Document ID: SEC-2013-0550-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2013-03-22T04:00Z

[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Pages 17725-17727]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06608]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69162; File No. SR-Phlx-2013-34]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Mini Options

March 18, 2012.
    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 18, 2013, 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 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to address the manner in which options 
contracts overlying 10 shares of a security (``Mini Options'') will 
trade as a Complex Order.\3\
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    \3\ A Complex Order is any order involving the simultaneous 
purchase and/or sale of two or more different options series in the 
same underlying security, priced at a net debit or credit based on 
the relative prices of the individual components, for the same 
account, for the purpose of executing a particular investment 
strategy. Furthermore, a Complex Order can also be a stock-option 
order, which is an order to buy or sell a stated number of units of 
an underlying stock or exchange-traded fund (``ETF'') coupled with 
the purchase or sale of options contract(s). See Exchange Rule 1080, 
Commentary .08(a)(i).
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    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.

[[Page 17726]]

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 provide for the 
manner in which Mini Options will trade as a Complex Order pursuant to 
Exchange Rule 1080. The Exchange previously filed to list and trade 
Mini Options.\4\ Exchange Rule 1080 entitled ``Phlx XL and Phlx XL II'' 
describes the manner in which Complex Orders,\5\ trade on the Exchange. 
The Exchange will describe below the manner in which Rule 1080 operates 
with respect to Mini Options.
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    \4\ See Securities Exchange Act Release No. 68132 (November 1, 
2012), 77 FR 66904 (November 7, 2012) (SR-Phlx-2012-126). The 
Exchange amended amend Rules 1001 (Position Limits), 1012 (Series of 
Options Open for Trading) and 1033 (Bids and Offers--Premium) to 
list and trade Mini Options overlying five (5) high-priced 
securities for which the standard contract overlying the same 
security exhibits significant liquidity. Specifically, the Exchange 
filed to list Mini Options on SPDR S&P 500 (``SPY''), Apple, Inc. 
(``AAPL''), SPDR Gold Trust (``GLD''), Google Inc. (``GOOG'') and 
Amazon.com Inc. (``AMZN''). The Exchange filed a separate proposal 
to specify the application of Mini Options to Qualified Contingent 
Cross and PIXL transactions. See SR-Phlx-2013-32 (not yet 
published).
    \5\ See Commentary .08 to Exchange Rule 1080.
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    With respect to Complex Orders, the Exchange states in Rule 1080 
that Complex Orders involve the simultaneous purchase and/or sale of 
two or more different options series in the same underlying security, 
priced as a net debit or credit based on relative prices of the 
individual components. The Exchange would permit Mini Options to trade 
as Complex Orders provided that the order involves the simultaneous 
purchase and/or sale of two or more different Mini Options series in 
the same underlying security, priced as a net debit or credit based on 
relative prices of the individual components and Mini Options are only 
part of a Complex Order strategy that includes other Mini Options. For 
example, a Complex Order strategy cannot be comprised of standard 
options in AAPL and Mini Options in AAPL7. Also, with respect to 
Complex Orders, the Exchange will not permit Mini Options to trade as a 
stock-option order. The Exchange proposes to add rule text with respect 
to Mini Options trading as Complex Orders to Commentary .08 of Rule 
1080.
    The Exchange proposes to commence trading Mini Options on March 22, 
2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Securities and Exchange Act of 
1934 (``Exchange Act''),\6\ in general, and with Section 6(b)(5) of the 
Exchange Act,\7\ in particular, in that the proposal is designed to 
prevent fraudulent and manipulative acts and practices, 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.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that investors and other market 
participants would benefit from the current rule proposal because it 
would allow market participants to take advantage of legitimate 
investment strategies and execute Complex Orders in Mini Options. 
Additionally, the Exchange believes the proposed rule change will avoid 
investor confusion by providing how Mini Options will trade the same or 
different as compared to standard options with respect to Complex 
Orders.
    The Exchange's proposal to permit Mini Options to trade as Complex 
Orders provided the strategy does not combine Mini Options and standard 
options serves to maintain the permissible ratios that are applicable 
to Complex Orders by separating the trading of standard Complex Orders 
and Mini Options Complex Orders. Also, the Exchange has determined to 
not permit Mini Option Complex Orders to trade as a stock-option order 
because as Mini Options are a new product, the Exchange would like to 
consider the impact in this area and file to amend the rule at a later 
date.

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. All members may transact 
Complex Orders on Phlx. The rule change does not permit unfair 
discrimination and does not impose a burden on Members with respect to 
trading Mini Options.

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 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) \8\ of the Act and 
Rule 19b-4(f)(6) \9\ thereunder.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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 the 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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    A proposed rule change filed under Rule 19b-4(f)(6) of the Act \10\ 
normally does not become operative prior to 30 days after the date of 
the filing. However, pursuant to Rule 19b-4(f)(6)(iii) of the Act,\11\ 
the Commission may designate a shorter time if such action is 
consistent with the protection of investors and the public interest. 
The Exchange has requested the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. In November 2012, the Exchange filed a proposed rule change to 
amend its rules to list and trade certain mini-options contracts on the 
Exchange, and represented in that filing that the Exchange's rules that 
apply to the trading of standard options contracts would apply to mini-
options contracts.\12\ The Exchange has represented that it intends to 
launch trading in mini-options contracts on March 22, 2013. The 
Exchange believes that waiver of the 30-day operative

[[Page 17727]]

delay is consistent with the protection of investors and the public 
interest because such waiver would minimize confusion among market 
participants about how complex orders and stock-options orders 
involving mini-options contracts will trade.\13\
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    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ See Securities Exchange Act Release No. 68132 (November 1, 
2012), 77 FR 66904 (November 7, 2012) (SR-Phlx-2012-126).
    \13\ See id.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Such waiver would allow the Exchange to implement the proposed rule 
change prior to its launch of mini-options contracts trading on March 
22, 2013, thereby mitigating potential investor confusion as to how 
complex orders and stock options orders involving mini-options 
contracts will trade. For this reason, the Commission hereby waives the 
30-day operative delay and designates the proposed rule change to be 
operative upon filing with the Commission.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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 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 Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change 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 email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2013-34 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-2013-34. This file 
number should be included on the subject line if email 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 on official business 
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal offices 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-2013-34, and should be submitted on or before April 
12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06608 Filed 3-21-13; 8:45 am]
BILLING CODE 8011-01-P