Document ID: SEC-2010-0447-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-03-24T04:00Z

[Federal Register: March 24, 2010 (Volume 75, Number 56)]
[Notices]               
[Page 14229-14231]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr10-135]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61736; File No. SR-NASDAQ-2010-038]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by The NASDAQ Stock Market LLC 
To Permit the Concurrent Listing of $3.50 and $4 Strikes for Classes 
Participating in the $0.50 Strike Program and the $1 Strike Program

March 18, 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 16, 2010, The NASDAQ Stock Market LLC (``NASDAQ'') 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 NASDAQ. 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

    NASDAQ is filing with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') a proposal for the NASDAQ Options Market 
(``NOM'' or ``Exchange'') to amend Chapter IV, Section 6 (Series of 
Options Contracts Open for Trading) to permit the concurrent listing of 
$3.50 and $4 strikes for classes that participate in both the $0.50 
Strike Price Program (``$0.50 Strike Program'')\3\ and the $1 Strike 
Price Program (``$1 Strike Program'').\4\
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    \3\ The $0.50 Strike Program was initiated in an immediately 
effective filing on November 6, 2009. See Securities Exchange Act 
Release No. 60952 (November 6, 2009), 74 FR 59277 (November 17, 
2009) (SR-NASDAQ-2009-099) (notice of filing and immediate 
effectiveness).
    \4\ The $1 Strike Program was initially approved as a pilot on 
March 12, 2008. See Securities Exchange Act Release No. 57478 (March 
12, 2008), 73 FR 14521(March 18, 2008) (SR-NASDAQ-2007-004 and SR-
NASDAQ-2007-080) (order approving). The program was subsequently 
made permanent and expanded. See Securities Exchange Act Release 
Nos. 58093 (July 3, 2008), 73 FR 39756 (July 10, 2008) (SR-NASDAQ-
2008-057) (notice of filing and immediate effectiveness); 59588 
(March 17, 2009), 74 FR 12410 (March 24, 2009) (SR-NASDAQ-2009-025) 
(notice of filing and immediate effectiveness); and 61347 (January 
13, 2010), 75 FR 3513 (January 21, 2010) (SR-NASDAQ-2010-003) 
(notice of filing and immediate effectiveness).
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    The Exchange requests that the Commission waive the 30-day 
operative delay period contained in Exchange Act Rule 19b-
4(f)(6)(iii).\5\
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    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available from NASDAQ's Web 
site at http://nasdaq.cchwallstreet.com/Filings/, at NASDAQ's principal 
office, 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 self-regulatory organization 
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 those 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 parts 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 this proposal is to amend Chapter IV, Section 6 to 
permit the concurrent listing of $3.50 and $4 strikes for classes that 
participate in both the $0.50 Strike Program and the $1 Strike Program.
    The Exchange recently implemented a rule change that permits strike 
price intervals of $0.50 for options on stocks trading at or below 
$3.00 pursuant to the $0.50 Strike Program.\6\ As part of the filing to 
establish the $0.50 Strike Program, the Exchange contemplated that a 
class may be selected to

[[Page 14230]]

participate in both the $0.50 Strike Program and the $1 Strike Program. 
Under the $1 Strike Program, new series with $1 intervals are not 
permitted to be listed within $0.50 of an existing $2.50 strike price 
in the same series, except that strike prices of $2 and $3 are 
permitted to be listed within $0.50 of a $2.50 strike price for classes 
also selected to participate in the $0.50 Strike Program.\7\ Under the 
Exchange's current Chapter IV, Section 6, for classes selected to 
participate in both the $0.50 Strike Program and the $1 Strike Program, 
the Exchange may either: (a) List a $3.50 strike but not list a $4 
strike; or (b) list a $4 strike but not list a $3.50 strike. For 
example, if a $3.50 strike for an option class in both the $0.50 and $1 
Strike Programs was listed, the next highest permissible strike price 
would be $5.00. Alternatively, if a $4 strike was listed, the next 
lowest permissible strike price would be $3.00. The intent of the $0.50 
Strike Program was to expand the ability of investors to hedge risks 
associated with stocks trading at or under $3 and to provide finer 
intervals of $0.50, beginning at $1 up to $3.50. As a result, the 
Exchange believes that the current filing is consistent with the 
purpose of the $0.50 Strike Program and will permit the Exchange to 
fill in any existing gaps resulting from having to choose whether to 
list a $3.50 or $4 strike for options classes in both the $0.50 and $1 
Strike Programs.
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    \6\ See Securities Exchange Act Release No. 60952 (November 6, 
2009), 74 FR 59277 (November 17, 2009) (SR-NASDAQ-2009-099) (notice 
of filing and immediate effectiveness); and Chapter IV, Section 6, 
Supplementary Material .05 to Section 6.
    \7\ See Chapter IV, Section 6, Supplementary Material .02(b) to 
Section 6.
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    Therefore, the Exchange is submitting the current filing to permit 
the listing of concurrent $3.50 and $4 strikes for classes that are 
selected to participate in both the $0.50 Strike Program and the $1 
Strike Program. To effect this change, the Exchange is proposing to 
amend Chapter IV, Section 6, Supplementary Material .02(b) to Section 6 
by adding $4 to the strike prices of $2 and $3 currently permitted if a 
class participates in both the $0.50 Strike Program and the $1 Strike 
Program.
    The Exchange is also proposing to amend the current rule text to 
delete references to ``$2.50 strike prices'' (and the example utilizing 
$2.50 strike prices) and to replace those references with broader 
language, e.g., ``existing strike prices.''
    Finally, the Exchange is proposing technical, housekeeping rule 
changes to Chapter IV, Section 2, Supplementary Material .02 to Section 
6 to conform formatting and punctuation and to Chapter IV, Section 6, 
Supplementary Material .09 to Section 6 to ensure consistency of 
internal numbering.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ 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 permitting the Exchange to list 
more granular strikes on options overlying lower priced securities, 
which the Exchange believes will provide investors with greater 
flexibility by allowing them to establish positions that are better 
tailored to meet their investment objectives.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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 proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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) \10\ of the Act and Rule 19b-
4(f)(6) \11\ thereunder. The Exchange provided the Commission with 
written notice of its 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 the proposed rule 
change.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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    The Exchange has requested that the Commission waive the 30-day 
operative delay to permit the Exchange to compete with other exchanges 
whose rules permit concurrent listing of $3.50 and $4 strikes for 
classes similarly participating in both a $0.50 strike program and a $1 
strike program. The Commission finds that waiver of the operative delay 
is consistent with the protection of investors and the public interest 
because such waiver will encourage fair competition among the 
exchanges. Therefore, the Commission designates the proposal operative 
upon filing.\12\
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    \12\ 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 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-NASDAQ-2010-038 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-2010-038. 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

[[Page 14231]]

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-NASDAQ-2010-038 and should be submitted on or before 
April 14, 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. 2010-6515 Filed 3-23-10; 8:45 am]
BILLING CODE 8011-01-P