broad-Based Index Options) and Section 7 (Position 
Limits for Industry and Micro-Narrow Based Index Options) of the NASDAQ 
Rules to permit NASDAQ Options Market LLC (``NOM'') Options 
Participants to utilize position limit exemptions,\4\ which are 
currently available on Phlx with respect to certain index options 
discussed below.
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    \4\ This would include all rules relating to exemptions. See 
Phlx Rule 1001A Position Limits.
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    Currently, Chapter XIV, Sections 5 and 7 state that NOM Options 
Participants shall comply with the applicable rules of the Chicago 
Board Options Exchange, Incorporated (``CBOE'') with respect to 
position limits, both for broad-based and industry or micro-narrow 
index options. The Exchange recently filed to list options on several 
Phlx proprietary and non-proprietary indexes on NOM, which are not 
listed on CBOE: MSCI EM, MSCI EAFE, PHLX Oil Service Sector\SM\ index 
(OSX), PHLX Semiconductor Sector\SM\ Index (SOX) and PHLX Housing 
Sector\TM\ Index (HGX) \5\ (collectively ``MSCI and PHLX Indexes''). In 
each of these filings, the Exchange sought to list and trade the MSCI 
and PHLX Indexes on NOM by amending the NOM rules to provide for the 
same position limits that are applied currently on Phlx for options 
overlying the MSCI and PHLX Indexes.\6\ Both filings intended that 
options on the MSCI and PHLX Indexes would be listed and traded on NOM 
as they are on Phlx.\7\ Both filings added new sections to Chapter XIV, 
Sections 5 and 7 to specify the applicable position limits because 
options on the MSCI and PHLX Indexes were not listed on another 
exchange other than Phlx.\8\
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    \5\ See Securities Exchange Act Release Nos. 67582 (August 2, 
2012), 77 FR 47455 (August 8, 2012) (SR-NASDAQ-2012-092) (an 
immediately effective filing relating to option [sic] on the MSCI EM 
and MSCI EAFE Index [sic]) and 67105 (June 4, 2012), 77 FR 34110 
(June 8, 2012) (SR-NASDAQ-2012-065) (an immediately effective filing 
relating to strike price intervals and position limits for OSX, SOX 
and HGX).
    \6\ Id. Today, this does not include the application of Phlx 
exemptions.
    \7\ Id.
    \8\ Id.
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    Unlike index options that are listed on CBOE, where applicable CBOE 
rules relating to position limits, including exemptions from position 
limits, are incorporated by reference in NOM's rules, all applicable 
Phlx rules relating to position limits for the MSCI and PHLX Indexes, 
including specifically position limit exemptions, are not incorporated 
by reference in NOM's rules.\9\ Rather, only the specified position 
limits for these indexes as set forth in Phlx's rules are replicated in 
NOM's rules.\10\
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    \9\ See Phlx Rules [sic] 1001A Position Limits. See also NOM 
Rules at Chapter XIV, Section 5(d) and Section 7(d) which replicate 
the Phlx position limits for the MSCI and Phlx Indexes within the 
NOM Rules.
    \10\ See Phlx Rules [sic] 1001A Position Limits. See also NOM 
Rules at Chapter XIV, Section 7(d) and (e) which replicate the Phlx 
position limits for Phlx Indexes within the NOM Rules.
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    The Exchange is proposing to incorporate by reference the entirety 
of Phlx's rules relating to position limits with respect to options 
overlying the MSCI and PHLX Indexes. This would allow NOM Options 
Participants desiring to trade options on the MSCI and PHLX Indexes to 
avail themselves of the same exemptions as Phlx members receive today.
    To this end, the Exchange is proposing to amend Chapter XIV, 
Section 5 to state that the applicable Phlx position limit rules would 
apply to the MSCI EAFE and MSCI EM broad-based index options. Also, the 
Exchange would amend Chapter XIV, Section 7 to state that the 
applicable Phlx position limit rules would apply to PHLX Oil Service 
Sector\SM\ index (OSX), PHLX Semiconductor Sector\SM\ Index (SOX) and 
PHLX Housing Sector\TM\ Index (HGX) industry and micro-narrow based 
index options. The Exchange proposes to remove section (d) of Chapter 
XIV,

[[Page 66661]]

Section 5 and sections (d) and (e) of Chapter XIV, Section 7 as that 
rule text is no longer necessary because all applicable Phlx position 
limit rules and exemptions would apply going forward to the MSCI and 
PHLX Indexes.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \11\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \12\ 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 providing NOM Options Participants that desire to transact 
options on MSCI and PHLX Indexes the ability to avail themselves of the 
same position limit rules and exemptions as Phlx members. It was the 
intent of the Exchange to list and trade options on the MSCI and PHLX 
Indexes in the same manner as those index options are traded on Phlx. 
This would include providing the same position limit rules and 
exemptions on position limits as are permitted on Phlx. The Exchange 
believes that permitting applicable Phlx position limit exemption 
rules, in addition to position limits, to be applied will ensure that 
the same exemptions would apply to options on the MSCI and PHLX Indexes 
on both NOM and Phlx.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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    Today the CBOE rules are applied on NOM in the same manner as the 
Exchange proposes to apply Phlx rules relating to position limits and 
exemptions. Those index options which trade on CBOE and NOM are subject 
to applicable CBOE rules with respect to index option position limits 
and exemptions. The Exchange believes that because NOM does not have 
its own rules governing exemptions, applying the CBOE position limit 
rules, including exemptions, ensures that NOM Options Participants are 
able to trade index options in much the same manner as they are traded 
on CBOE, subject to the same regulatory requirements. The Exchange is 
proposing to similarly apply Phlx rules in the same manner with respect 
to the MSCI and PHLX Indexes. The Exchange believes that this filing is 
non-controversial because it seeks to apply the rules of another self-
regulatory organization to NOM Options Participants in the same way as 
those rules apply today to Phlx members trading the MSCI and PHLX 
Indexes.

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 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 after the date of the filing, 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 \13\ and Rule 19b-4(f)(6) 
thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \16\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay. The Exchange 
believes that doing so would provide NOM Options Participants with the 
ability to utilize position limit exemptions for the MCSI and PHLX 
Indexes and trade options on those indexes in the same manner as Phlx 
members. The Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest. Therefore, the Commission hereby waives the 30-day operative 
delay and designates the proposal operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 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 summarily may temporarily suspend 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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-121on 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-NASDAQ-2012-121. 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

[[Page 66662]]

available publicly. All submissions should refer to File Number SR-
NASDAQ-2012-121 and should be submitted on or before November 27, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-27033 Filed 11-5-12; 8:45 am]
BILLING CODE 8011-01-P