Document ID: SEC-2010-0524-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-04-07T04:00Z

[Federal Register: April 7, 2010 (Volume 75, Number 66)]
[Notices]               
[Page 17820-17822]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap10-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61812; File No. SR-Phlx-2010-49]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by NASDAQ OMX PHLX, Inc. To 
Establish $2.50 Strike Price Intervals for Options on the NASDAQ 
Internet Index \SM\

March 31, 2010.
    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 29, 2010, 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 is filing with the Commission a proposal to amend: 
Phlx Rule 1101A (Terms of Options Contracts) regarding listing options 
on the NASDAQ Internet Index \SM\ trading under the symbol QNET at 
$2.50 strike-price intervals below $200; and Phlx Rule 1107A (NASDAQ 
OMX Group, Inc. Indexes) regarding disclaimer of express or implied 
warranties in respect of NASDAQ OMX Group, Inc. (``NASDAQ'') indexes.
    The Exchange requests that the Commission waive the 30-day 
operative delay period contained in Exchange Act Rule 19b-
4(f)(6)(iii).\3\
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    \3\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/
Filings/, 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

[[Page 17821]]

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 proposal is to amend Rule 1101A regarding 
listing options on the NASDAQ Internet Index \SM\ trading under the 
symbol QNET (the ``Index'') at $2.50 strike-price intervals below $200; 
and to amend Rule 1107A regarding disclaimer of express or implied 
warranties in respect of NASDAQ Indexes.
    The NASDAQ Internet Index \SM\ has been listed and maintained by 
NASDAQ OMX continuously since November 27, 2007.\4\ The Index is 
designed to track the performance of the largest and most liquid U.S.-
listed companies engaged in internet-related businesses that are listed 
on a U.S. stock exchange. The Index includes companies engaged in a 
broad range of internet-related services including, but not limited to 
internet software, internet access providers, internet search engines, 
web hosting, Web site design, and internet retail commerce. The 
Exchange intends to list options on the Index per subsection (b) of 
Rule 1009A (Designation of the Index).\5\
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    \4\ For a description of the Index, Index Methodology, and Index 
pricing, see https://indexes.nasdaqomx.com/. An Exchange-Traded Fund 
denominated The PowerShares Nasdaq Internet Portfolio (PNQI), which 
is based on the Index, was initiated last year.
    \5\ No options are currently traded on the Index. Rule 1009A 
establishes generic listing standards for options on narrow-based 
and broad-based indexes pursuant to Rule 19b-4(e) of the Act. See 
Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 
70952 (December 22, 1998). The listing standards in Rule 1009A are 
similar to those of other options exchanges such as, for example, 
Chicago Board Options Exchange, Incorporated (``CBOE''); 
International Stock Exchange LLC (``ISE''); and The NASDAQ Stock 
Market LLC (``NASDAQ Market'').
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    Phlx Rule 1101A currently indicates in subsection (a) that the 
Exchange shall determine fixed point strike price intervals for index 
options at no less than $5.00, provided that for indexes that are 
listed in Rule 1101A, the Exchange may determine to list strike prices 
at no less than $2.50 intervals if the strike price is less than $200. 
The rule provides also that such options may be listed at no less than 
$2.50 strike price intervals on indexes delineated in this rule, and in 
response to demonstrated customer interest or specialist request. 
Demonstrated customer interest includes institutional (firm) corporate 
or customer interest expressed directly to the Exchange or through the 
customer's floor brokerage unit, but not interest expressed by a 
Registered Options Trader (``ROT'') with respect to trading for the 
ROT's own account.\6\
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    \6\ Subsection (b) of Rule 1014 states that an ROT is a regular 
member or a foreign currency options participant of the Exchange 
located on the trading floor who has received permission from the 
Exchange to trade in options for his own account, and includes a 
Streaming Quote Trader and a Remote Streaming Quote Trader as 
defined in Rule 1014.
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    The proposed rule change adds the NASDAQ Internet Index\SM\ to the 
list of indexes in Rule 1101A upon which the Exchange may list options 
at $2.50 strike price intervals.\7\
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    \7\ For recent rule change proposals wherein the Exchange 
similarly added other indexes to Rule 1101A, see Securities Exchange 
Act Release Nos. 57899 (June 2, 2008), 73 FR 32379 (June 6, 2008) 
(SR-Phlx-2008-40) (notice of filing and immediate effectiveness); 
and 57515 (March 18, 2008), 73 FR 15554 (March 24, 2008) (SR-Phlx-
2008-21) (notice of filing and immediate effectiveness).
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    Phlx Rule 1107A currently provides that NASDAQ does not guarantee 
the accuracy and/or uninterrupted calculation of the NASDAQ-100 
Index[reg] (the ``index'') or any data included therein; makes no 
warranty, express or implied, as to results to be obtained by the 
Exchange, owners of the options on the index, or any other person or 
entity from the use of the index or any data included therein; and 
makes no express or implied warranties, and expressly disclaims all 
warranties of merchantability or fitness for a particular purpose or 
use with respect to the index or any data included therein. The rule 
also provides, without limiting any of the foregoing, that in no event 
shall NASDAQ have any liability for any lost profits or special, 
incidental, punitive, indirect, or consequential damages, even if 
notified of the possibility of such damages. In proposing adoption of 
Rule 1007A, the Exchange stated that Rule 1107A, being similar in 
concept to current Rules 1104A, 1105A, and 1106A, as well as rules of 
other options exchanges, should put NASDAQ on similar footing with 
other licensors of options on indexes to the Exchange.\8\
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    \8\ See Securities Exchange Act Release No. 58194 (July 18, 
2008), 73 FR 43275 (July 24, 2008) (SR-Phlx-2003-21) (notice of 
filing and immediate effectiveness regarding adoption of Rule 
1107A). See also disclaimers and limitation of liability at NYSE 
Amex (formerly ``AMEX'') Rule 902C and at CBOE Rule 24.14.
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    The proposed rule change expands the coverage of Rule 1107A to 
include the NASDAQ Internet Index \SM\.
    The Exchange believes that its proposal to modify Rules 1101A and 
1107A should encourage listing and trading options on the NASDAQ 
Internet Index \SM\ at appropriate strike price intervals and should 
encourage maintenance of the index so that overlying options may be 
available for listing and trading, thereby expanding investment and 
hedging opportunities for investors and other market participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanisms of 
a free and open market and a national market system, by encouraging 
listing options on the NASDAQ Internet Index \SM\ at appropriate strike 
price intervals and encouraging maintenance of the index so that 
options overlying the index may be available for trading and hedging.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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

    The Exchange believes that the foregoing proposed rule change may 
take effect upon filing with the Commission pursuant to Section 
19(b)(3)(A) \11\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \12\ 
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

[[Page 17822]]

operative for 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
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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.

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-2010-49 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-2010-49. 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 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 
a.m. and 3 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-2010-49 and should be 
submitted on or before April 28, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7781 Filed 4-6-10; 8:45 am]
BILLING CODE 8011-01-P