Document ID: SEC-2009-0393-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2009-03-24T04:00Z

[Federal Register: March 24, 2009 (Volume 74, Number 55)]
[Notices]               
[Page 12410-12412]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr09-133]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59588; File No. SR-NASDAQ-2009-025]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by The NASDAQ Stock Market LLC 
Related To the $1 Strike Price Program

March 17, 2009.
    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 17, 2009, 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 and II 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 proposes for NOM to modify Chapter IV, Section 6 (Securities 
Traded on NOM) of its options rules to expand the Exchange's $1 Strike 
Price Program (the ``Program'').\3\
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    \3\ The $1 Strike Price 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).The program was subsequently 
expanded and made permanent. See Securities Exchange Act Release No. 
58093 (July 3, 2008), 73 FR 39756 (July 10, 2008) (SR-NASDAQ-2008-
057).
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    The text of the proposed rule change is available from Nasdaq's 
website at http://nasdaq.cchwallstreet.com, at Nasdaq's principal 
office, and at the Commission's Public Reference Room.

[[Page 12411]]

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 this proposed rule change is to modify Chapter IV, 
Section 6 of NOM options rules to expand the Program to allow the 
Exchange to select 55 individual stocks on which options may be listed 
at $1 strike price intervals and to expand the price range on which the 
Exchange may list such options.
    Currently, the Program allows Nasdaq to select a total of 10 
individual stocks on which option series may be listed at $1 strike 
price intervals. In order to be eligible for selection into the 
Program, the underlying stock must close below $50 in its primary 
market on the previous trading day. If selected for the Program, the 
Exchange may list strike prices at $1 intervals from $3 to $50, but no 
$1 strike price may be listed that is greater than $5 from the 
underlying stock's closing price in its primary market on the previous 
day. The Exchange may also list $1 strikes on any other option class 
designated by another securities exchange that employs a similar 
Program under their respective rules. The Exchange may not list long-
term option series at $1 strike price intervals for any class selected 
for the Program. The Exchange also is restricted from listing any 
series that would result in strike prices being $0.50 apart.
    The Exchange now proposes to expand the Program to allow Nasdaq to 
select a total of 55 individual stocks on which option series may be 
listed at $1 strike price intervals, and to expand slightly the price 
range on which the Exchange may list $1 strikes, i.e., from $1 to $50. 
The existing restrictions on listing $1 strikes would continue, i.e., 
no $1 strike price may be listed that is greater than $5 from the 
underlying stock's closing price in its primary market on the previous 
day, and Nasdaq is restricted from listing any series that would result 
in strike prices being $0.50 apart.
    As stated in the Commission orders that initially approved the $1 
strike price program and in subsequent extensions and expansions of the 
program,\4\ the Exchange believes that $1 strike price intervals 
provide investors with greater flexibility in the trading of equity 
options that overlie lower price stocks by allowing investors to 
establish equity options positions that are better tailored to meet 
their investment objectives. Indeed, member firms representing 
customers have repeatedly requested that Nasdaq seek to expand the 
Program in terms of the number of classes on which option series may be 
listed at $1 strike price intervals. The Exchange notes that current 
market conditions, in which the number of securities trading below $50 
has increased dramatically, further warrant the expansion of the 
Program.
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    \4\ See supra note 3. See also. Securities Exchange Act Release 
Nos. 48013 (June 11, 2003), 68 FR 35933 (June 17, 2003) (SR-Phlx-
2002-55); 49801 (June 3, 2004), 69 FR 32652 (June 10, 2004) (SR-
Phlx-2004-38); and 57111 (January 8, 2008), 73 FR 2297 (January 14, 
2008) (SR-Phlx-2008-01).
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    The Exchange is also proposing to set forth a delisting policy. 
Specifically, the Exchange would, on a monthly basis, review series 
that were originally listed under the Program with strike prices that 
are more than $5 from the current values of the options classes in the 
Program. The Exchange would delist series with no open interest in both 
the put and the call series having a: (i) Strike higher than the 
highest strike price with open interest in the put and/or call series 
for a given expiration month; and (ii) strike lower than the lowest 
strike price with open interest in the put and/or call series for a 
given expiration month.
    Notwithstanding the proposed delisting policy, Nasdaq could grant 
member requests to add strikes and/or maintain strikes in certain 
options classes in series eligible for delisting.
    Further, in connection with the proposed delisting policy, if the 
Exchange identifies series for delisting, the Exchange shall notify 
other options exchanges with similar delisting policies regarding 
eligible series for listing, and shall work with such other exchanges 
to develop a uniform list of series to be delisted, so as to ensure 
uniform series delisting of multiply listed options classes. Nasdaq 
expects that the proposed delisting policy will be adopted by other 
options exchanges that amend their rules to employ a similar expansion 
of the Program.
    With regard to the impact on system capacity, Nasdaq has analyzed 
its capacity and represents that it and the Options Price Reporting 
Authority (``OPRA'') have the necessary systems capacity to handle the 
additional traffic associated with the listing and trading of an 
expanded number of series as proposed by this filing.
    The Exchange believes that the Program has provided investors with 
greater trading opportunities and flexibility and the ability to more 
closely tailor their investment strategies and decisions to the 
movement of the underlying security. Furthermore, the Exchange has not 
detected any material proliferation of illiquid options series 
resulting from the narrower strike price intervals. For these reasons, 
Nasdaq requests an expansion of the current Program.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \5\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \6\ in particular, in that it is designed 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. 
The Exchange believes that expanding the current $1 Strike Program will 
result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment decisions in greater 
number of securities.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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: (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

[[Page 12412]]

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 a self-regulatory organization to provide 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 of the 
proposed rule change, or such shorter time as designated by the 
Commission. Nasdaq has met this requirement.
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    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Commission has determined that waiving the 
30-day operative delay of the Exchange's proposal is consistent with 
the protection of investors and the public interest because such waiver 
will enable the Exchange to implement its proposed expansion of the 
Program contemporaneously with other exchanges,\9\ and respond to 
increased customer demand for $1 strikes without delay.\10\ Therefore, 
the Commission designates the proposal operative upon filing. The 
Commission expects that the Exchange will continue to monitor the 
trading volume associated with the additional options series listed as 
a result of this proposal and the effect of these additional series on 
market fragmentation and on the capacity of the Exchange's, OPRA's, and 
vendors' automated systems.
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    \9\ See Securities Exchange Act Release No. 59587 (March 17, 
2009) (SR-ISE-2009-04, SR-CBOE-2009-001, SR-NYSEArca-2009-10, and 
SR-NYSEALTR-2009-11) (Order Granting Accelerated Approval of 
Proposed Rule Changes, as Amended, to Expand the $1 Strike Program).
    \10\ 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 such 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 No. SR-NASDAQ-2009-025 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-2009-025. 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 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-NASDAQ-2009-025 and should be 
submitted on or before April 14, 2009.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6328 Filed 3-23-09; 8:45 am]

BILLING CODE 8010-01-P