Document ID: SEC-2010-0364-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-03-10T05:00Z

[Federal Register: March 10, 2010 (Volume 75, Number 46)]
[Notices]               
[Page 11211-11213]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr10-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61630; File No. SR-Phlx-2010-26]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. 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 2, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 19, 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 and II 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 
Commentary .05 to Rule 1012 (Series of Options 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

[[Page 11212]]

Strike Price Program (``$1 Strike Program'').\4\ 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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    \3\ The $0.50 Strike Program was initially approved on September 
18, 2009. See Securities Exchange Act Release No. 60694 (September 
18, 2009), 74 FR 49048 (September 25, 2009) (SR-Phlx-2009-65) (order 
approving).
    \4\ The $1 Strike Program was initially approved as a pilot on 
June 11, 2003. See Securities Exchange Act Release Nos. 48013 (June 
11, 2003), 68 FR 35933 (June 17, 2003) (SR-Phlx-2002-55) (order 
approving). The program was subsequently made permanent and 
expanded. See Securities Exchange Act Release Nos. 57111 (January 8, 
2008), 73 FR 2297 (January 14, 2008) (SR-Phlx-2008-01) (notice of 
filing and immediate effectiveness); 59590 (March 17, 2009), 74 FR 
12412. (March 24, 2009) (SR-Phlx-2009-21) (notice of filing and 
immediate effectiveness); and 61277 (January 4, 2010), 75 FR 1442 
(January 11, 2010)(SR-Phlx-2009-108) (notice of filing and immediate 
effectiveness).
    \5\ 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 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 this proposal is to amend Commentary .05 to Rule 
1012 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 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 Rule 1012, 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. 60694 (September 18, 
2009), 74 FR 49048 (September 25, 2009) (SR-Phlx-2009-65) (order 
approving); and Commentary .05(a)(ii) to Rule 1012.
    \7\ See Commentary .05(a)(i)(C) of Rule 1012.
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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 Commentary .05(a)(i)(B) to Rule 1012 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.''
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

    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) \10\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \11\ 
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 from the date on which it was filed, or such shorter time as 
the Commission may designate.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6)(iii). 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 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.
    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

[[Page 11213]]

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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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-2010-26 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-2010-26. 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. 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-2010-26 and should be submitted on or before March 31, 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. 2010-5078 Filed 3-9-10; 8:45 am]
BILLING CODE 8011-01-P