Document ID: SEC-2009-0188-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-02-10T05:00Z

[Federal Register: February 10, 2009 (Volume 74, Number 26)]
[Notices]
[Page 6680-6681]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10fe09-126]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59322; File No. SR-Phlx-2009-03]

Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Phlx Rule 1092, Obvious Errors and Catastrophic Errors

January 30, 2009.
    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 January 27, 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 amend Phlx Rule 1092, Obvious Errors and
Catastrophic Errors, to clarify when an options trade can be nullified
in a ``no bid'' option.
    The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings,
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 the proposed rule change is to clarify how the
obvious error rule operates where an options is priced ``no bid.''
Currently, under the obvious error rule, the trade in question must
result from an execution price where that series was quoted no bid and
at least one strike price below (for calls) or above (for puts) in the
same class was also quoted no bid at the time of the erroneous
execution (in which case the trade shall be nullified). The Exchange
proposes to amend Rule 1092(c)(ii)(E) to state that: (i) For 5 seconds
prior to the execution the series must have remained no bid; (ii) the
quote in question that results in the erroneous trade is not
considered; and (iii) bids and offers of the parties to the subject
trade that are in any of the series in the same options class are not
be considered. Accordingly, the new rule makes clear, similar to the
rules of other exchanges, what is taken into consideration when dealing
with a potential obvious error in no bid options.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the objectives of Section
6(b)(5) of the Act \5\ 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 situations where relief from an error may be sought.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 \6\ and Rule 19b-
4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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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    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.
    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \8\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6) \9\ permits the Commission to
designate a shorter time if such action is consistent with the
protection of investors and the public interest. Phlx requests that the
Commission waive the 30-day operative delay to immediately offer market
participants on Phlx the same potential for relief that is available at
other options exchanges for errors involving options series quoted no
bid. The Exchange argued that the proposed changes should serve to
clarify the situation where relief from such errors may be sought. The
Commission believes that waiving the 30-day

[[Page 6681]]

operative delay \10\ is consistent with the protection of investors and
the public interest. Given that the Exchange's proposed rule change is
substantially similar to the rules of other exchanges previously
approved by the Commission,\11\ the proposal does not appear to present
any novel regulatory issues. Therefore, the Commission designates the
proposal operative upon filing.
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 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).
    \11\ See Nasdaq Options Market Rules, Chapter V, Section
6(b)(ii) and Chicago Board Options Exchange, Incorporated Rule
6.25(a)(2).
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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-2009-03 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-2009-03. 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 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-2009-03 and should be
submitted on or before March 3, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2698 Filed 2-9-09; 8:45 am]

BILLING CODE 8011-01-P