Document ID: SEC-2009-0437-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2009-04-01T04:00Z

[Federal Register: April 1, 2009 (Volume 74, Number 61)]
[Notices]               
[Page 14829-14831]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01ap09-79]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59632; File No. SR-NASDAQ-2009-030]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of a Proposal To Extend 
the Options Penny Pilot for The NASDAQ Options Market

March 26, 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 March 25, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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 Nasdaq. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq is proposing to extend a pilot (the ``pilot'') that permits 
certain options series to be quoted and traded in increments of $0.01. 
The Exchange proposes to extend the pilot through July 3, 2009. There 
is no new text contained in this proposed rule change. The text of the 
filing is available at http://www.cchwallstreet.com/nasdaq, at NASDAQ's 
principal office, and at the Commission's Public Reference Room.
    Nasdaq has designated this proposal as non-controversial and 
provided the Commission with the notice required by Exchange Act Rule 
19b-4(f)(6)(iii). Nasdaq requests that the Commission waive the 30-day 
pre-operative waiting period contained in that rule. If such waiver is 
granted by the Commission, this rule proposal, which is effective upon 
filing with the Commission, shall become immediately operative pursuant 
to SEC Rule 19b-4(f)(6).

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq 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. Nasdaq 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 continue to permit 
specified options series to be quoted and traded in increments of $0.01 
by extending the pilot through July 3, 2009. Prior to the Penny Pilot 
Program, options were quoted options in nickel and dime increments. The 
minimum price variation for quotations in options series that are 
quoted at less than $3 per contract is $0.05 and the minimum price 
variation for quotations in options series that are quoted at $3 per 
contract or greater is $0.10.
    Under the Penny Pilot Program, beginning on January 26, 2007, 
market participants were able to begin quoting in penny increments in 
certain series of option classes. The Penny Pilot Program originally 
included the following thirteen options: Ishares Russell 2000 (IWM); 
NASDAQ-100 Index Tracking Stock (QQQQ); SemiConductor Holders Trust 
(SMH); General Electric Company (GE); Advanced Micro Devices, Inc.

[[Page 14830]]

(AMD), Microsoft Corporation (MSFT); Intel Corporation (INTC); 
Caterpillar, Inc. (CAT); Whole Foods Market, Inc. (WFMI); Texas 
Instruments, Inc. (TXN); Flextronics International Ltd. (FLEX); Sun 
Microsystems, Inc. (SUNW); and Agilent Technologies, Inc. (A).
    On September 28, 2007, the following twenty-two options classes 
were added: SPDRs (SPY); Apple, Inc. (AAPL); Altria Group Inc. (MO); 
Dendreon Corp. (DNDN); Amgen Inc. (AMGN); Yahoo! Inc. (YHOO); QUALCOMM 
Inc. (QCOM); General Motors Corporation (GM); Energy Select Sector 
(XLE); DIAMONDS Trust, Series 1 (DIA); Oil Services HOLDRs (OIH); NYSE 
Euronext, Inc. (NYX); Cisco Systems, Inc. (CSCO); Financial Select 
Sector SPDR (XLF); AT&T Inc. (T); Citigroup Inc. (C); Amazon.com Inc. 
(AMZN); Motorola Inc. (MOT); Research in Motion Ltd. (RIMM); Freeport-
McMoRan Copper & Gold Inc. (FCX); ConocoPhillips (COP); and Bristol-
Myers Squibb Co. (BMY). These thirty-five options classes are among the 
most actively-traded, multiply-listed options classes.
    On March 28, 2008, the following 28 options classes were added:

Goldman Sachs Group, Inc. (GS)
Countrywide Financial Corporation (CFC)
Bank of America Corporation (BAC)
iShares MSCI Emerging Mkts. Index Fund (EEM)
Merrill Lynch & Co., Inc. (MER)
Vale (RIO)
EMC Corporation (EMC)
Exxon Mobil Corporation (XOM)
Wal-Mart Stores, Inc. (WMT)
The Home Depot, Inc. (HD)
Valero Energy Corporation (VLO)
Alcoa Inc. (AA)
Dell Inc. (DELL)
SanDisk Corporation (SNDK)
The Bear Stearns Companies, Inc. (BSC)
Pfizer Inc. (PFE)
eBay Inc. (EBAY)
Halliburton Company (HAL)
Lehman Brothers Holdings Inc. (LEH)
JPMorgan Chase & Co. (JPM)
Washington Mutual, Inc. (WM)
Ford Motor Company (F)
Target Corporation (TGT)
American International Group, Inc. (AIG)
Newmont Mining Corporation (NEM)
Verizon Communications Inc. (VZ)
Mini-NDX Index Options (MNX)
Starbucks Corporation (SBUX)

    The minimum price variation for all classes included in the Penny 
Pilot Program, except for the QQQQs, is $0.01 for all quotations in 
option series that are quoted at less than $3 per contract and $0.05 
for all quotations in option series that are quoted at $3 per contract 
or greater. The QQQQs are quoted in $0.01 increments for all options 
series.
    During the extended Pilot Program, Nasdaq will submit a report 
addressing the impact of the pilot on the quality of the Exchange's 
markets and option quote traffic and capacity not later than the last 
business day of May 2009, covering the period from February 1, 2009 
through April 30, 2009, and will submit further reports as requested by 
the Commission as the pilot continues.
2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\5\ in general and with Section 
6(b)(5) of the Act,\6\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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; and are not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers, or to regulate by virtue of any authority conferred by this 
title matters not related to the purposes of this title or the 
administration of the exchange.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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    Analysis of the current Pilot has shown that the reduction in the 
minimum quoting increment has resulted in narrowing the average quoted 
spreads in all classes in the Pilot. A reduction in quoted spreads 
means that customers and other market participants may be able to trade 
options at better prices. Extending the Pilot Program as proposed will 
allow further analysis of the impact of penny quoting in the Pilot 
classes over a longer period of time on, among other things: (1) 
Spreads; (2) peak quote rates; (3) quote message traffic; (4) displayed 
size; (5) ``depth of book'' liquidity; and (6) market structure. 
Nasdaq's unique options market structure will add to the analysis 
delivered by the existing options markets to date.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result 
in any burden on competition that is 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing rule 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-4(f)(6) 
thereunder.\8\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change along with a 
brief description and 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. The 
Exchange has satisfied the pre-filing requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay so that the proposed rule change may become operative 
upon filing with the Commission pursuant to Section 19(b)(3)(A) of the 
Act \9\ and Rule 19b-4(f)(6) \10\ thereunder. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because such waiver 
will allow the Penny Pilot Program to continue without interruption 
through July 3, 2009.\11\ Accordingly, the Commission designated the 
proposed rule change operative upon filing with the Commission.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4.
    \11\ For the 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. 
78(c)(f).
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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,

[[Page 14831]]

including whether the proposed rule change, as amended, 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-NASDAQ-2009-030 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-NASDAQ-2009-030. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090 on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of the filing will also be available 
for inspection and copying at Nasdaq's principal office and on its 
Internet Web site at www.nyse.com. 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-NASDAQ-2009-030 and should be submitted on or before 
April 22, 2009.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-7291 Filed 3-31-09; 8:45 am]

BILLING CODE 8010-01-P