Document ID: SEC-2010-0328-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-03-04T05:00Z

[Federal Register: March 4, 2010 (Volume 75, Number 42)]
[Notices]               
[Page 9988]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04mr10-123]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61590; File No. SR-Phlx-2009-113]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order 
Granting Approval of Proposed Rule Change Relating to Index Option 
Position Limits

February 25, 2010.
    On December 29, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' or 
``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 increase the position limits for certain 
narrow-based (industry) index option contracts. The Commission 
published the proposed rule change for comment in the Federal Register 
on January 19, 2010.\3\ The Commission received no comments on the 
proposed rule change. 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. 61326 (January 11, 
2010), 75 FR 2902 (``Notice'').
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    The Exchange proposes to revise the three tiered levels of position 
limits that are set forth in Phlx Rule 1001A by increasing those limits 
for options on the PHLX Oil Service Sector, PHLX Semiconductor Sector, 
PHLX Utility Sector, PHLX Gold/Silver Sector, PHLX Housing Sector, SIG 
Energy MLP Index, SIG Oil Exploration & Production Index, and the 
NASDAQ China Index (collectively, the ``Specified Index Options'').\4\ 
Currently, the Specified Index Options are subject to position limits 
of 18,000, 24,000, or 31,500 contracts based generally on the degree of 
concentration of a single component stock or groups of component stocks 
comprising the index.\5\ The Exchange proposes to increase these limits 
to 54,000, 72,000, and 94,500 contracts, respectively, for the 
Specified Index Options. In addition, the Exchange proposes to delete 
certain obsolete references in Rule 1001A.\6\
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    \4\ The SIG Indexes noted herein are trademarks of SIG Indices, 
LLLP.
    \5\ Specifically, Phlx Rule 1001A(b)(i) currently provides for 
the following position limits for narrow-based index options: (1) 
18,000 contracts if the Exchange determines that any single 
underlying stock accounted, on average, for 30% or more of the index 
value during the 30-day period immediately preceding the semi-annual 
review of the pertinent index option required by Phlx Rule 
1001A(b)(ii); (2) 24,000 contracts if the Exchange determines, at 
the time of the required semi-annual review, that any single 
underlying stock accounted, on average, for 20% or more of the index 
value or that any five underlying stocks together accounted, on 
average, for more than 50% of the index value, but that no single 
stock in the group accounted, on average, for 30% or more of the 
index value, during the 30-day period immediately preceding the 
review; or (3) 31,500 contracts if the Exchange determines that the 
conditions specified above which would require the establishment of 
a lower limit have not occurred. In addition, the rule provides that 
position limits with respect to options on the KBW Bank Index are 
44,000 contracts.
    \6\ Phlx exercise limits in Phlx Rule 1002A, Exercise Limits, 
are established by reference to position limits. The proposed 
increase in position limits for the Specified Index Options would 
therefore effectively increase exercise limits for these options. 
See Phlx Rule 1002A.
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    The Exchange states that it recognizes that the purpose of position 
limits is to prevent manipulation and protect against disruption of the 
markets for both the option as well as the underlying security. The 
Exchange states that it has considered the effects of increased 
position limits for the Specified Index Options on the marketplace, and 
believes that manipulation and disruption concerns are addressed by a 
combination of existing surveillance functions and the implementation 
of tiered position limits.
    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange.\7\ In 
particular, the Commission believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\8\ which requires, among 
other things, that the rules of a national securities 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.
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    \7\ In approving this rule, the Commission notes that it has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Exchange's proposal to increase 
the three tiered levels of position limits for the Specified Index 
Options is reasonable. Specifically, the Commission believes that 
increasing the three tiered levels of position limits for the Specified 
Index Options may bring additional depth and liquidity to these index 
options classes without significantly increasing concerns regarding 
manipulation or disruption of the market for index options or the 
underlying component securities.\9\
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    \9\ The Exchange states that it dedicates substantial resources 
to monitoring the markets for evidence of manipulation or disruption 
caused by investors with positions at or near current position or 
exercise limits, and that the proposed increased position limits 
would not diminish the surveillance function in this regard. See 
Notice, supra note 3.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-Phlx-2009-113) be, and it 
hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4458 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P