Document ID: SEC-2011-0937-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-07-06T04:00Z

[Federal Register Volume 76, Number 129 (Wednesday, July 6, 2011)]
[Notices]
[Pages 39457-39463]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16843]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64770; File No. SR-Phlx-2011-87]

Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating 
to Listing and Trading Various Russell Products

June 29, 2011.
    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 June 22, 2011, NASDAQ OMX PHLX LLC (``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 the 
Substance of the Proposed Rule Change

    The Exchange, pursuant to Section 19(b)(1) of the Act \3\ and Rule 
19b-4 thereunder,\4\ proposes to amend Exchange Rules 1079, 1001A and 
1101A to list and trade new options on various Russell \5\ Indexes 
based upon the (i) full values of the Russell U.S. Indexes (``Full 
Value Russell U.S. Indexes'') and (ii) one-tenth values of the Russell 
U.S. Indexes (``Reduced Values Russell U.S. Indexes'').\6\ 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.
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ Russell refers to the Frank Russell Company. Information 
about the Russell U.S. Indexes can also be found at http://www.russell.com/us/indexes/us/definitions.asp.
    \6\ The Exchange currently lists cash-settled, European-style 
FULL Value Russell Options and Reduced Value Russell Options, 
including FLEX options and LEAPS, on the Russell 2000[supreg] Index 
and the Mini-Russell 2000.
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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 amend its Exchange 
Rules 1079 (FLEX Index, Equity and Currency Options), 1001A (Position 
Limits), and 1101A (Terms of Options Contracts) to list and trade cash-
settled, European-style options, including FLEX \7\ options and 
LEAPS,\8\ on the following products (collectively ``Russell U.S. 
Indexes''): Russell 3000[supreg] Index,\9\ Russell 3000[supreg] Value 
Index,\10\ Russell 3000[supreg] Growth Index,\11\ Russell 2500\TM\ 
Index,\12\ Russell 2500\TM\ Value Index,\13\ Russell 2500\TM\ Growth 
Index,\14\ Russell 2000[supreg] Value Index,\15\ Russell 2000[supreg] 
Growth

[[Page 39458]]

Index,\16\ Russell 1000[supreg] Index,\17\ Russell 1000[supreg] Value 
Index,\18\ Russell 1000[supreg] Growth Index,\19\ Russell Top 
200[supreg] Index,\20\ Russell Top 200[supreg] Value Index,\21\ Russell 
Top 200[supreg] Growth Index,\22\ Russell MidCap[supreg] Index,\23\ 
Russell MidCap[supreg] Value Index,\24\ Russell MidCap[supreg] Growth 
Index,\25\ Russell Small Cap Completeness[supreg] Index,\26\ Russell 
Small Cap Completeness[supreg] Value Index \27\ and Russell Small Cap 
Completeness[supreg] Growth Index.\28\ The Exchange also proposes to 
list and trade long-term options on each of the Full Value Russell U.S. 
Indexes and Reduced Value Russell U.S. Indexes noted above (``Russell 
LEAPS'').\29\
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    \7\ FLEX Options are flexible exchange-traded index, equity, or 
currency option contracts that provide investors the ability to 
customize basic option features including size, expiration date, 
exercise style, and certain exercise prices. FLEX Options may have 
expiration dates within five years. See Exchange Rules 1079 and 
1012.
    \8\ LEAPS or Long Term Equity Anticipation Securities are long 
term options that generally expire from twelve to thirty-nine months 
from the time they are listed.
    \9\ The Russell 3000 Index measures the performance of the 
largest 3000 U.S. companies representing approximately 98% of the 
investable U.S. equity market.
    \10\ The Russell 3000 Value Index measures the performance of 
the broad value segment of the U.S. equity universe. It includes 
those Russell 3000 companies with lower price-to-book ratios and 
lower forecasted growth values.
    \11\ The Russell 3000 Growth Index measures the performance of 
the broad growth segment of the U.S. equity universe. It includes 
those Russell 3000 companies with higher price-to-book ratios and 
higher forecasted growth values.
    \12\ The Russell 2500 Index measures the performance of the 
small to mid-cap segment of the U.S. equity universe, commonly 
referred to as ``smid'' cap. The Russell 2500 Index is a subset of 
the Russell 3000[supreg] Index.
    \13\ The Russell 2500 Value Index measures the performance of 
the small to mid-cap value segment of the U.S. equity universe. It 
includes those Russell 2500 companies with lower price-to-book 
ratios and lower forecasted growth values.
    \14\ The Russell 2500 Growth Index measures the performance of 
the small to mid-cap growth segment of the U.S. equity universe. It 
includes those Russell 2500 companies with higher price-to-book 
ratios and higher forecasted growth values.
    \15\ The Russell 2000 Value Index measures the performance of 
small-cap value segment of the U.S. equity universe. It includes 
those Russell 2000 companies with lower price-to-book ratios and 
lower forecasted growth values.
    \16\ The Russell 2000 Growth Index measures the performance of 
the small-cap growth segment of the U.S. equity universe. It 
includes those Russell 2000 companies with higher price-to-book 
ratios and higher forecasted growth values.
    \17\ The Russell 1000 Index measures the performance of the 
large-cap segment of the U.S. equity universe. It is a subset of the 
Russell 3000[supreg] Index and includes approximately 1,000 of the 
largest securities based on a combination of their market cap and 
current index membership. The Russell 1000 represents approximately 
92% of the Russell 3000 Index.
    \18\ The Russell 1000 Value Index measures the performance of 
the large-cap value segment of the U.S. equity universe. It includes 
those Russell 1000 companies with lower price-to-book ratios and 
lower expected growth values.
    \19\ The Russell 1000 Growth Index measures the performance of 
the large-cap growth segment of the U.S. equity universe. It 
includes those Russell 1000 companies with higher price-to-book 
ratios and higher forecasted growth values.
    \20\ The Russell Top 200 Index measures the performance of the 
largest cap segment of the U.S. equity universe. The Russell Top 200 
Index is a subset of the Russell 3000[supreg] Index. It includes 
approximately 200 of the largest securities based on a combination 
of their market cap and current index membership and represents 
approximately 65% of the U.S. market.
    \21\ The Russell Top 200 Value Index measures the performance of 
the especially large cap segment of the U.S. equity universe 
represented by stocks in the largest 200 by market cap that exhibit 
value characteristics. It includes Russell Top 200 companies with 
lower price-to-book ratios and lower forecasted growth values. These 
stocks also are members of the Russell 1000[supreg] Value Index.
    \22\ The Russell Top 200 Growth Index offers measures the 
performance of the especially large cap segment of the U.S. equity 
universe represented by stocks in the largest 200 by market cap that 
exhibit growth characteristics. It includes Russell Top 200 Index 
companies with higher price-to-book ratios and higher forecast 
growth values. The companies also are members of the Russell 
1000[supreg] Growth Index.
    \23\ The Russell Midcap Index measures the performance of the 
mid-cap segment of the U.S. equity universe. The Russell Midcap 
Index is a subset of the Russell 1000[supreg] Index. It includes 
approximately 800 of the smallest securities based on a combination 
of their market cap and current index membership. The Russell Midcap 
Index represents approximately 27% of the total market 
capitalization of the Russell 1000 companies.
    \24\ The Russell Midcap Value Index measures the performance of 
the mid-cap value segment of the U.S. equity universe. It includes 
those Russell Midcap Index companies with lower price-to-book ratios 
and lower forecasted growth values.
    \25\ The Russell Midcap Growth Index measures the performance of 
the mid-cap growth segment of the U.S. equity universe. It includes 
those Russell Midcap Index companies with higher price-to-book 
ratios and higher forecasted growth values.
    \26\ The Russell Small Cap Completeness measures the performance 
of the Russell 3000[supreg] Index companies excluding S&P 500 
constituents.
    \27\ The Russell Small Cap Completeness Value Index measures the 
performance of the Russell 3000[supreg] Index companies excluding 
S&P 500 constituents. It includes those Russell Small Cap 
Completeness Index companies with lower price-to-book ratios and 
lower forecasted growth values.
    \28\ The Russell Small Cap Completeness Growth Index measures 
the performance of the Russell 3000[supreg] Index companies 
excluding S&P 500 constituents. It includes those Russell Small Cap 
Completeness Index companies with higher price-to-book ratios and 
higher forecast growth values.
    \29\ Each of these Russell U.S. Indexes is a capitalization-
weighted index containing various groups of stocks drawn from the 
largest 3,000 companies incorporated in the United States. All index 
components are traded on the New York Stock Exchange (``NYSE''), the 
NYSE Amex, Inc. (``NYSE Amex'') and/or the NASDAQ Stock Market LLC 
(``NASDAQ''). Options on all of the indexes, currently trade on the 
International Securities Exchange, LLC (``ISE'') and options on all 
of the indexes, except for the Russell 2500 Index (regular, value, 
and growth) and the Russell Small Cap Completeness Index (regular, 
value, and growth), currently trade on the Chicago Board Options 
Exchange (``CBOE''). The Russell 2000[supreg] Index is traded on 
Phlx and the Boston Options Exchange (``BOX''). All of the Russell 
U.S. Indexes are subsets of the Russell 3000 Index. The growth and 
value versions of each primary index (Russell 3000, Russell 2500, 
Russell 2000, Russell 1000, Russell Top 200, Russell Midcap, and 
Russell Small Cap Completeness) may contain common components, but 
the capitalization of those components is apportioned so that the 
sum of the total capitalization of the growth and value indexes 
equals the total capitalization of the respective primary index.
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Index Design and Composition
    The Russell U.S. Indexes are designed to be a comprehensive 
representation of the investable U.S. equity market. These indexes are 
capitalization-weighted and include only common stocks belonging to 
corporations domiciled in the United States. These indexes are traded 
on NYSE, NYSE Amex and/or NASDAQ. Stocks are weighted by their 
``available'' market capitalization, which is calculated by multiplying 
the primary market price by the ``available'' shares; that is, total 
shares outstanding less corporate cross-owned shares; shares owned by 
Employee Stock Ownership Plans (``ESOPs'') and Leveraged Employee Stock 
Ownership Plans (``LESOPs'') that comprise 10% or more of shares 
outstanding; shares that are part of unlisted share classes; and shares 
held by an individual, a group of individuals acting together, or a 
corporation not in the index that owns 10% or more of the shares 
outstanding; and shares subject to Initial Public Offering lock-ups.
    All equity securities listed on NYSE, NYSE Amex or NASDAQ are 
considered for inclusion in the Russell U.S. Indexes, with the 
following exceptions: (1) Stocks trading less than $1.00 per share on 
average during the month of May; (2) stocks of non-U.S. companies; (3) 
preferred and convertible preferred stocks; (4) redeemable shares; (5) 
participating preferred stocks; (6) warrants and rights; (7) trust 
receipts; (8) royalty trusts; (9) limited liability companies; (10) 
Bulletin Board and Pink Sheet stocks; (11) closed-end investment 
companies; (12) limited partnerships; and (13) foreign stocks. All of 
these stocks are ``reported securities'' as defined by Rule 11Aa3-
1(a)(4) under the Act.\30\ [sic]
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    \30\ 17 CFR 240.11Aa3-1(a)(4). [sic]
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    As of May 31, 2010, the stocks comprising the Russell 1000[supreg] 
Index had an average market capitalization of $12.24 billion, ranging 
from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $0.14 
billion (Seahawk Drilling Inc.). The number of available shares 
outstanding averaged 401.41 million, ranging from a high of 28.98 
billion (Citigroup Inc.) to a low of 6.17 million (NVR Inc.). The 
Russell 1000[supreg] Index has a total capitalization of approximately 
$11.7 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 1000[supreg] 
Growth Index had an average market capitalization of $13.20 billion, 
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of 
$0.14 billion (Seahawk Drilling Inc.). The number of available shares 
outstanding averaged 355.18 million, ranging from a high of 8.76 
billion (Microsoft Corp.) to a low of 6.17 million (NVR Inc.). The 
Russell 1000[supreg] Growth Index has a total capitalization of 
approximately $8.2 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 1000[supreg] 
Value Index had an average market capitalization of $11.31 billion, 
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of 
$0.14 billion (Seahawk Drilling Inc.). The number of available shares 
outstanding averaged 429.04 million, ranging from a high of 28.98 
billion (Citigroup Inc.) to a low of 6.17 million (NVR Inc.). The 
Russell 1000[supreg] Value Index has a total capitalization of 
approximately $7.6 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 2000[supreg] 
Growth Index had an average market capitalization of $623.07 million, 
ranging from a high of $4.53 billion (Human Genome Sciences Inc.) to a 
low of $14.57 million (Repros Therapeutics Inc.). The number of 
available shares outstanding averaged 44.06 million,

[[Page 39459]]

ranging from a high of 658.72 million (Cell Therapeutics) to a low of 
2.02 million (Atrion Corp.). The Russell 2000[supreg] Growth Index has 
a total capitalization of approximately $0.8 trillion as of May 31, 
2010.
    As of May 31, 2010, the stocks comprising the Russell 2000[supreg] 
Value Index had an average market capitalization of $579.57 million, 
ranging from a high of $3.34 billion (UAL Corp.) to a low of $26.15 
million (Cardiac Science Corp.). The number of available shares 
outstanding averaged 46.19 million, ranging from a high of 2.20 billion 
(E*Trade Financial Corp.) to a low of 1.23 million (Seaboard Corp.). 
The Russell 2000[supreg] Value Index has a total capitalization of 
approximately $0.8 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 3000[supreg] 
Index had an average market capitalization of $4.39 billion, ranging 
from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $14.57 
million (Repros Therapeutics Inc.). The number of available shares 
outstanding averaged 161.73 million, ranging from a high of 28.98 
billion (Citigroup Inc.) to a low of 1.23 million (Seaboard Corp.). The 
Russell 3000[supreg] Index has a total capitalization of approximately 
$12.9 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 3000[supreg] 
Growth Index had an average market capitalization of $4.77 billion, 
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of 
$14.57 million (Repros Therapeutics Inc.). The number of available 
shares outstanding averaged 146.50 million ranging from a high of 8.76 
billion (Microsoft Corp.) to a low of 2.02 million (Atrion Corp.). The 
Russell 3000[supreg] Growth Index has a total capitalization of 
approximately $9.0 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 3000[supreg] 
Value Index had an average market capitalization of $4.10 billion, 
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of 
$26.15 million (Cardiac Science Corp.). The number of available shares 
outstanding averaged 171.82 million, ranging from a high of 28.98 
billion (Citigroup Inc.) to a low of 1.23 million (Seaboard Corp.). The 
Russell 3000[supreg] Value Index has a total capitalization of 
approximately $8.4 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 
Midcap[supreg] Index had an average market capitalization of $4.59 
billion, ranging from a high of $18.79 billion (TJX Cos Inc.) to a low 
of $0.14 billion (Seahawk Drilling Inc.). The number of available 
shares outstanding averaged 173.74 million, ranging from a high of 1.74 
billion (Qwest Communications International) to a low of 6.17 million 
(NVR Inc.). The Russell Midcap[supreg] Index has a total capitalization 
of approximately $3.5 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 
Midcap[supreg] Growth Index had an average market capitalization of 
$4.71 billion, ranging from a high of $18.79 billion (TJX Cos Inc.) to 
a low of $0.14 billion (Seahawk Drilling Inc.). The number of available 
shares outstanding averaged 163.59 million, ranging from a high of 1.38 
billion (Xerox Corp.) to a low of 6.17 million (NVR Inc.). The Russell 
Midcap[supreg] Growth Index has a total capitalization of approximately 
$2.3 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 
Midcap[supreg] Value Index had an average market capitalization of 4.43 
billion, ranging from a high of $15.48 billion (Las Vegas Sands Corp.) 
to a low of $0.14 billion (Seahawk Drilling Inc.). The number of 
available shares outstanding averaged 187.15 million, ranging from a 
high of 1.74 billion (Qwest Communications International) to a low of 
6.17 million (NVR Inc.). The Russell Midcap[supreg] Value Index has a 
total capitalization of approximately $2.4 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell Top 
200[supreg] Index had an average market capitalization of $42.92 
billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to 
a low of $2.24 billion (AOL Inc.). The number of available shares 
outstanding averaged 1.31 billion, ranging from a high of 28.98 billion 
(Citigroup Inc.) to a low of 48.90 million (Liberty Media Corp.--
Starz). The Russell Top 200[supreg] Index has a total capitalization of 
approximately $8.2 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell Top 
200[supreg] Growth Index had an average market capitalization of $44.74 
billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to 
a low of $9.11 billion (Boston Scientific Corp.) The number of 
available shares outstanding averaged 1.07 billion, ranging from a high 
of 8.76 billion (Microsoft Corp.) to a low of 64.32 million (Blackrock 
Inc.). The Russell Top 200[supreg] Growth Index has a total 
capitalization of approximately $5.9 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell Top 
200[supreg] Value Index had an average market capitalization of $41.52 
billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to 
a low of $2.24 billion (AOL Inc.). The number of available shares 
outstanding averaged 1.49 billion, ranging from a high of 28.98 billion 
(Citigroup Inc.) to a low of 48.90 million (Liberty Media Corp.--
Starz). The Russell Top 200[supreg] Value Index has a total 
capitalization of approximately $5.2 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 2500 
TM Index had an average market capitalization of $1.06 
billion, ranging from a high of $10.19 billion (Centurylink Inc.) to a 
low of $14.57 million (Repros Therapeutics Inc.). The number of 
available shares outstanding averaged 62.53 million, ranging from a 
high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million 
(Seaboard Corp.). The Russell 2500 TM Index has a total 
capitalization of approximately $2.6 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell 2500 
TM Growth Index had an average market capitalization of 
$1.07 billion, ranging from a high of $7.62 billion (Genworth Financial 
Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number 
of available shares outstanding averaged 57.71 million, ranging from a 
high of 673.37 million (Advanced Micro Devices Inc.) to a low of 2.02 
million (Atrion Corp.). The Russell 2500 TM Growth Index has 
a total capitalization of approximately $1.7 trillion as of May 31, 
2010.
    As of May 31, 2010, the stocks comprising the Russell 
2500TM Value Index had an average market capitalization of 
$1.05 billion, ranging from a high of $10.19 billion (Centurylink Inc.) 
to a low of $26.15 million (Cardiac Science Corp.). The number of 
available shares outstanding averaged 65.34 million, ranging from a 
high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million 
(Seaboard Corp.). The Russell 2500 TM Value Index has a 
total capitalization of approximately $1.8 trillion as of May 31, 2010.
    As of May 31, 2010, the stocks comprising the Russell Small Cap 
Completeness Index had an average market capitalization of $1.11 
billion, ranging from a high of $31.67 billion (Blackrock Inc.) to a 
low of $14.57 million (Repros Therapeutics Inc.). The number of 
available shares outstanding averaged 61.07 million, ranging from a 
high of 1.66 billion (Level 3 Communications Inc.) to a low of 1.23 
million (Seaboard Corp.). The Russell Small Cap Completeness Index has 
a total capitalization of approximately $2.7 trillion as of May 31, 
2010.

[[Page 39460]]

    As of May 31, 2010, the stocks comprising the Russell Small Cap 
Completeness Growth Index had an average market capitalization of $1.17 
billion, ranging from a high of $31.67 billion (Blackrock Inc.) to a 
low of $14.57 million (Repros Therapeutics Inc.). The number of 
available shares outstanding averaged 59.29 million, ranging from a 
high of 1.24 billion (Activision Blizzard Inc.) to a low of 2.02 
million (Atrion Corp.). The Russell Small Cap Completeness Growth Index 
has a total capitalization of approximately $1.8 trillion as of May 31, 
2010.
    As of May 31, 2010, the stocks comprising the Russell Small Cap 
Completeness Value Index had an average market capitalization of $1.08 
billion, ranging from a high $31.67 billion (Blackrock Inc.) to a low 
of $26.15 million (Cardiac Science Corp.). The number of available 
shares outstanding averaged 62.61 million, ranging from a high of 1.66 
billion (Level 3 Communications Inc.) to a low of 1.23 million 
(Seaboard Corp.). The Russell Small Cap Completeness Value Index has a 
total capitalization of approximately $1.8 trillion as of May 31, 2010.
Index Calculation and Index Maintenance
    The value of each Russell Index is currently calculated by Reuters 
Limited (``Reuters'') \31\ on behalf of Russell and is disseminated 
every 15 seconds during regular Exchange trading hours to market 
information vendors via RussellTick TM.\32\
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    \31\ Reuters is a ThomsonReuters company.
    \32\ RussellTick \TM\, developed by NASDAQ OMX Information, LLC, 
is a premier data feed that consolidates the distribution of the 
Russell Family of Indexes. NASDAQ OMX is the primary distribution 
source for all real-time Russell U.S. Indexes.
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    The methodology used to calculate the value of the Russell U.S. 
Indexes is similar to the methodology used to calculate the value of 
other well known market-capitalization-weighted indexes. The level of 
each index reflects the total market value of the component stocks 
relative to a particular base period and is computed by dividing the 
total market value of the companies in each index by the respective 
index divisor. The divisor is adjusted periodically to maintain 
consistent measurement of the index. Below is a table of base dates and 
the respective index levels as of May 26, 2011:

------------------------------------------------------------------------
                   Index                     Total value    Price value
------------------------------------------------------------------------
Russell 3000 [supreg].....................     3587.75086     1457.85247
Russell 3000 [supreg] Growth..............     2879.89383     2426.1502
Russell 3000 [supreg] Value...............     3817.44497     2589.28728
Russell 1000 [supreg].....................     3602.4988      1418.35062
Russell 1000 [supreg] Growth..............      529.47313      403.83622
Russell 1000 [supreg] Value...............      725.61762      416.2859
Russell Top 200 [supreg]..................     2939.54016      546.63736
Russell Top 200 [supreg] Growth...........      910.11636      672.12634
Russell Top 200 [supreg] Value............     1071.03283      651.91595
Russell Midcap [supreg]...................     6401.81184     2797.43808
Russell Midcap [supreg] Growth............     1341.84209     1065.26732
Russell Midcap [supreg] Value.............     1793.62334     1125.65007
Russell 2000 [supreg].....................     3726.27315     2064.91582
Russell 2000 [supreg] Growth..............     3201.14137     2903.97679
Russell 2000 [supreg] Value...............     5864.70724     3980.15914
Russell 2500 TM...........................     1061.26992      772.74832
Russell 2500 TM Growth....................     3547.792       3254.40744
Russell 2500 TM Value.....................     5493.08424     3839.81694
Russell Small Cap Completeness [supreg]...     2229.12739     1905.30123
Russell Small Cap Completeness [supreg]        1726.03596     1624.91776
 Growth...................................
Russell Small Cap Completeness [supreg]        2732.41535     2105.81535
 Value....................................
Russell 3000E [supreg] Index..............     1298.3572      1156.55132
Russell 3000E [supreg] Growth Index.......     1297.56505     1211.74568
Russell 3000E [supreg] Value Index........     1066.61795      938.33245
Russell Microcap [supreg] Index...........     1196.56615     1116.96383
Russell Microcap [supreg] Growth Index....     1119.15656     1093.12822
Russell Microcap [supreg] Value Index.....      953.92585      870.2775
Russell 3000 [supreg] Dynamic Index \TM\..     1059.29034     1054.09067
Russell 3000 [supreg] Defensive Index \TM\     1073.79788     1063.74849
Russell 1000 [supreg] Dynamic Index \TM\..     1059.42851     1053.97672
Russell 1000 [supreg] Defensive Index \TM\     1073.99375     1063.61825
Russell 2000 [supreg] Dynamic Index \TM\..     1057.89868     1055.42339
Russell 2000 [supreg] Defensive Index \TM\     1071.77749     1065.42301
------------------------------------------------------------------------

In recent years, the value of the Russell U.S. Indexes has increased 
significantly. As a result, the premium for options on the Full Russell 
U.S. Indexes has also increased, causing these index options to trade 
at a level that may be uncomfortably high for retail investors. 
Therefore, the Exchange also proposes to trade Reduced Value Russell 
U.S. Indexes. The Exchange believes that listing reduced value options 
would attract a greater source of customer business than if it listed 
only full value options on the Full Value Russell U.S. Indexes. The 
Exchange further believes that listing reduced value options would 
provide an opportunity for investors to hedge, or speculate on, the 
market risk associated with the stocks comprising the Russell U.S. 
Indexes and use this trading vehicle while extending a smaller outlay 
of capital. The Exchange believes that this should attract additional 
investors and, in turn, create a more active and liquid trading 
environment.\33\
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    \33\ The Exchange believes that reduced value options on Russell 
U.S. Indexes have generated considerable interest from investors, as 
measured, by their robust trading volume on CBOE and ISE.

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[[Page 39461]]

    Options on the Russell U.S. Indexes would expire on the Saturday 
following the third Friday of the expiration month (``Expiration 
Saturday''). Trading in options on the Russell U.S. Indexes would 
normally cease at 4:15 p.m. Eastern Standard Time (``EST'') \34\ on the 
Thursday preceding an Expiration Saturday. The exercise settlement 
value at expiration of each new index option would be calculated by 
Reuters on behalf of Russell, based on the opening prices of the 
index's component securities on the last business day prior to 
expiration (``Settlement Day'').\35\ The Settlement Day is normally the 
Friday preceding Expiration Saturday. If a component security in a 
Russell Index does not trade on Settlement Day, the last reported sales 
price in the primary market from the previous trading day would be used 
to calculate both full and reduced settlement values. Settlement values 
for the Full and Reduced Value Russell U.S. Indexes would be 
disseminated via RussellTick\TM\.
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    \34\ See Exchange Rule 1001A. [sic]
    \35\ The aggregate exercise value of the option contract is 
calculated by multiplying the index value by the index multiplier, 
which is 100.
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    The Russell U.S. Indexes are monitored and maintained by Russell, 
which is responsible for making all necessary adjustments to the index 
to reflect component deletions, share changes, stock splits, stock 
dividends (other than ordinary cash dividends), and stock price 
adjustments due to restructuring, mergers, or spin-offs involving the 
underlying components. Some corporate actions, such as stock splits and 
stock dividends, require simple changes to the available shares 
outstanding and the stock prices of the underlying components. Other 
corporate actions, such as share issuances, change the market value of 
an index and require the use of an index divisor to effect adjustments.
    The Russell U.S. Indexes are re-constituted annually on the last 
Friday in June (unless the last Friday is the 27th or later of the 
month, in which case the re-constitution occurs on the prior Friday), 
based on prices and available shares outstanding as of the preceding 
May 31. New index components are added only as part of the annual re-
constitution, after which, should a stock be removed from an index for 
any reason, it could not be replaced until the next re-constitution 
except in the case of a spin-off where the new company resulting from 
the spin-off meets the membership criteria of one of the existing 
indexes.
    The Exchange represents that it would monitor the Russell U.S. 
Indexes on a quarterly basis, and would not list any additional series 
for trading and would limit all transactions in such options to closing 
transactions only for the purpose of maintaining a fair and orderly 
market and protecting investors if: (i) The number of securities in the 
Index drops by one-third or more; (ii) 10% or more of the weight of the 
Index is represented by component securities having a market value of 
less than $75 million; (iii) less than 80% of the weight of the Index 
is represented by component securities that are eligible for options 
trading pursuant to Exchange Rules 1000A et seq.; (iv) 10% or more of 
the weight of the Index is represented by component securities trading 
less than 20,000 shares per day; or (v) the largest component security 
accounts for more than 25% of the weight of the Index or the largest 
five components in the aggregate account for more than 50% of the 
weight of the Index. The Exchange represents that, if the Index ceases 
to be maintained or calculated, or if the Index values are not 
disseminated every 15 seconds by a widely available source, it would 
not list any additional series for trading and would limit all 
transactions in such options to closing transactions only for the 
purpose of maintaining a fair and orderly market and protecting 
investors.
Contract Specifications
    The proposed contract specifications for the options on the Russell 
U.S. Indexes are based on the contract specifications of similar 
options currently listed on CBOE, NYSE Amex and ISE.\36\ The Russell 
U.S. Indexes are broad-based indexes, as defined in Exchange Rule 
1101A(a). Options on the Russell U.S. Indexes would be European-style 
and a.m. cash-settled. The Exchange's standard trading hours for index 
options (9:30 a.m. to 4:15 p.m. E.S.T.), as set forth in Exchange Rule 
1101A at Commentary .01, would apply to options on the Russell U.S. 
Indexes. Exchange Rules that apply to the trading of options on broad-
based indexes also would apply to options on both the Full and Reduced 
Value Russell Indexes.\37\ The trading of these options also would be 
subject to, among others, Exchange Rules governing margin requirements 
\38\ and trading halt procedures \39\ for index options.
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    \36\ See note 27.
    \37\ See generally Exchange Rules 1001A through 1107A (Rules 
Applicable to Trading Options on Indices) and Exchange Rules 1000 
through 1094 (Rules Applicable to Trading of Options on Stocks, 
Exchange-Traded Fund Shares and Foreign Currencies).
    \38\ See Exchange Rule 721 (Proper and Adequate Margin).
    \39\ See Exchange Rule 1047A (Trading Rotations, Halts or 
Reopenings).
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    For options on the Full Value Russell U.S. Indexes, the Exchange 
proposes to establish an aggregate position limit of 50,000 contracts 
on the same side of the market, provided that no more than 30,000 of 
such contracts are in the nearest expiration month series. Full Value 
Russell Index contracts would be aggregated with Reduced Value Russell 
Index contracts, where ten Reduced Value Russell Index contracts would 
equal one Full Value Russell Index contract.\40\ These limits are 
identical to the limits applicable to options based on the Russell U.S. 
Indexes that currently trade on ISE.\41\
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    \40\ See Exchange Rule 1001A(e). The same limits that apply to 
position limits would apply to exercise limits for these products. 
See Exchange Rule 1002A.
    \41\ See ISE Rule 2004.
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    Additionally, Commentary .01 to Exchange Rule 1001A provides that 
under certain circumstances index options positions may be exempted 
from established position limits for each contract ``hedged'' by an 
equivalent dollar amount of the underlying component securities. 
Furthermore, Commentary .02 to that same Rule provides that member 
organizations may receive exemptions of up to two times the applicable 
position limit where the index options positions are in proprietary 
accounts used for the purpose of facilitating orders for customers of 
those member organizations.\42\ The Exchange proposes to apply existing 
index margin requirements for the purchase and sale of options on the 
Russell U.S. Indexes.\43\ Exchange Rule 1003 describes a member or 
member organizations obligations to file with the Exchange a report of 
that member or member organization's positions.\44\
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    \42\ See Exchange Rule 1001A (Position Limits).
    \43\ See Exchange Rule 721 (Proper and Adequate Margin).
    \44\ See Exchange Rule 1003 (Reporting of Options Positions).
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    The Exchange proposes to set strike price intervals for these index 
options at $2.50 when the strike price of Full or Reduced Value Options 
Russell U.S. Indexes is below $200, and at least $5.00 strike price 
intervals otherwise.\45\ The minimum tick size for series trading below 
$3 would be $0.05 and for series trading at or above $3 would be 
$0.10.\46\
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    \45\ See proposed Exchange Rule 1101A.
    \46\ See Exchange Rule 1034 (Minimum Increments) and proposed 
1101A (Position Limits).
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    Exchange Rule 1101A provides that after a particular class of stock 
index options has been approved for listing

[[Page 39462]]

and trading on the Exchange, the Exchange shall from time to time open 
for trading series of options therein. Within each approved class of 
stock index options, the Exchange may open for trading series of 
options expiring in consecutive calendar months (``consecutive month 
series''), series of options expiring at three-month intervals (``cycle 
month series''), and/or series of options having up to thirty-six 
months to expiration (``long-term options series''). Prior to the 
opening of trading in any series of stock index options, the Exchange 
shall fix the expiration month and exercise price of option contracts 
included in each such series.\47\
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    \47\ See Exchange Rule 1101A(b) as it currently exists.
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    The Exchange therefore, proposes to list options on the Full and 
Reduced Value Russell U.S. Indexes in the three consecutive near-term 
expiration months, plus up to three successive expiration months in the 
March cycle. For example, consecutive expirations of June, July and 
August, plus September, December and March expirations would be 
listed.\48\ The trading of long-term options on the Russell U.S. 
Indexes would be subject to the same rules that govern all the 
Exchange's index options, including sales practice rules, margin 
requirements, and trading rules.
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    \48\ See Exchange Rule 1101A.
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    All of the specifications and calculations for options on the 
Reduced Value Russell U.S. Indexes would be the same as those used for 
the Full Value Russell U.S. Indexes with position limits adjusted 
accordingly for the Reduced Value Russell Options. The reduced-value 
options would trade independently of, and in addition to, the full-
value options. Options on all the Russell U.S. Indexes would be subject 
to the same rules that presently govern all Exchange index options, 
including sales practice rules, margin requirements, trading rules, and 
position and exercise limits.
    Exchange Rules are designed to protect public customer trading. 
Specifically, Rule 1024 prohibits members and member organizations from 
accepting a customer order to purchase or write an option unless such 
customer's account has been approved in writing by a designated Options 
Principal of the Member.\49\ Additionally, Exchange Rule 1026, 
regarding suitability, is designed to ensure that options are only sold 
to customers capable of evaluating and bearing the risks associated 
with trading in this instrument.\50\ Further, Exchange Rule 1027 
permits members and employees of member organizations to exercise 
discretionary power with respect to trading options in a customer's 
account only if the member or employee of a member organization has 
received prior written authorization from the customer and the account 
had been accepted in writing by a designated Options Principal.\51\ 
Finally, Exchange Rule 1025, Supervision of Accounts, Rule 1028, 
Confirmations, and Rule 1029, Delivery of Options Disclosure Documents, 
will also apply to trading in of options on the Russell Indexes.
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    \49\ See Exchange Rule 1024 (Conduct of Accounts for Options 
Trading).
    \50\ See Exchange Rule 1026 (Suitability).
    \51\ See Exchange Rule 1027 (Discretionary Accounts). Further, 
this Rule states that discretionary accounts shall receive frequent 
review by a Registered Options Principal qualified person 
specifically delegated such responsibilities under Rule 1025, who is 
not exercising the discretionary authority.
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Surveillance and Capacity
    The Exchange represents that it has an adequate surveillance 
program in place for options on the Russell U.S. Indexes and intends to 
apply those same procedures that it applies to the Exchange's other 
index options. Additionally, the Exchange is a member of the 
Intermarket Surveillance Group (``ISG'') under the Intermarket 
Surveillance Group Agreement, dated June 20, 1994. The members of the 
ISG include all of the national securities exchanges. These members 
work together to coordinate surveillance and share information 
regarding the stock and options markets. In addition, the major futures 
exchanges are affiliated members of the ISG, which allows for the 
sharing of surveillance information for potential intermarket trading 
abuses.
    The Exchange also represents that it has the necessary systems 
capacity to support the new options series that would result from the 
introduction of options on the Full and Reduced Value Russell U.S. 
Indexes, including LEAPS on the Full Value Russell U.S. Indexes.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \52\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \53\ in particular, in that it will permit trading 
in options on Full and Reduced Value Russell U.S. Indexes pursuant to 
the rules designed to prevent fraudulent and manipulative acts and 
practices to protect investor and the public interest, promote just 
equitable principles of trade. The Exchange also represents that it has 
the necessary systems capacity to support the new options series. As 
stated in the filing, the Exchange has rules in place designed to 
protect public customer trading.
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    \52\ 15 U.S.C. 78f(b). See Exchange Rules 1101A and 1012 (Series 
of Options Open for Trading).
    \53\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the Russell U.S. Indexes would provide 
investors additional trading opportunities. The Exchange believes that 
listing reduced value options would attract a greater source of 
customer business than if it listed only full value options on the Full 
Value Russell U.S. Indexes. The Exchange further believes that listing 
reduced value options would provide an opportunity for investors to 
hedge, or speculate on, the market risk associated with the stocks 
comprising the Russell U.S. Indexes and use this trading vehicle while 
extending a smaller outlay of capital.

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 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

    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 after the date of the filing, or such 
shorter time as the Commission may designate, it has become effective 
pursuant to 19(b)(3)(A) of the Act \54\ and Rule 19b-4(f)(6) \55\ 
thereunder.
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    \54\ 15 U.S.C. 78s(b)(3)(A).
    \55\ 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. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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. If the

[[Page 39463]]

Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule should be approved 
or disapproved.

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 No. SR-Phlx-2011-87 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 No. SR-Phlx-2011-87. 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 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 available publicly. All 
submissions should refer to File No. SR-Phlx-2011-87 and should be 
submitted on or before July 27, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\56\
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    \56\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16843 Filed 7-5-11; 8:45 am]
BILLING CODE 8011-01-P